NYT on WiFi: Low Profit Potential?

The New York Times runs an article by Barnaby Feder announcing that WiFi is “hot” but that profit potential is “tepid”. (Always nice to see the Times doing its part for vocabulary appreciation.) A couple quotes:

Many of the early leaders in Wi-Fi are obscure companies like Proxim, Buffalo, Linksys and Dlink.

[T]he communications giants that operate wide-area networks may very likely become controlling partners, if not the outright owners, of localized Wi-Fi networks in order to manage their broadband business efficiently.

“The more attention it gets, the more the big players get involved,” said Andrew Seybold, an analyst whose company, Outlook 4Mobility, follows wireless communications. “It’s not an industry that is going to create the next Netscape or the next Microsoft.”


Huh. In other words, this may be such an important telecom breakthrough that the communications giants may decide that their only option is to become an outright owner of the networks. (And nevermind that “obscure” Linksys is nearing a half billion dollars in revenue and has products in 8400 retail outlets in the U.S. alone.)

As far as statistics go, it’s not clear to me why the author fails to mention the fact that 90% of all laptops sold by 2006 will have WiFi built in – certainly that would be an interesting stat to support the growing ubiquity of the technology, or the longer-term profit potential? Here’s another good one: in 2007, there will be 21 million WiFi hotspot users. At just $20/month for access, you’re looking at a $400m/month industry. Think you might see a few dollars of profit in there?

I guess these statistics must be why AT&T, IBM and Intel announced a joint venture that will create 20,000 (yes, twenty thousand) hotspots before the end of 2004. Named Cometa, it’s expected to be the largest WiFi provider.

And let’s not let facts get in the way of a good ol’ skeptical story. Why not mention that one of the major corporations to commit to WiFi early on was T-Mobile, who has inked deals with “ obscure” companies like Borders, American Airlines and Starbucks to provide WiFi subscription-based access in more than 2500 unique locations around the country in 2003?

And to wrap up this rant, why in an article that purports to identify the limited profit potential of an industry still in its infancy are there no financial figures to identify the market opportunity?

The closest the journalist gets to analysis is this comment, which misses the mark on so many levels it’s hard to know where to start:

As with other forms of high-speed, or broadband, communications, consumers may embrace Wi-Fi only to the extent that they can figure out how to pay little or nothing for it.


But the ultimate problem with this assertion is that the real market for WiFi is with business users, not consumers. Of course, one of the biggest obstacles to broadband adoption has been ease-of-use (how many of you would tell your parents to try to set up a DSL modem?), not cost (though cost is also an issue). Ever try setting up a WiFi access point? No? Try this: slide the PCMCIA card into the slot. Slide the CD in the CD-ROM drive. Click next a few times. Now open your browser. (It’ll get even easier next year, when Intel’s new Banias chip will ship with integrated WiFi capabilities.)

Come on – this is just a hack piece all around.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.