WLANs Buck Gloomy Tech Market Trends

Electronic News, April 30, 2001 by Gemma Paulo

IF YOU WERE TO PICK ONE TECHnology sector to grow robustly despite the current economic slump, wireless LANs (WLANs) would be a top choice. WLANs are not only becoming significantly cheaper and faster -- trends that bode well for any technology -- but are particularly upbeat for a technology that addresses the market's strong desire for mobile access by workers into corporate networks.

Those factors -- cheaper, faster and in demand -- will drive end-use sales of WLAN products from about $1.2 billion in 2000 to more than $4.5 billion in 2005. However, during this period, steeply falling prices on all products will cause revenues to grow much more slowly than shipments.

The rapidly increasing use of pagers, cell phones and laptop PCs over the past several years has whetted the appetite of end-users for wireless networking. Although WLANs still fall short of wireline network performance, they are improving on several fronts, not just speed and price, but management tools and security, too.

The highest WLAN speeds now available peak at about l1Mbits/sec. --comparable to old-school Ethernet -- with the average throughput under good conditions running at about 5.5Mbits/sec. However, fallback rates can be as slow as 1Mbit/sec. Soon, WLAN technology will shift into higher gear. The year 2002 will see the introduction of 5GHz products that can boost network speeds up to 54Mbits/sec.

Prices for WLAN network interface cards (NICs) fell below $200 in 2000, but are still much higher than wired Fast Ethernet NICs, which sell for about $45. Businesses are faced with the task of balancing the need for mobility with footing the considerable cost of WLAN components.

Prices will continue to fall rapidly, though, as low-cost, high-volume vendors ramp up production in this market. In addition, networking vendors will tailor products for individual market segments. Some products, such as access points (APs) for the home, do not have to be as scaleable or manageable as those targeted for large enterprises. So, home APs will sport lower price tags.

The IEEE 802.11 workgroup is working on a number of WLAN security enhancements, including enhanced encryption formats, remote key distribution and mutual authentication that prevents man-in-the-middle attacks. Vendors are continually improving functionality and designing management software for market segments. Some vendors are adding other solutions that can work in parallel with these enhancements. Some provide network monitoring and control capability through common Telnet or SNMP services from a Web browser interface.

Improvements in WLAN technology seem to be resonating with IT managers in the United States. According to a survey of 344 U.S. IT professionals earlier this year by Scottsdale, Ariz.-based Cahners In-Stat Group, 103 IT professionals said their companies currently had WLAN technology. Eighty-four others said their organizations planned to deploy WLANs within five years. Large businesses are the organizations most likely to have WLANs. In the In-Stat survey, 42 percent of the companies already possessing WLANs have 1,000 employees or more. Of those companies planning to implement WLANs within five years, 38 percent are small businesses and 10 percent are in the small-office/home-office sphere, making smaller businesses a major force in the WLAN market. Vendors are beginning to introduce products that are easy to install, easy to manage and relatively low cost in order to appeal to this segment.

PC and PDA vendors are beginning to incorporate IEEE 802.llb -- the current WLAN technology of choice -- into their products. Agere Systems Inc. and Intersil Corp. both released mini-PCI Wi-Fi cards (as 802.1lb-certified products are known) late in 2000, which allowed PC and PDA vendors to incorporate WLAN technology into their mobile products. In early April, Intersil and Z-Com Inc. partnered to develop CompactFlash Wi-Fi cards for use in PDAs; the cards are expected to reach market by mid-2001.

All of these developments point to rapid, sustainable growth in the WLAN market for at least several years. For some electronics manufacturers, this will be a welcome antidote to current market woes.

Gemma Paulo is an industry analyst with Cahners In-Stat Group, Scottsdale, Ariz.