THE HOTTEST STAR in the tech investment galaxy is Wi-Fi. But as with many things that burn too brightly, the industry Wi-Fi hype might burn>"/>
THE HOTTEST STAR in the tech investment galaxy is Wi-Fi. But as with many things that burn too brightly, the industry Wi-Fi hype might burn out before everyone notices its light.
"The sweet spot for pricing is $1 per hour or lessfar lower than the $6 per hour being charged by Starbucks."
Wi-Fi is the common nickname given to 802.11 wireless technology. Wi-Fi hardwarebe it on a chip inside a personal computer or in a separate deviceallows PCs, handheld computers, and any equipment that understands Wi-Fi to communicate wirelessly over distances up to roughly 300 feet. If there's an Internet connection at the wired end of a Wi-Fi network, that connection can be shared by everything on the network.
Wi-Fi's utility and potential for ubiquity first excited nerds and last year spread to mobile professionals and wired businesses. At the same time that Starbucks was working with Bellevue-based T-Mobile USA to put Wi-Fi hot spots within reach of thousands of baristas, local companies sprang up to cash in on the boomand the venture capitalists have taken notice.
Intel, which makes the Centrino Wi-Fi chips for laptops, has earmarked $150 million for Wi-Fi investment. Matt Gordon, director of strategic investments for Intel Capital Seattle, said Intel recently put money into three area companies, including Bellevue's TeleSym, which is working on transmitting voice calls over Wi-Fi; Action Engine in Redmond, which has a way to make programs continue working during "occasionally connected computing"; and Bellevue's RovingIP.net, formed by former McCaw Cellular execs to let mobile devices roam from Wi-Fi network to Wi-Fi network.
INDEED, ROAMING, security, and software-development tools for Wi-Fi networksusually aimed at the business marketare common and sometimes overlapping themes among Seattle-area companies chasing investment dollars. Others are Issaquah's WiMetrics, Seattle's NetMotion Wireless, Kirkland's WaveLink, and Seattle's Chameleon Technology. This list doesn't include local wireless Internet service providers hooking up retailers, hotels, and marinas, like BroadbandXpress, or bigger companies' Wi-Fi ambitions, such as Microsoft's entry into Wi-Fi hardware and mobile phone carriers T-Mobile USA and AT&T Wireless Services adding Wi-Fi to their capabilities.
There's a lot of money to chase. While market research firm VentureOne notes that venture investment last quarter dropped to its lowest level in five years, newsletter publisher VentureWire says wireless technology firms raised $333 million in that quarter alone, more than enterprise software companies did, for a total of nearly $2 billion in venture capital since the beginning of last year.
Yet even for business markets, there might be too many companies with too many similar ideas. And broader-based revenue streams are largely untested. For one thing, using Wi-Fi for Internet access is, well, like using the Internet. Consumers still have to buy new equipment, find or create a Wi-Fi network, and configure everything to work together flawlessly. Average users might not put up with the current complexity. "It's free spectrum, it's jammable, and it's confusable," notes Bill Baxter, president and CEO of Bellevue's Bsquare. He spoke at last month's South Sound Technology conference in Tacoma, which, like many other local tech events recently, had "mobility" as a theme.
FOR ANOTHER, THERE'S a strong movement, led by community groups like SeattleWireless.net, to make Wi-Fi Internet access free. Recall the "information wants to be free" rallying cry of the dot-com era and you might wind up with lots of Wi-Fi usage that no one is willing to pay fora difficult return-on-investment proposition to sell to VCs who want to reach a mass market.
Free access and commodity-priced hardware leaves few obvious Wi-Fi services for which consumers might be willing to pay a premium, even if businesses shell out. After all, consumers expect that connections will be secure, that applications will continue to work, and that they can move from network to network. They probably don't care if a connection is Wi-Fi as long as it's wireless.
And mass-market consumers who are willing to pay are notoriously price sensitive. A new survey from ForceNine Consulting finds that while demand among consumers for Wi-Fi is quite strong, the sweet spot for pricing is $1 per hour or lessfar lower than the recently reduced $6 per hour being charged at Starbucks.
These caveats have led to something of an anxious hopefulness among VCs and Wi-Fi entrepreneurs and observers. There's a feeling among many with whom I've spoken that the Wi-Fi investment bubble will burst, perhaps as early as this fall, collapsing before a mass market for Wi-Fi has a chance to build.
Such a collapse would be unlike the Internet bubble, which expanded and exploded as investors and consumers marched in lockstep co-dependency. But there's little doubt that, also like the Internet, Wi-Fi will become ubiquitouseven if it happens after the invest- ment hype is a memory to those inside the industry.
Frank Catalano is a tech-industry analyst, consultant, and author. He can be reached via www.catalanoconsulting.com.