Wi-Fi is all the rage, and now tech's titans are trying to take it mainstream. Until now, the technology has pretty much been the province of consumers who used Wi-Fi to create home networks and techies eager to put up community networks known as hot spots. Now, some big chip, networking, and computer companies see Wi-Fi's popularity as a way to boost their fortunes. Telecom carriers are adopting it to avoid possible cannibalization of next-generation wireless data networks, or 3G.
Intel (INTC ) is spending $300 million to market its Centrino laptop chips, which come equipped for Wi-Fi. In March, Cisco Systems (CSCO ) agreed to spend $500 million for Linksys, a Wi-Fi equipment maker. That puts it in competition with Microsoft (MSFT ), which entered the same market last year. Phone companies, including Verizon (VZ ) and SBC (SBC ) are joining T-Mobile in offering Wi-Fi services.
These companies will have to clear plenty of hurdles before Wi-Fi pays off for them. BusinessWeek's Heather Green recently spoke with Massachusetts Institute of Technology professor Nicholas Negroponte, a Wi-Fi proponent and onetime investor in Wi-Fi startup Joltage Networks (a New York City-based commercial hot-spot operator that went under in February). Following are edited excerpts of their conversation:
Q: We're seeing a lot of corporations getting involved with Wi-Fi. How much will they help increase the usage of Wi-Fi? Do you think they'll benefit as much, or as directly, as they expect?
A:Wi-Fi is like the Internet itself, reenacting the bottoms-up process that surprised people so much. Corporations played the same role circa 1980-90. The benefit this time is a little different, however. The value of fixed wireless -- call it nomadic computing -- is very much something unto its own. It changes the way people meet, where they work, and how they stay connected. This is to say that companies will see great value even without interconnecting the Wi-Fi networks. That comes next.
Q: Can you describe the model for Joltage and why the company was shut down? What lessons were learned there? How much did you invest?
A:The Joltage model was and still is excellent. It was just way ahead of its time. It is (was) an organic model, composed (in principle) of many (millions) of micro-telecommunications entities. One way to think of them is as independent units that collaborate only when somebody wants to roam. The Net itself was the means to reach beyond your hot spot. In the future, hot spots will relay data and work jointly in that manner too.
What I should have learned a long time ago, did not, and once again experienced in Joltage: It never pays to be first. I invested about $250,000.
Q: Do you think commercial Wi-Fi services can make money? If so, what is the right model to become profitable?
A:Like so many things, there are many models, some of which have more immediate payoff (but may not scale). Others are loss leaders. Yet others are local franchises. There is no one winner.
I happen to like those models where people install Wi-Fi anyway, for reasons that have nothing to do with making money. However, by opening your Wi-Fi system to others, you can earn income, more like a windfall. Weaving those together is, in some sense, the extreme form of organic.
Q: Do think Wi-Fi will obviate 3G?
A:3G and Wi-Fi are different. One is mobile, and one is nomadic. 3G has its own problems, which I summarize as being "too little too soon." But 3G is here to stay, and some of the systems will be more scalable than others. CDMA has an advantage in this regard.
The issue is more about bandwidth than system A vs. system B. If you give me broadband -- something over 2 million bits per second, preferably over 5 million -- I cannot really use it without devoting my fullest attention (which means my hands and eyes, not just my ears). In so doing, I am probably not walking, certainly not at the wheel of a car. Therefore, if I am stopped and "attending," many of the issues that face cell-phone operators aren't present (like hand-off). The problem is different. There really is room to cohabitate.
Cohabitation starts to deteriorate when the Wi-Fi network turns into a mesh -- when collaborative radios do the kind of message-passing that really does obviate 3G-style mobility. So the race is not Wi-Fi vs. 3G, it is mesh networks vs. 4G.