WHEN WILL WI-FI MAKE SOME DOUGH?

Now that Wi-Fi is as popular as biscotti — it's found in more than 2600 Starbucks locations and was dubbed “the best thing since sliced bread” by a 70-year-old RV-owner quoted in Time magazine — it seems to have as many hard parts, too, especially security problems and elusive profits.

To start with, as hot spots proliferate (to north of 30,000 by 2005, according to Allied Business Intelligence), wireless LAN users might soon be deluged by near-constant prompts to accept competing signals, a disaster the Aberdeen Group refers to as “the urban Wi-Fi crash of 2004.”

The WPA protocol is helping to alleviate security concerns with more advanced encryption techniques. Meanwhile, vendors are engaging in religious crusades over the best way to make wireless LANs secure. While the Cisco/Enterasys/Hewlett-Packard faction contends that access points should be intelligent devices, their opponents — including Cymbal, Trapeze Networks and Aruba Networks — swear access points should be kept dumb and managed by a centralized intelligence.

All the while, software sniffers offer to police the airwaves. And a new standard — 80211.i — will offer even more security enhancements next year. These solutions may become less fragmented as vendors pair up and partner or merge, but, “It will take a while, because the market hasn't yet decided what solutions it favors,” said Infonetics analyst Richard Webb.

Despite Wi-Fi's growth, service providers haven't yet decided how exactly to make Wi-Fi a profitable endeavor, either. “The euphoria of early 2002 has given way to a more sober view,” said Peter S. Kastner, chief research officer for the Aberdeen Group. As proof, Kastner points to Cometa Networks, which, after much initial fanfare, slowly and quietly began backing away from its initial targets of deploying 30,000 access points in a few years.

“Investors wanted a reasonable return, and that wasn't happening, so the rollouts have been slower,” Kastner said.

Ironically, even if all goes well and engineers remedy Wi-Fi's technical shortcomings, the technology may pose as much threat to existing revenues as it provides opportunity for new ones. Infonetics research shows that the point at which enterprises are ready to switch to wireless LANs is about the same point at which they're ready to switch to voice over IP, a combination that could siphon corporate cell phone revenues from carriers and deliver it to wireless LAN providers. That's why the partnership among Proxim, Avaya and Motorola in January sounded a wake-up call for the wireless world. “[Carriers] stand to lose a lot of revenue from corporate users,” said Webb.

Wi-Fi roaming agreements — like the one between T-Mobile and Sprint and other carriers' agreements with Wayport — could ease that concern. Once carriers broker agreements with one another, the Wi-Fi industry could repeat the growth the cell phone industry saw when it introduced intercarrier roaming.

After that, sliced bread might not seem so appealing by comparison.