WiFi Bubble

As hotspots proliferate, The Economist asks if the WiFi boom is actually a bubble:

The coming shake-out in Wi-Fi will force operators to identify which of their many hotspot locations make sense. They should concentrate on business users, advises Andrew Cole of Adventis, a telecoms consultancy. The bubble, he says, is in consumer Wi-Fi. Hotspots in coffee shops, cinemas and malls will mostly prove uneconomic. Gartner predicts that the number of hotspots in retail outlets will peak in 2005, and then decline, as uneconomic hotspots are switched off.

But for real-estate owners, hotels, airports and convention centres, you can build a business case, says Mr Chand. Such venues may, however, choose not to operate hotspots themselves, but instead delegate marketing, billing and roaming to incumbent telecoms firms. Either that, or they will give away free access to attract customers. Neither model bodes well for the hotspot-operator start-ups now trying to capture the Wi-Fi market.

The outlook is equally grim for the dozens of start-ups making Wi-Fi chips, systems and equipment. A few may get lucky, and be bought out by a larger equipment-maker, such as Cisco, says Mr Chand. But most will fail. Already, though sales of Wi-Fi equipment are booming, prices have tumbled, and margins are now wafer-thin. Wi-Fi will continue to spread, and will remain popular. But, rather like the internet, it may disappoint many investors who hoped to make their fortunes.


Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.