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The 802.11 Business

Once upon a time, there was talk of HomeRF or HiperLAN becoming the dominant wireless LAN (WLAN) technology. Not any more, you can stick a fork in them, they’re done. 802.11 technology is well on its way to dominating the WLAN market the way Ethernet had LANs

Why? It’s faster and has more range than HomeRF, it’s much farther along in the market than HiperLAN, and despite the fact that it’s built-in security protocol, Wired Equivalent Privacy (WEP), can be broken relatively easily, it’s enormously popular. Analysts universally predict that the future of WLANs belong to 802.11. Ken Haase, general chairman of the HomeRF Working Group, even tacitly admits that HomeRF’s future is in telephony, not data networking.

Big Market Getting Bigger

WLANs aren’t just a niche market anymore. Allen Nogee, In-Stat/MDR‘s Senior Analyst for Wireless Component Technology says, “So far this year (first half, 2002) the numbers for all hardware (access point (AP) and Network Interface Card (NIC)) is 7.24 million for 802.11b, and 210 thousand for 802.11a.” For all of 2002, he predicts that, “it will probably be 16 – 17M.”

Sound impressive? Some think In-Stat’s numbers are on the low side. Tim Mahon, a CS First Boston analyst, sees 1-½ million 802.11a chips alone shipping in 2002, and another 200,000 combo chips. In 2002, he’s saying 11 million combo chips will ship next year. Richard Redelfs, CEO & President, Atheros, the 802.11a chip OEM, thinks Mahon’s numbers are closer to the truth. Smiling, he says, “It’s higher than half-a-million, we would be out of business if it was that low.”

Today, the market belongs to 802.11b. Navin Sabharwal, Director of Residential & Networking Technologies for Allied Business Intelligence observes that, “The market is basically 95% 11b, that will change. 11a will continue to make modest progress. 2003 will see a radical shift with 11b (solo NICs and APs) going down to 55%. The bulk of this growth will be in dual band.”

Chris Neal, Research Director for Sage Research, agrees. In Sage’s focus group studies of medium and large businesses, Sage found that CIOs are “thinking about multi-standard cards. They’re cautious about 802.11a, because of limits on 2002 capital expenditures so they’re dragging feet until spring of next year. Eventually, though, the bandwidth needs are such that they’ll go there, but not immediately.”

Driving 802.11

Several factors are driving 802.11. Gemma Paulo, senior analyst, Enterprise and Residential Communications for In-Stat/MDR, said, “In the ‘business’ space, WLANs are popular in the verticals, namely education, healthcare, retail, manufacturing/warehousing, etc.” Sabharwal thinks though that enterprise players are also driving the business market. He says, the “Number one motivation for the enterprise is that wireless is designed for notebooks and PDAs. This means that workers are no longer tied to their desktops. As companies move to laptops this lets them compute on the road, campus, or conference room. It doesn’t make sense to tether that person with an Ethernet cable.”

Paulo goes on to say that, “In the ‘home/SOHO’ space, WLANs are very popular among broadband users worldwide, with Asia Pacific really driving growth, especially Japan and South Korea. 802.11b equipment is cheap & reliable, and until consumer electronics companies actively try to embed 802.11a chipsets into CE equipment, 802.11b or 802.11g will work well for the home, as 2.4 GHz WLAN technologies are a bit more robust going through walls. We expect that eventually the desire to distribute multimedia in the home will drive a mass embedding of WLAN into CE devices, but this will not happen until 3 or 4 years down the road.”

Redelfs doesn’t think it’s going to take anything like that long and 802.11a, with its 54Mbps, not b, will move wireless ‘networking’ into consumer electronics. “There will be a market for ‘a’ in video distribution in situations because b isn’t fast enough. Sony has already done demonstrations of an 802.11 empowered video server with TiVo style technology to transmit video and audio to flat screen televisions, thus avoiding co-axial costs and hassles.” He goes on to say that Sony is on the verge of announcing 802.11a empowered home theater products.

As a result, WLAN chipset sales have increased dramatically since 802.11b’s introduction in 1999 and it shows no signs of slowing down. Businesses are the largest market for WLAN chipsets, but residential use is growing even faster. Indeed, Sabharwal says that the consumer/SOHO markets have grown explosively” with the growth “in the retail channel seems split between small business and residential.”

The Players

Many companies want a part of this product. The leading chip OEMS are Texas Instruments (TI), Intersil, and Atheros. Many other companies, more than 40 altogether according to Sabharwal want a piece of the WLAN pie. These include Resonext, LinCom Wireless, Agere Systems, Atmel, Cirrus Logic, Cisco, Intel, Philips, RF Microdevices Raytheon and Symbol Technologies.

Not all of them will make it. Ed Sperling, editor in chief of ElectronicNews sees “A lot of investment, but no one seems to be profiting that much. Sabharwal comes right out and says “the ones who are shipping today, Intersil, Philips, Atmel, Agrere, TI, Maxim, Atheros are in a better position and that Intel will be a player if they keep funding it.” But, it will be “hard for others to break out. Some won’t even be able to ship. We’re starting to see a shakeout. One thing I’ve seen is that they’re no more interest in new people entering this space since the middle of this year. In Q4/Q1 we’ll see a shakeout.”

The competition in the WLAN-chipset marketplace will continue to be fierce. With 802.11b profit margins already razor thin, grabbing market share in the ‘a,’ ‘g’ and combo chip market will become all-important in 2003. And, being to the first to market with combo chips will play an important role. Sperling thinks “most vendors will likely support chipsets that support all the standards since the cost of chips is doesn’t add much to cost of devices and customers don’t care about standards, they just want devices that work.”

Once upon a time, there was talk of HomeRF or HiperLAN becoming the dominant wireless LAN (WLAN) technology. Not any more, you can stick a fork in them, they’re done. 802.11 technology is well on its way to dominating the WLAN market the way Ethernet had LANs

Why? It’s faster and has more range than HomeRF, it’s much farther along in the market than HiperLAN, and despite the fact that it’s built-in security protocol, Wired Equivalent Privacy (WEP), can be broken relatively easily, it’s enormously popular. Analysts universally predict that the future of WLANs belong to 802.11. Ken Haase, general chairman of the HomeRF Working Group, even tacitly admits that HomeRF’s future is in telephony, not data networking.

Big Market Getting Bigger

WLANs aren’t just a niche market anymore. Allen Nogee, In-Stat/MDR‘s Senior Analyst for Wireless Component Technology says, “So far this year (first half, 2002) the numbers for all hardware (access point (AP) and Network Interface Card (NIC)) is 7.24 million for 802.11b, and 210 thousand for 802.11a.” For all of 2002, he predicts that, “it will probably be 16 – 17M.”

Sound impressive? Some think In-Stat’s numbers are on the low side. Tim Mahon, a CS First Boston analyst, sees 1-½ million 802.11a chips alone shipping in 2002, and another 200,000 combo chips. In 2002, he’s saying 11 million combo chips will ship next year. Richard Redelfs, CEO & President, Atheros, the 802.11a chip OEM, thinks Mahon’s numbers are closer to the truth. Smiling, he says, “It’s higher than half-a-million, we would be out of business if it was that low.”

Today, the market belongs to 802.11b. Navin Sabharwal, Director of Residential & Networking Technologies for Allied Business Intelligence observes that, “The market is basically 95% 11b, that will change. 11a will continue to make modest progress. 2003 will see a radical shift with 11b (solo NICs and APs) going down to 55%. The bulk of this growth will be in dual band.”

Chris Neal, Research Director for Sage Research, agrees. In Sage’s focus group studies of medium and large businesses, Sage found that CIOs are “thinking about multi-standard cards. They’re cautious about 802.11a, because of limits on 2002 capital expenditures so they’re dragging feet until spring of next year. Eventually, though, the bandwidth needs are such that they’ll go there, but not immediately.”

Driving 802.11

Several factors are driving 802.11. Gemma Paulo, senior analyst, Enterprise and Residential Communications for In-Stat/MDR, said, “In the ‘business’ space, WLANs are popular in the verticals, namely education, healthcare, retail, manufacturing/warehousing, etc.” Sabharwal thinks though that enterprise players are also driving the business market. He says, the “Number one motivation for the enterprise is that wireless is designed for notebooks and PDAs. This means that workers are no longer tied to their desktops. As companies move to laptops this lets them compute on the road, campus, or conference room. It doesn’t make sense to tether that person with an Ethernet cable.”

Paulo goes on to say that, “In the ‘home/SOHO’ space, WLANs are very popular among broadband users worldwide, with Asia Pacific really driving growth, especially Japan and South Korea. 802.11b equipment is cheap & reliable, and until consumer electronics companies actively try to embed 802.11a chipsets into CE equipment, 802.11b or 802.11g will work well for the home, as 2.4 GHz WLAN technologies are a bit more robust going through walls. We expect that eventually the desire to distribute multimedia in the home will drive a mass embedding of WLAN into CE devices, but this will not happen until 3 or 4 years down the road.”

Redelfs doesn’t think it’s going to take anything like that long and 802.11a, with its 54Mbps, not b, will move wireless ‘networking’ into consumer electronics. “There will be a market for ‘a’ in video distribution in situations because b isn’t fast enough. Sony has already done demonstrations of an 802.11 empowered video server with TiVo style technology to transmit video and audio to flat screen televisions, thus avoiding co-axial costs and hassles.” He goes on to say that Sony is on the verge of announcing 802.11a empowered home theater products.

As a result, WLAN chipset sales have increased dramatically since 802.11b’s introduction in 1999 and it shows no signs of slowing down. Businesses are the largest market for WLAN chipsets, but residential use is growing even faster. Indeed, Sabharwal says that the consumer/SOHO markets have grown explosively” with the growth “in the retail channel seems split between small business and residential.”

The Players

Many companies want a part of this product. The leading chip OEMS are Texas Instruments (TI), Intersil, and Atheros. Many other companies, more than 40 altogether according to Sabharwal want a piece of the WLAN pie. These include Resonext, LinCom Wireless, Agere Systems, Atmel, Cirrus Logic, Cisco, Intel, Philips, RF Microdevices Raytheon and Symbol Technologies.

Not all of them will make it. Ed Sperling, editor in chief of ElectronicNews sees “A lot of investment, but no one seems to be profiting that much. Sabharwal comes right out and says “the ones who are shipping today, Intersil, Philips, Atmel, Agrere, TI, Maxim, Atheros are in a better position and that Intel will be a player if they keep funding it.” But, it will be “hard for others to break out. Some won’t even be able to ship. We’re starting to see a shakeout. One thing I’ve seen is that they’re no more interest in new people entering this space since the middle of this year. In Q4/Q1 we’ll see a shakeout.”

The competition in the WLAN-chipset marketplace will continue to be fierce. With 802.11b profit margins already razor thin, grabbing market share in the ‘a,’ ‘g’ and combo chip market will become all-important in 2003. And, being to the first to market with combo chips will play an important role. Sperling thinks “most vendors will likely support chipsets that support all the standards since the cost of chips is doesn’t add much to cost of devices and customers don’t care about standards, they just want devices that work.”

The Technologies

802.11b uses Complementary Code Keying (CCK) to achieve bit transfer rates of 5.5 and 11Mbps in the 2.4Ghz range. CCK works by using Differential Quadrature Phase Shift Keying (DQPSK), which encodes data by four phase shifts, and making each DQPSK ‘word’ carry additional data. Unfortunately, the 2.4 range already must contend with interference from microwave ovens, 2.4GHz telephones and other 802.11b networks. Because 802.11b only has three channels for simultaneous data transfers its throughput can plummet with multiple users.

On the other hand, 802.11b is shipping. 802.11g, another 2.4GHz standard, is another matter. After a long standards fight between Texas Instruments and Intersil over whose technology should be used to deliver service at the 22Mbps range, 802.11g still hasn’t achieved final IEEE approval. Approval is now expected in May 2003.

To finally get 802.11g out the door, Intersil and TI agreed to disagree. So it is that ‘g’ has two mandatory standards CCK at 2.4GHz for ‘b’ compatibility and 802.11a’s Orthogonal Frequency Division Multiplexing (ODFM) for a maximum of 54Mbps. ODFM achieves higher throughput by breaking a single wide frequency channel into several, multiplexed sub-channels.

In addition, ‘g’ comes with a pair of optional, and incompatible, modes to achieve throughput ranges in the 22Mbps range. These are Intersil’s CCK-OFDM mode with a maximum throughput of 33Mbps and TI’s Packet Binary Convolutional Coding (PBCC-22), with a throughput range of 6 to 54Mbps. PBCC combines codeword scrambling with binary convolutional coding to achieve its higher theoretical throughput rates.

By sticking to the 2.4GHz range, ‘g’ has the same interference problems of ‘b.’ 802.11a, on the other hand, uses ODFM at the interference free 5GHz range. In addition, as Redelfs observes, the 2nd generation of 802.11a supports 13 channels in North America and 19 in Europe giving it far more effective bandwidth and making it much more scaleable for IT uses.

In practice, no 802.11 actually hits its maximum possible throughput. Network overhead and distance attenuation combine to knock ‘b”s speed to about 2 to 4Mbps in most office environments and ‘a”s to 20Mbps. The exact performance and maximum range depends on the distance between AP and NICs, the housing structure’s materials, and interference. A site survey is a must for any large-scale WLAN deployment.

Typically, any 802.11 chipset consists of a radio, baseband processor, Medium Access Controller (MAC), internal logic to encode and decode its supported communications mode, RF noise filters, an amplifier, and support for both PCI and Cardbus interfaces.

At this point, this is usually done with two or more chips. But, most major vendors are working towards single chip CMOS designs that will require a smaller die size and less power and space on boards. In addition, zero conversion designs, like Intersil’s PRISM 3 chips, can perform direct down-conversion (DDC) RF signals, without requiring a step-down to intermediate frequency stages before conversion to the actual baseband signal. This also reduces the chipset cost and helps to make single CMOS chip designs possible.

This will be especially helpful in combo chips, which most analysts think displace pure ‘b’ chips be the best sellers in 2003 and 2004. At this time, though, sample quantities of combo chip sets are available. Atheros claims to have the lead, and TI and Intersil, devoted to their ‘g’ chip families, are known to be lagging behind other vendors.

Nogee, though, thinks, “802.11g does have a place. It will eventually replace most 802.11b. It has better range than “a” and is backward compatible with “b.” If you could get higher speeds with very little price penalty, wouldn’t you go for it?”

Some vendors though want to deliver higher throughput today without the IEEE’s blessing. TI, for example, has recently shipped a PBCC enabled 802.11b chipset, aka ‘b+,’ with claims that compatible ‘b+’ AP and NICs will reach up to 22Mbps speeds. And, since its beginning Atheros has supported ‘turbo’ modes that enable its ‘a’ chipsets to hit over 100Mbps speeds. Of course, these are all proprietary and incompatible approaches.

WLAN Futures

So it is that it seems clear that one-way or the other one 802.11 variant or the other will emerge on top. The question: which one? Some analysts think combo chips-perhaps even supporting b, g, and a on a single chip-will be the wave of the future. While others think that, delays and all, g, with built-in ‘b’ backwards compatibility will yet win out.

While WLAN chipset volume is high, and will go only higher, profits are another matter. One trouble spot is that although vendors shipped more WLAN chipsets in 2001, the revenue the chipsets generated fell because their per-unit price dropped.

The reason, according to Nogee, is that “Once the Taiwanese manufacturers started creating chips in large numbers, prices dropped fast. The rate of the fall in prices has slowed, but prices continue to drop. Also, with many more players now, there is much competition, and generally its on price more than anything else.”

Another potential problem is users becoming frustrated with incompatibilities. Nogee notes that, “The hodge-podge mix of security standards is the biggest problem now. Five 802.11b devices might all use a different security standard, and it’s almost impossible to know if one will work with the other. I think most people know that 802.11a at 5GHz won’t work with 802.11b at 2.4GHz. But Wireless Ethernet Compatibility Alliance’s (WECA) stance with first calling 802.11a Wi-Fi5 and now using Wi-Fi for all 802.11 technologies, hasn’t helped with the standards confusion.”

Eventually UltraWideBand (UWB), a non-IEEE technology, may play a role in the WLAN space. Indeed, Redelfs says that “UWB is interesting technology,” and that Atheros isn’t an 802 company, we view ourselves as a wireless company, we’ll build UWB if it makes sense.”

For the next few years, though, one way or the other, one standard or the other, 802.11 will rule both home and business WLAN.

The Reseller Take

For resellers, the bottom line is that you should look for NICs and AP with combination chipsets. I can’t see any one of these technologies dominating the marketplace anytime soon.

As the price-points drop, I expect the wireless market to pick up even if the rest of the economy continues to flop around like a fish out of water. Whether they like it or not, customers will need to replace their aging network infrastructures and move to new offices. When they do so, the new high-speed wireless standards will attract customers who don’t want to spend any more time dragging cable.

Specifically, I believe that combination a/g or a/b+ devices will sell well. I also expect though that the margins will shrink quickly. The key to making money at WLANs thus won’t be in selling equipment; it will be in network installation, integration and maintenance. With a complete installation and administration package in hand, I foresee a nicely profitable year ahead for network integrators.

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