Question

CASE 1-WI-FI INC.

OVERVIEW

Attach Wi-Fi to a broadband modem and any nearby computer equipped with Wi-Fi receptors and you can log on to the Net. Wi-Fi networks, known as hot spots have popped up so tfast that more than 18 million people worldwide have logged on, and the numbers are growing daily. The challenge is to transform this innovation into a global business, developing coherent and dependable networks, coming up with billing systems, roaming agreements, and technical standards. Wi-Fi could extend dramatically the range and expanse of the Web, changing its vary nature.

The potential productivity gains are so compelling that many companies are investing in custom-built systems, without waiting for a fine-tuned industrial version of Wi-Fi to hit the market. As more companies compete, prices are plummeting. It costs only $2,000 to install a hot spot, one-fifth what it was two years ago. Although corporations are interested in the power and flexibility of Wi-Fi networks, many are postponing rollouts in strategic areas until they are convinced it is secure. A possible solution is the overlap between Wi-Fi and the high-speed cellular system, known as Third Generation (3G) that also promises a wireless internet access with broader coverage.

The benefits are impressive: Wi-Fi turns every machine, from laptops to cash registers into network devices. And it fuels demand for always-on broadband connections. The consumer-electronics industry is counting on Wi-Fi, to link a host of appliances in the home. Cellular manufacturers are working on Wi-Fi phones that would let people move seamlessly from Wi-Fi to cellular networks. Starbucks and McDonald’s have installed Wi-Fi networks in their stores to attract new customers and boost sales.

The challenge is to build Wi-Fi into a solid pillar of the networked world. Intel assigned 800 engineers to work on Wi-Fi and in December 2002 joined IBM and AT&T to launch Cometa to build and have running 5,000 hot spots by March 2004. Intel is also building new chips; The Centrino family of chips embeds a Wi-Fi receptor into a laptop computer. Every Dell computer laptop and 70% of H-P consumer offerings will be Wi-Fi ready. However, Wi-Fi isn’t likely to become rock-solid standard until hot spots are dependable, and security systems satisfy the most demanding customers.

DISCUSSION QUESTIONS:

1. Define the product-market within which wireless networks are positioned.

B)Analyze the wireless network market, forecast the future directions of the market, and identify the possible consequences.

C)Indicate possible variables that may be useful in segmenting the wireless networks market

D)-Discuss the innovation challenges confronting companies competing in the wireless network market.

Answer 1

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Define the product-market within which wireless networks are positioned.

Wireless networks are positioned in the broadband internet access market because, even though, they rely on previous internet access providers the service they provide is an upgraded access to the internet that allows customers to complement their current home or office wired access with a wireless access in public areas for an additional cost. However, suppliers are also providing equipment to improve the current access with a wireless one just by adding a box and a wireless card to their systems. The customer segment that is targeted by this technology are users that already have broadband access, so it is very dependent on the growth of broadband access, and Wi-Fi is adding value to this kind of connections. Potential customers are corporations and its executives, so they can access internet anywhere at anytime, the always-on broadband access. Users would have to pay an additional fee to enjoy this service. On the other hand households that want to install wireless networks in their homes will need extra equipment but no additional monthly fee.

Analyze the wireless network market, forecast the future directions of the market, and identify the possible consequences.

The wireless network market is divided into two main segments: business people that move around and so may need to hook up to the internet anytime and anywhere, and higher income/educated households where wireless networked homes could become a standard in the near future. These two segments are driving the primary demand. However, other segments could become very important in the long run such as cell phone holders because of the many value added services that could be developed over wireless networks. In view of these market segments, the industry may shift to offer boxes and low flat fee access to public places such as hotels, airports, restaurants, coffee shops, etc. in order to broaden distribution quickly and encourage the adoption of this new technology, but in the long run, most of the revenue will come from value-added services rather than access. In the first years of launch, this will entail a significant amount of investment, but most important is the willingness to deliver new technologies on time, and if they fail to do so, the solution will never take off and people will sign off wireless connectivity because there is not any added value. Offering added value thus poses a big obstacle for Wi-Fi providers.

Indicate possible variables that may be useful in segmenting the wireless networks market.

Wireless networks have two types of segments that would benefit from its services, homes and executives and business people. One variable that could be useful to segment the market is the use of broadband which is a requirement to have wireless access; the need to travel or move to other places of business people is a relevant variable to consider because users would benefit from accessing the net anywhere at anytime. The level of wired networks installed in geographic areas could also be another variable because in regions such as Asia, Europe, or South America wired networks are being replaced by wireless technologies faster due to the flexibility to bypass the implementation of wired networks. Other factors could be income level or level of education because the higher those demographics, it is more likely that people would adopt this kind of technology.

Discuss the innovation challenges confronting companies competing in the wireless network market.

There are different types of companies competing in the wireless network market, and many of them are successors of few Wi-Fi start-ups. The first type of companies is the small wireless ISP’s, which include firms such as MobileStar Networks, Joltage Networks, and Surf &Sip. The next group is the Wi-Fi aggregators, such as Boingo, IPass, and Cometa Networks. The last group of first movers are the small semiconductor manufacturers such as Intersil, which had 58% market share in 2002. However, Intersil decided to exit the market because of the increasing competition of larger firms. Semiconductor manufacturers such as Intel, who is investing more than $ 300 million to market its Centrino processor, and Toshiba, are entering the market very aggressively. Also, and perhaps the most important group because of size are the telecommunications companies. This group is led by T-Mobile that has the largest Wi-Fi network in place; however, many firms like Verizon, Sprint PCS, and AT&T wireless are very active in the Wi-Fi market. The last group to enter the market that is seriously threatening the small startups are the software and hardware companies such as Cisco and Microsoft.

Competing technologies on wireless networks such as Wi-Fi, 3G, and Bluetooth have many challenges ahead, particularly in terms of which technology is going to be the standard or if they are going to work together to facilitate roaming and interconnectivity. One of the biggest challenges is deciding how they are going to collaborate. This is a government related issue because of the radio spectrum they use. Another innovation issue is to develop security systems to facilitate mass corporate adoption. Today, one of the main problems is that there is not enough security in these networks to persuade corporations to fully adopt Wi-Fi. In terms of innovations the challenge is how easy these technologies integrate different devices with each other, like home appliances, cell phones, PDA’s, laptops, desktops, and TV’s. Probably the most important challenges are the new value added services around this technology that will make it a must for users. What kind of services can be delivered using this technology that couldn’t be provided using wired networks?