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Wireless LANs will eat GSM networks - Analysis report

The growth of wireless LANs will "cannibalise" as much as 7% of GSM phone revenues over the next five years, predicts a market researcher in the USA

If operators of public wireless LANs manage to form an association, they could threaten much of the growth of ordinary mobile phone networks, according to Monica Paolini, researcher for Analysys in America.

The danger to established GSM networks isn't often spelled out in public. Most reports look at the potential of the so-called "third generation" phone networks, and predict huge revenues for the Vodafones and Oranges of the world as they sell high-speed data over phone networks.

Only rarely does a report mention the unmentionable: that computer LANs run at vastly higher data rates than even the most optimistic predictions for 3G phones - and have the potential to be a lot cheaper to install in urban areas.

Paolini predicts that over 20 million American users will be hooked up wirelessly in five years' time. This figure is presented as optimistic. In fact, it could be a gross underestimate.

"More than 21 million Americans will be using public wireless local area networks (WLANs) in 2007, attracted by the cheap and superfast remote Internet access provided in airports, shopping malls, coffee bars and hotels," according to the report: Public Wireless LAN Access: US Market Forecasts 2002-2007.

But the report focuses on the potential of a wireless standard known as WiFi, or 802.11b - a standard which is becoming very popular around the world, but is already being superseded by newer technology - in particular, the new WiFi 5 standard, 802.11a.

The report also fails to take the possibility of public Bluetooth access points into proper account, according to initial news releases.

"For the market to accelerate as we expect, it's imperative for service providers to offer better location information and network detection software as part of well-presented service propositions with appropriate security and pricing," adds Monica Paolini.

One of the biggest questions raised by these new services, thinks Paolini, is the impact they will have on cellular operators as they attempt to develop new fast data services. By 2007, Analysys predicts that the public WLAN market will equate to about 25% of mobile data service revenues and could cannibalize up to 7% of cellular data operator revenues in the US.

But this figure could be eclipsed if the public WLAN industry adopts other, parallel technologies such as WiFi 5 and Bluetooth, which allow far more users in the same room to access the Internet - and which are also a lot faster than 3G phone systems.