IEEE 802.11 Industry overview Standards

Industry Overview

The wireless LAN (WLAN) industry is expected to grow at an annual rate of 35% over the next four years. Demand for WLANs in the United States alone should increase five-fold within the next five years. Major products in this industry are similar to those found in traditional wired network offerings. WLAN equipments range from network interface cards (NIC) to access points and wireless bridges.

From a broad perspective, the industry can be divided along lines of competing technology standards, the most notable of which are IEEE 802.11b, 802.11a, HomeRF, and HyperLAN.

l IEEE 802.11b, also known as Wi-Fi (Wireless Fidelity), is the most dominant standard in the industry at the moment. Over two-thirds of corporate WLAN environments use 802.11b equipment. The importance of this standard can be glimpsed in the fact that Microsoft has pledged to include 802.11b support in Whistler, the next version of its Windows operating system. Acceptance of the 802.11b standard can be attributed to a combination of falling prices and better data throughput (11Mbps).

l In comparison, HomeRF is a fading technology. Driven by low prices and reliability, its low maximum throughput (2Mbps) became a weakness as 802.11b prices fell. Lifting of key FCC regulations will allow HomeRF systems to reach speeds of 10Mbps by the end of this year. However, HomeRF would still be surrendering the advantage of early entry to 802.11b devices for 18 months during a very critical time period for the WLAN market. With 22Mbps 802.11b devices scheduled to hit the market in force very soon, the erosion of its price advantage has put proponents of HomeRF in a precarious position.

l IEEE 802.11a is high speed WLAN standard that uses the 5.7GHz unlicensed band. It operates at 50-100Mbps. Cisco is expected to play an important role in this segment. HiperLAN and HiperLAN/2 are European WLAN standards for short-range, high-speed wireless networking. HyperLAN has yet to make significant progress outside of Europe.

An issue of concern to the industry’s future is the rapid advances in the development of 802.11a-based high-end WLAN solutions. Operating in the 5.7GHz band and relatively immune to interference, 802.11a does not have to deal with performance degradation resulting from interference with Bluetooth radio devices. Its high bandwidth (55-100Mbps) will also make it a better competitor against rapidly advancing wire-based solutions. Cisco Systems’ purchase of Radiata’s 802.11a technology seems to be banking on that possibility. Even so, Cisco and other industry leaders expect 802.11b to be the driving component in most WLAN devices for the foreseeable future. Conflicts arising from patent-infringement claims are not least among the reasons for this prediction. Wi-LAN of Canada will be pursuing legal action against Cisco for violating its US patent rights on OFDM technology, which is an essential component of 802.11a implementations. Texas Instruments’ royalty-free PBCC is likely to replace OFDM as the future technology of when the IEEE meets to decide standard specifications early this year, which may cause a market split in the broadband WLAN market until a clear winner emerges.

Thanks to the wide vendor support for IEEE 802.11b and price drops, WLAN systems are finally taking off. A recent study revealed that 21% of corporations had deployed WLANs. That number is slated to reach 50% by the end of the year. Airports, convention centers, and hotels are also experimenting with WLANs to increase the value of their services. With WLAN-laptop integration on the horizon, business travelers would doubtlessly find wireless Internet access convenient. Some hotels already include wired LAN connections, but WLANs would eliminate significant wiring costs while simplifying management. Although wireless LAN equipment remains more expensive than wired LAN equipment, the gap is closing fast. Absence of costs and inconveniences associated with wired networking is no longer offset by the expensiveness of WLAN devices, and as such time is ripe for market growth to really take off. In order to take advantage of this unique opportunity, WLAN businesses must increase service availability to accelerate the proliferation of users. Wayport, a Texas company, builds wireless networks in hotels and networks, charges for access and shares revenues with the location owners. The synergy in this business model is obvious: WLAN offerings attract more clients to hotels, and increased hotel customers result in more WLAN access revenue.

Schools would be the next market to embrace wireless networking. With lower equipment prices, WLANs make it possible to share a limited number of computers, moving them freely between classrooms. Coffee shops and restaurants are in the process of deploying WLANs as well. Starbucks has teamed up with Microsoft to make wireless Internet access available at most of its locations by 2002. WLANs in theatres and malls are expected in the future, although the revenue models for those markets are less clear than others. Price erosion is helping wireless networking equipment find their way into homes as well. Networking kits, including a base station, are available at $400 and prices are dropping fast. The 11Mbps throughput achieved by 802.11b equipment has made high bandwidth uses such as streaming video delivery feasible, leading to new product concepts. Sony’s PCF “Airboard” delivers video content via 802.11b WLAN to a portable LCD screen. Sony developed the product in conjunction with Intersil, the world leader in 802.11b chipsets, which reflects the increasingly cooperative industry atmosphere.

Traditional WLAN uses such as warehouse inventorying and telemedicine will increase as well, lower cost and higher bandwidth providing the incentive for more extensive use.

Despite the flurry of activity in the WLAN industry, barriers to full realization of market potential remain. Corporate IT managers cited absence of compelling need (25%) and perceived benefits (10%) as the most common arguments against the deployment wireless LANs, while 20% had not even considered WLANs as a potential networking solution. This points to a lack of public awareness regarding WLANs, considering the obvious benefits in cost, mobility, and manageability that it offers. Fortunately it is a problem already in the process of being resolved. Integrated WLAN is expected to be the drive the growth of PDA and notebook sales, and thus likely increase end-user awareness of the technology. With networking industry giants like Cisco, Lucent, and Nortel offering 802.11b WLAN solutions, the support base has been greatly expanded. Consumer electronics ideas such as Sony’s PCF initiative will help increase overall awareness as well.

There are several noteworthy industry trends that are shaping the market at the moment. Arguably, the most important solution has to be falling prices. Lower prices have finally made wireless networking economically attractive in comparison to wired solutions. Another is wide acceptance of IEEE 802.11b, and the resulting development of interoperable products that has allowed the industry to overcome early market fragmentation created by disputing standards. With standard 802.11 high-rate (b) connections reaching 11Mbps, WLANs are now competitive with wired LANs speed-wise. Combined with lower prices, the higher data rates have made WLANs viable replacements for wired networks. Increasing integration of wireless networking features into PDAs and notebooks, as mentioned above, are increasing awareness of WLAN products as well as accelerating chip sales while creating demand for wireless infrastructure. Perhaps the most significant trend, although less apparent at the present, is the convergence of data, voice, and video. Sony’s PCF device illustrates the trend very well. WLAN technology has potential to be used in a number of consumer electronics devices. Similarly, so-called 3G (third-generation) mobile handsets revolve around the concept of data/voice/video convergence. Wireless LAN-enable devices may end up competing with 3G handsets as mediums of content delivery.

It looks more and more as if 802.11b will be the WLAN standard for 2001. The early entry factor, along with support from traditional networking giants and lower pricing has established it as the WLAN option of choice among consumers as seen by its penetration level in the corporate market. The market should grow to around $0.8~1 billion by the end of this year. Of course, HomeRF’s proposed increase in throughput may disrupt that momentum. HomeRF is seen by many to be a more stable standard that supports convergence technologies such as Voice-over-IP very well. Even if HomeRF makes some headway this year however, it would be difficult to displace 802.11b as the leading standard. In fact the most potent challenger might be 802.11a, the high-bandwidth solution that rivals the speed and reliability of wired LANs. Many vendors are already offering or developing 802.11a product lines. However 802.11a probably have to wait until it can start displacing 802.11b as the primary WLAN standard as it is only reasonable to expect that industry leaders will want their current product offerings to reach market maturity.

Key players in the WLAN equipment market include Lucent, Symbol, Proxim, Cisco, and Breezecom among others. Intersil and Lucent are the only major chipset providers.

Cisco Systems entered the WLAN market when it acquired Aironet in November 1999. Cisco’s Aironet line of products is based on the IEEE 802.11b standard. The company arguably has the most momentum of all aforementioned vendors. Cisco’s WLAN devices, which include NICs, APs, bridges, and routers, heavily populate some high-profile networks such as Microsoft’s Redmond campus, and the University of North Carolina at Chapel Hill. With the acquisition of Radiata and it’s pioneering 802.11a technology in November 2000, Cisco is in a better position than any of its competitors to break into the high bandwidth (55-100Mbps) WLAN market. It is also one of the most balanced WLAN companies, possessing significant market shares in every major WLAN product category (NIC, Access Points, Bridges).

At one point Proxim was the leading WLAN equipment maker, with 37% share of the market. Unfortunately for the company, the frequency hopping standard (HomeRF) on which its products were based slowly lost market share to the speedier IEEE 802.11b standard. In 1997, when both technologies were limited to around 2Mbps throughput, HomeRF devices accounted for over 60% of the market. Since then Proxim has seen its market share drop as HomeRF lost popularity, reaching 12% in 1999. 11Mbps 802.11b devices have been on the market for 6 months now, and 22Mbps equipment will be available by the end of 2001, while HomeRF will reach 10Mbps by that time. Wisely, Proxim diversified its product line to include 802.11b devices, perhaps saving itself in the process. With Bluetooth devices destined to hit market with increasing force, HomeRF, which causes less interference between WLANs and Bluetooth PANs (personal area network), might regain some precious ground. Backed with over 50 OEMs and a balanced, low-priced product line, Proxim still remains a powerful force in home and SOHO segments.

Along with Cisco, Breezecom is among the leaders in building-to-building bridge sales. More specialized than other major WLAN names, Breezecom is focused on this long-range equipment that connects LANs to other LANs, forming a WAN-like backbone. The company also manufactures NICs and APs, although it does not have a significant market share in those high volume products. Symbol is another niche company, but in a different way. Symbol WLAN equipment is heavily preferred by the retail industry, and it holds a dominant share of that market.

Despite its recent financial struggles, Lucent remains a key player in the WLAN industry. The company’s microelectronics and Orinoco WLAN divisions were spun-off as Agere Systems. Its WLAN products are still shipping high volumes and its microelectronics division supplies some 20% of the demand for 802.11b chipsets. Intersil, the undisputed leader of 802.11b semiconductor sales with its highly successful PRISM and PRISM II chipsets, may take advantage of Lucent’s crisis to increase its already near-monopoly market share as price decreases accelerate sales growth. Average wireless NICs go for around $130, with some priced under $100. Access points are now available for as low as $200. The price downfall is a result of industry consensus on wireless data transmission standards, namely 802.11b, which specified direct sequence spread spectrum (DSSS) as the default technology. This led networking giants like Cisco to enter the market, creating huge economies of scale. Market size should exceed $1.2 billion by the end of 2001 by most estimates, and a quick verification using average prices and Intersil’s chipset shipment figures confirms it.

	Avg. Price	Price Range	% Of total units*
NIC	$137.73	$90-180	81.19%
AP	$569.29	$200-1000	16.91%
Bridge	$1382.27	$1200-1500	1.90%

Estimated 2001 802.11b chipset shipments = 500,000
Total Market Size = (Avg. Price ´ % ´ 500,000) + … = $1.17 Billion
* Average of three independent estimates

IEEE Committees On Global 802.11x standards
a/b/c/d/e/f/g/h

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