Wi-Fi Growth To Accelerate But Challenges Remain

As mobile penetration reaches saturation point in many markets, wireless operators are committed to finding new revenue streams and Wi-Fi is seen as the next big thing. Allied Business Intelligence claims that worldwide hotspots will grow from 28,000 this year to more than 160,000 in 2007 (see Wi-Fi Hotspots On Verge Of Growth, Says Report).

Uptake of services will rise accordingly with the Pyramid study claiming that by 2008, there will be 707 million Wi-Fi users. By comparison, there will be 2 billion mobile phone users and 262 million users of fixed broadband.

However, revenues from wireless local area networks (WLAN) are unlikely to match those of broadband or mobile. John Yunker, an analyst at Pyramid Research, states that average revenue per Wi-Fi user (ARPU) will fall from $30 per month this year to $3.50 per month in 2008. Intense competition between service providers will lead to consolidation and smaller players are likely to go out of business.

“Price erosion is going to force the majority of ISPs under,” he said. “The ones that survive will have to provide localised solutions – likely targeting enterprise segments where the margins are better.”

With limited opportunities for standalone Wi-Fi operations, there is merit in using the technology to enhance existing products. Service providers are already integrating Wi-Fi into DSL and dial-up offerings in order to reduce churn.