Quotes of the Day

At Rockabilly Barbers in East Northport, New York, you can get an Elvis-era haircut while listening to vintage rock. But it's not all throwback: Rockabilly also offers the hottest new networking technology on the planet. Proprietor Robert Wagner, an ex-Marine, noticed that many of his patrons would lug their laptops in to do a little work while waiting for a trim. Spotting an opportunity, he installed a wireless fidelity (Wi-Fi) network in the barbershop to offer customers high-speed wireless Internet access. "I've got lots of musicians and business executives who come in and read e-mail," Wagner says. "Some even edit video online while they wait. We aren't your father's barbershop."

And Wi-Fi isn't your father's Internet connection either. Once dismissed as an obscure toy for geeks and technophiles, the technology is going mass market and now has the troubled tech industry rocking 'round the clock. Wi-Fi, the marketing moniker for a communications standard with the impossibly nerdish name IEEE 802.11b, makes it possible to log on to the Internet without cables.

Families use Wi-Fi networks to lounge with their laptops by the pool, or connect multiple PCs to a shared Internet connection without laying cable throughout the house. Thousands of public Wi-Fi networks — hot spots that provide wireless Internet access within a range of about 100 m — are popping up in airport lounges, coffee shops, hotels, pubs, ferryboats crossing the Baltic Sea and, of course, barbershops.

While users may love the easy access, Wi-Fi's impact on mobile-phone operators may be less welcome. Mobile-phone firms spent billions to upgrade networks for Internet-style services, but now Wi-Fi is doing it better, quicker and at lower cost, cutting into revenues from fast data networks like gprs and potentially undermining the big upgrade to third-generation (3G) mobile-phone technology before those networks are even completed. Whether hot spots can make money for cellular operators is still unproved — but then so is the business case for 3G. "Mobile operators shouldn't ignore this," says Maja Kecman, an analyst with the Cambridge-based consultancy Analysys. "The impact of Wi-Fi will be substantial, and it has been underestimated."

Mobile operators would do well to act fast. North America and Europe already have roughly 5,000 Wi-Fi hot spots in public places like airports and coffee shops, a figure that's expected to rise to nearly 90,000 by 2007. Total revenue from public Wi-Fi access in the U.S. was $22.5 million last year but could hit $2.8 billion by 2007, according to Analysys. In Western Europe, Wi-Fi revenue was $11 million last year and is expected to rise to $2.6 billion over the same period. In the U.S., the main revenue drivers are likely to be corporate users, but Analysys predicts small- and medium-sized businesses will drive growth in Western Europe. Of course, we've heard promises about the great wireless future before. Yet Wi-Fi could well be real. "There is no doubt about it: Wi-Fi is a big deal," says Maribel Dolinov of Forrester Research. "But the hype surrounding it is getting a little tough to swallow."

There's no denying that Wi-Fi is catching on. More than 18 million shipments of Wi-Fi equipment were made last year, up 60% from 2001, and could double by 2006, according to technology research group In-Stat/MDR. The U.S. is still way ahead of Europe, partly because there are more laptop users in the U.S, but the gap is closing. Eventually, Europe could well drive Wi-Fi use over mobile phones, the tech toy of choice for Europeans.

The Wi-Fi phenomenon is relatively young, but the underlying technology dates back to World War II, when the avant-garde American composer George Antheil and the sultry Hollywood starlet Hedy Lamarr met at a dinner party. Antheil, an early proponent of "machine music," and Lamarr, an Austrian exile and passionate opponent of the Nazis, came up with an idea that would help protect radio-guided torpedoes from being jammed. Instead of using one signal to direct the missile, they invented "frequency hopping," which regularly changes the signal that guides a torpedo, thus making it impossible to jam — and paving the way for today's Wi-Fi networks, which operate on a similar principle.

Fast-forward to the Netherlands at the end of the 1980s. Engineers at NCR, a company owned by AT&T that made cash registers and atm machines, were trying to figure out a way to connect cash registers through a wireless network. They hoped to save department stores bundles of money by enabling managers to easily move registers around stores without the expense of repeatedly installing the wires necessary to connect them to the company's computers. The NCR unit that finally solved the problem eventually became Agere Systems, a spin-off of Lucent Technologies. The first Wi-Fi products were clunky PC cards that connected cash registers to company computers. Then, in 1999, Apple made a bet on Wi-Fi, equipping its laptops with receivers and launching the AirPort transmitter. Slowly, Wi-Fi began taking off.

Now the big guys are starting to pile in. Early last year, T-Mobile, Deutsche Telekom's mobile arm, bought MobileStar Network, which operated 500 Wi-Fi hot spots in Starbucks coffee shops in the U.S. Other big carriers — France Télécom's Orange, Swisscom, Verizon Wireless, among others — are joining up too. Deutsche Telekom is taking its Wi-Fi strategy to Europe by wiring up Starbucks franchises and negotiating hot-spot deals in other key locations on the Continent. "Our plan in Europe is to set up Wi-Fi networks across our market in airport lounges, hotels, public spots, railway stations," says Nikesh Arora, chief marketing officer for T-Mobile International. T-Com, Deutsche Telekom's fixed-line business, is now selling 199 Wi-Fi kits for use in the home and by small businesses.

Wi-Fi could open up new possibilities in entertainment too. The PCs of today's rip-and-burn generation are chock-full of MP3s, videos and digital photographs. But the problem has always been moving music and video off the PC and onto the home entertainment system. Now firms like Hewlett-Packard and Philips have devices on the market that use Wi-Fi to connect computers with stereos and TVs. The systems aren't perfect, but they are improving rapidly. At 11 megabits per second (mbps), most home Wi-Fi networks are still too slow to beam video from the PC to a Wi-Fi receiver. The next step is 54 mbps, which will support streaming video.

There are a few drawbacks to Wi-Fi. Operators that charge for the service, like T-Mobile, aren't making it cheap to use. Logging onto T-Mobile's Wi-Fi network at the Starbucks at Hackesche Markt in downtown Berlin is easy with a laptop and a credit card. Within minutes any road warrior can sign up, pay and be off surfing at 11 mbps, fast enough to watch the new Tomb Raider trailer. But the cost — starting at 7.95 for one hour — discourages regular use. Another problem with laptops is that Wi-Fi sucks the juice out the battery faster than you can say MP3. It's possible to configure the laptop to use less power, but the industry recognizes this as a big problem, especially when Wi-Fi moves to cell phones.

The coverage in hot spots is also small; leave the café and your connection dries up. And the hot spots can be hard to find in the first place, though that's getting easier thanks to companies like Boingo Wireless of the U.S. Boingo has what it calls "sniffer" software that detects which Wi-Fi networks are on and whether the operator charges, and then allows the user to choose which network to log onto. The WiFinder website (www.wifinder.com) is another option. The site has a search engine that locates hot spots worldwide by city or country. But it's far from perfect. A search turned up 37 listings for Berlin, but some of them were actually in Hamburg. WiFinder has a few bugs to work out before the IPO.

The biggest criticism of Wi-Fi has been that it's not robust enough to replace sturdy always-on data networks like gprs and 3G. But WAN International, based in Halden, Norway, may be debunking this assumption. Instead of setting up isolated hot spots, WAN is building what it calls Wi-Fi "zones," the largest of which has a radius of 12 km. WAN has built its own radio antennas to transmit Wi-Fi signals over long distances, allowing users to move between local Wi-Fi networks and wide area networks. Bjorn Eilertsen, WAN's ceo, says the Wi-Fi networks in Halden cover 65% of the city. Networks are also under construction in Oslo, Fredrikstad and Sarpsborg.

Five telecommunications operators in the Asia-Pacific region have joined together to create a similar long-distance Wi-Fi network. The Wireless Broadband Alliance — made up of Korea Telecom, China Netcom, Maxis, StarHub and Telstra — is developing and marketing Wi-Fi services in Korea, China, Malaysia, Singapore and Australia. The goal is to expand the base of 8,600 hot spots to more than 20,000 by the end of the year. With that kind of coverage, Wi-Fi is no longer a niche technology, but a fast, always-on network that could siphon off a significant amount of revenue operators had hoped to use to refinance the huge investment in gprs and 3G.

It's too late for cellular operators to stop Wi-Fi, says Scott Rafer, the WiFinder chairman. "People in Europe are waiting for T-Mobile and Vodafone to get more active," he says. "Wi-Fi isn't going to replace GPRS and 3G, but it's going to make them a vast amount cheaper." Cheap, convenient wireless Internet access sounds great. If Wi-Fi hot spots really do merge into zones, it's a good bet that consumers will soon be flooding them.

• WILLIAM BOSTON
• Wi-Fi makes networking easier