Dell'Oro: faster gear to drive Wi-Fi market

Consumers won't wait to snap up new, faster wireless LAN gear this year, research company Dell'Oro Group Inc. said Tuesday, even though the IEEE 802.11n standard responsible for the latest breakthrough probably won't be signed off on until 2007.

Products based on the draft 802.11n specification, which was approved last week, will make up about 15 percent of all the home wireless LAN routers shipped worldwide this year, said analyst Greg Collins of Dell'Oro, in Redwood City, California. He expects consumers this year to buy about 3 million pre-standard 802.11n access points and an equal number of PC Card clients for notebook PCs.

The new standard is designed for real-world throughput of at least 100M bps (bits per second) and will allow consumers to stream video around their homes, vendors say. Collins expects to see versions that are backward compatible with the current 802.11b/g standard as well as 802.11a, so users can upgrade gradually. By 2009, Dell'Oro forecasts the faster gear will make up 90 percent of consumer wireless LAN shipments. Enterprises will wait for the standard to be ratified and notebooks to hit the market with integrated 802.11n chipsets, but they will begin widely deploying 802.11n networks in 2008 and 2009, he said.

Consumers' embrace of the long-awaited faster gear will push the worldwide market for wireless LAN equipment to US$3.4 billion in revenue in 2006, up from $2.5 billion in 2005, according to Dell'Oro's forecast. It will give vendors a breather after years of declining margins and slow revenue growth in the market, because the early gear will be priced at a premium, he added.

That figure does not include DSL (Digital Subscriber Line) and cable modems with built-in wireless LAN capability. Those devices, which usually come from a service provider instead of being sold at retail, make up a growing portion of the consumer wireless LAN market, Collins said. Shipments of those devices doubled between 2004 and 2005, while shipments of stand-alone consumer Wi-Fi routers and access points grew just 30 percent, he said. The 802.11n gear will accelerate that trend as carriers roll out voice, video and data services and try to give consumers a way to share them around their homes.

"Wireless LAN in the consumer space is definitely moving toward becoming a platform for triple-play services from the service providers," Collins said.

For enterprises, 2006 will see a resurgence in the wireless LAN market, Collins said. Many were holding off in 2005 during an industry transition between traditional independent access points and wireless LAN switches with easier centralized security and management, he said. The turning point was Cisco Systems Inc.'s acquisition of wireless switch vendor Airespace, according to Collins. And although a large percentage of enterprise wireless LAN deployments still are in specialized industries such as health care, general offices have been adding the technology since 2004, he added.

While Cisco dominates the enterprise market with a share of about 60 percent, the San Jose, California, company's Linksys division commands the consumer sector with about a 45 percent share, according to Collins. Cisco's acquisition last year of TV set-top box maker Scientific-Atlanta Inc. could help it keep up as the market shifts to broadband gateways and set-top boxes with integrated wireless LAN, he said.

By 2009, the overall Wi-Fi market, not including integrated routers, will reach $4.8 billion in revenue, he said.