Falling Costs Drive Wireless LAN Penetration
The adoption and strong support of wireless standard 802.11b, coupled with the consequent decline in costs, are the main engines behind growth in the European Wireless LAN (Wlan) market, which continues to make headway with its associated cost savings and productivity-enhancing qualities, according to a new study by Frost & Sullivan, the international marketing consulting company, noting that the networking effect will act as the most significant contributor to the high growth rates in the European Wlan market.
Comprising access points, notebook, desktop and PDA add-ons as well as gateway devices, the European Wlan market, accruing sales worth $260.75 million, is set to reach $976 million in 2006.
Aided by plummeting broadband service prices and further development of the home consumer market, the main thrust of this growth will be derived from gateway products. Frost & Sullivan expects 802.11b to retain its dominant role in the market, with a steady migration to 802.11g and 5GHz over the next few years.
The market is now gaining critical mass, driving acceptance of the technology’s value.
Jan ten Sythoff, Wireless Programme Manager at Frost & Sullivan explains: “This is for the simple reason that the growth in the number of places and sites providing Wlan access runs in tandem with the increase in the technology’s popularity amongst end-users, thus expanding interest in Wlan access.”
However, the study states that security remains a chief concern. Along with end-user confusion caused by multiple standards, the advent of next-generation standards and the prevalence of a changing and uncertain regulatory environment, are having an adverse effect on sales and provide a stumbling block for accelerated mainstream deployment.
Frost & Sullivan expects combined 2.4/5GHz solutions to enjoy the most buoyant growth during the forecast period. Already, silicon developers’ endeavours are geared towards the introduction of integrated chips with the ability to provide connectivity to the two different spectra. Systems capable of interoperating with 802.11b, 802.11g and the 5GHz standard agreed for Europe would represent be the optimal product.
In the medium to long term, Frost & Sullivan believe that the market will move to 5GHz technology, providing increased bandwidth, scalability as well as added quality of service capabilities. However, 5GHz technology faces a number of challenges - mainly of a regulatory nature as there are strict legal requirements in this band to protect those industries which are using the spectrum already (predominantly radar and satellite).
These regulations are expected to enable commercial product shipments by 2003, but any decisions could potentially be delayed. Clearly, the study argues, that any deferment of 5GHz technology should broaden the scope for 802.11g technology to flourish. Frost & Sullivan highlights the need for 5GHz technology to develop further in order to facilitate the launch of leading-edge products, particularly in terms of reducing power consumption.
Differentiation
Vendors must differentiate or compete on price to be able to carve out an advantage and larger share in the Wlan market. In light of the influx of low-cost vendors into the Wlan market, Frost & Sullivan recommends participants to foster strong partnerships and to provide additional product capabilities in order to fortify their presence in the Wlan arena.
“Partnering also plays a key role in the penetration of different vertical markets. The applications in the various market sectors vary significantly. In logistics and retail, for instance, inventory control is the major application. Meanwhile in the healthcare market, the focus is access to patient records. The education market has different requirements and also needs a focused channel approach,” the study continues.
Robust market growth, along with increasingly complex end-user requirements and decreasing costs, has opened up a new wave of opportunities for market entrants. Although market leaders are increasing their market share, the market is becoming more fragmented. Frost & Sullivan observes a distinct trend towards aggressive pricing and distribution strategies amongst low-cost market entrants.
The study reiterates that vendors must place more emphasis on differentiation, for which there is significant potential. Added security and a clear upgrade path will soon become standard requirement in the industry. Alternatively, lower prices and ease-of-use will be significant factors, particularly for addressing the home and small business markets. An important channel to market will be the operators, who can provide an interesting solution by integrating broadband and Wlan technologies.
“Many of the leading vendors also have highly complimentary technologies and skills which are key to gaining a competitive edge. These include handheld computing, networking equipment, voice over IP and barcode scanning. Counting such technologies amongst a company’s offerings creates a unique competitive advantage as they can be more easily integrated, but partnering can also provide additional skills in delivering a complete solution” the study concludes.
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