The Wireless LAN (WLAN) market continued to shine, as unit shipments grew 15 percent overall in 2Q02, bringing some much-needed sunshine to the dreary networking technology industry, according to In-Stat/MDR (www.instat.com). However, the high-tech market research firm reports that end-use revenues remained flat, with overall end-use revenues falling 1 percent over the quarter. This tremendous outpacing of equipment volume growth to revenue growth points to the rapid commoditization of the 802.11b equipment market.

“Although the slightly negative revenue growth is troubling for WLAN equipment manufacturers across the board, the falling margins have both driven increased 802.11b volume shipments, as well as spurred vendors to quickly roll out new, high-speed products,” commented Gemma Paulo, a Senior Analyst with In-Stat/MDR. “This is not an industry that is lacking in innovation, as even the low-end vendors are finding ways to differentiate their WLAN products, this is a very good sign that there is still a significant amount of momentum in this market.”

In-Stat/MDR also found that:

• Networking giant Cisco continued to dominate the market in terms of overall revenue, although small business and home specialist Linksys topped the market in terms of unit shipments.

• The 802.11a market continued its healthy growth, with players such as Proxim, Intel, Netgear, D-Link, SMC, and Actiontec contributing to this volume and revenue growth. 802.11a newcomer Linksys grabbed 5 percent of the quarterly 802.11a volume share even though it started shipping very late in the second quarter.

• The home market continued to drive overall WLAN market growth, with total home shipments growing 20 percent, spurred on by the popularity of low-cost wireless broadband gateway products (combo AP and router devices often with multiple Ethernet ports and optional print servers). Linksys, D-Link, Buffalo, Apple and Netgear all performed strongly in the home/SOHO market.

• Asia Pacific remained a high-growth market for wireless LAN growth, with Taiwan, South Korea and Hong Kong coming on very strong. D-Link registered impressive growth in Taiwan and AsiaPac in general.

The report, “2Q 2002 WLAN Market Analysis” (#IN020201WL), contains market shares and forecasts for NICs and access points, by technology (802.11b, 802.11a, others), and by market (business and consumer).

In another report, “Public WLAN Service: Mobile Operators Mustn't Miss the Boat,” In-Stat/MDR notes that if they don't act quickly, mobile operators may miss their chance to get a critical head start in the burgeoning public Wireless LAN market.

The high-tech market research firm reports that offering WLAN services today will enable mobile operators to experiment with broadband services, to combine them with their GPRS and CDMA 1x RTT offerings, and migrate users to WCDMA when it becomes available. If they delay in implementing WLAN technology, competitors will get a sole head start over mobile operators, covering all the hotspots and competing head-on with their future services.

“Public WLAN services will help educate users on WWAN data usage, thus increasing their usage and adding to overall data ARPU incrementally while helping to alleviate the decline in voice ARPU,” says Donald Longueuil, an Analyst with In-Stat/MDR. Mobile operators will be able to contain the potential revenue erosion from competitive WLAN providers by offering public WLAN services themselves.

“Entering this new market will not only provide them with a logical service line extension, but it will also allow them to defend their valuable future next-generation revenues.”

In addition, they will be able to address a demand that they currently do not meet, increasing their overall data cash flows. According to Longueuil, “Every mobile operator could achieve increased wireless data revenue if they implement a WLAN solution properly. But to do this, they must start now, either by growing organically or by purchasing a WLAN service provider. Delaying entry into the market will likely prove detrimental in the long run.”

In-Stat/MDR has also found that:

• WWAN/WLAN as a combined offering achieves approximately $676 million greater revenues worldwide in 2006 that offering WWAN alone. Mobile operators' overall cash flows could increase 51 percent, as offering WLAN service will not only generate revenue for that service, but will also cause an addition to WWAN usage and cash flow

• In 2006, of the total public WLAN users worldwide, approximately 52 percent will be paying their service bills to WWAN operators. Fairly consistent growth is forecasted throughout the world, particularly in Europe and Asia/Pacific. Growth will be strongest in early years, as the market is being developed, since mobile operators will have the CAPEX and desire to be the first to market, and to attract and solidify a user base.

• Due to the number of mobile operators in Europe and their deployment strategies, Europe should lead the other three regions in total number of mobile operator WLAN users.

• There will be approximately 5,000 hotspots at the end of 2002 worldwide and approximately 41,000 at the end of 2006. Although private non-telecom companies own the majority of public hotspots today, that majority will shift to the mobile operators by 2006.