Wi-Fi opportunities: rural Mexico has looks of prime market. (Tech Talk).

If you don't know what Wi-Fi is yet, a few marketing folks plan to fix that.

Computer chip manufacturer Intel recently launched a US$300 million advertising campaign to introduce its new Centrino wireless-enabled laptop chips. Much of its investment is focused on promoting public awareness of Wi-Fi.

In basic terms, this wireless networking technology allows computer and PDA (i.e. Palm Pilot) users with US$70 wireless network cards to access the Internet over the same frequencies used by microwave ovens and cordless phones.

The fact that Wi-Fi uses parts of the radio spectrum that do not require government licenses means individuals and businesses can roll out wireless network access points quickly, cheaply and virtually anywhere.

EXPLOSIVE GROWTH

Rapidly, Wi-Fi has emerged as the de facto standard for wireless computer networking, much in the same way that Ethernet technologies came to dominate the wired network industry. The Meta Group recently projected that 95% of new laptops will have integrated wireless capability by 2005.A number of hardware manufacturers have introduced Wi-Fi access cards for PDAs, cellphones and other handheld devices.

Central to the penetration of Wi-Fi has been the development of the "hotspot" business model, targeted toward the traveling and mobile workforce. A hotspot is a public access point--generally a hotel, airport or restaurant--from which users of computers and devices with Wi-Fi networking cards can access the Internet.

In December 2002, there were approximately 3,000 hotspots in the States. That number will grow to more than 10,000 by year's end and 30,000 by 2005. Current economics mean that each needs about 20 subscribers to break even.

Major Wireless Internet Service Providers (WISPs) have already landed in Mexico. U.S. hotspot network firms Boingo and iPass each offer access from hotels, airports and convention centers in several cities around the country.

Still, the development of hotspots in Mexico has been relatively slow (I would estimate there are only about 50 in the entire country), largely owing to the low penetration of laptops.

MOBILE INTERNET DREAMS DISSIPATE

Whatever the future of this new industry, it has changed the investment plans of mobile phone companies in Mexico and throughout the world. The development of high-speed mobile phone data networks (known as 3G) has slowed to a crawl, as operators have found it too expensive to migrate cellular telephone networks to GSM or CDMA Ix technologies.

In Mexico, the push toward 3G Internet access has stalled. In the words of a Telcel executive with whom I recently spoke, "data services are not an important part of our forward-looking strategy."

The difference between 3G and Wi-Fi Internet access is striking. While Wi-Fi access speeds average 5Mbs today, real-world 3G speeds are generally about a hundredth of that, similar to that of a 56kbs dial-up modem. Wi-Fi connections also allow computer users to access the full Internet, while mobile phone-based connections are generally limited to text services and some specially formatted Web pages.

THINKING RURAL

Up to now, the buzz about Wi-Fi has revolved around the big dream of "broadband access - anytime - anywhere." Big aspirations like this inevitably require massive investments in network infrastructure and marketing in major urban areas.

Nevertheless, it is smaller Wi-Fi solutions that can provide Mexico with the most benefits. In particular, the Wi-Fi business case is most readily adaptable to rural Mexico, where this technology can extend broadband Internet service for a few hundred dollars per network access point.

Add to this the impending development of low-cost, Wi-Fi enabled Internet access, and rural Mexico could be wired much sooner than previously believed possible. This could be a huge pre-paid service opportunity, similar to the Plan Amiga that has brought more than IS million mobile phone subscribers to Telcel in recent years.

Now for the best part: Wi-Fi can be rolled out one access point and user at a time, so there is no need to invest millions before one sees a return on investment. And that should raise the interest of even the most cynical investor.

Bruce Sinclair ([e-mail]) is the Technology Industries Director for Infoamericas, a multinational research and consulting firm specializing in Latin American markets.