Cisco is betting big time on wireless

You know a technology is hot when Cisco Systems Inc. starts throwing serious money at it. Because the company has spent about US$2 billion to purchase wireless data companies in the past year, it’s no stretch to say that wireless technology is the next sizzler.

And according to Cisco, the firm’s recent investments couldn’t have come at a better time as the wireless LAN market heats up, and user demand for high-speed access to corporate networks is at an all-time high.

“It looks like we timed wireless almost perfectly in terms of when we came to market and how much we bet,” Cisco President and Chief Executive Officer John Chambers said in an interview with Network World last December.

To wit: Cisco last November announced plans to acquire wireless LAN vendor Aironet Wireless Communications for US$799 million. Last February, Cisco and Motorola announced a US$1 billion alliance to develop and deliver a framework for Internet-based wireless networks. Cisco and Motorola strengthened that alliance by jointly purchasing Bosch Telecom in Richardson, Tex., and forming a new company called SpectraPoint Wireless.

SpectraPoint Wireless will focus on delivering data, voice and video to businesses over a fixed “last-mile” wireless infrastructure.

In October, Cisco announced a partnership with 10 huge companies – including Motorola – to drive standards for broadband wireless Internet services. And in November, Cisco rolled out its first products based on those standards.

What’s Cisco’s motivation? The local multipoint distribution services (LMDS) broadband fixed-wireless market alone is expected to reach US$2 billion-plus by 2003. LMDS is a last-mile technology that replaces the need for wired phone and cable lines.

“Broadband fixed wireless could pace DSL and cable” as the preferred broadband Internet access technology, says Mark Milazzo, Cisco’s director of wireless market development.

Wireless LAN connections are expected to be a US$283 million market in 2003, up from US$168 million in 1999, according to International Data Corp., a market research firm in Framingham, Mass. IDC expects record shipments in traditional (retail, transportation and warehousing) and nontraditional (health care, education and home) markets over the next three years.

Wireless was always hot for voice, and more than 10 years ago it looked as if data could be a killer application for wireless. But back then, the market never really materialized.

So why would that market materialize now?

In mobile wireless, handsets are inexpensive, and competition is driving equipment suppliers and service providers to differentiate their offerings. Data is one way to do that, Milazzo says.

Access is also ubiquitous in the mobile world, he adds.

“In the whole rest of the world outside of the U.S., mobile is the preferred way to communicate,” Milazzo says.

Fixed wireless provides cost-effective broadband connectivity without forcing customers to lease lines from a telco or lay new fibre. A single antenna is not only portable, but also can support up to eight T-1s, Milazzo says.

And in wireless LANs, an increase in speed from 2Mbps to 11Mbps and advances in the IEEE 802.11 standard have resurrected this once moribund market.

“For Cisco, it’s a natural evolution simply because they built the wire-line market, and now much of the data that was moved over wire-line will be ported over to wireless as well,” says Larry Swasey, vice-president of communications research at Allied Business Intelligence (ABI) in Oyster Bay, N.Y. “We’ve already seen the movement among Internet content providers, wireless operators, and hardware and software manufacturers to decide upon standards that should be used. Within the next 10 years, we’re going to see an increasingly high number of minutes – percentage of usage – on the wireless network for data.”

ABI believes shipments of broadband wireless customer premises equipment and wireless LAN gear will steadily increase over the next five years.

For broadband fixed wireless, Cisco is now shipping the WT2700 Wireless Technology Suite, a wireless WAN interface for the uBR7246 and uBR7223 Universal Broadband Routers. These products deliver two-way data, voice and video communications over the air to homes and businesses.

The WT2700 line is based on Vector Orthogonal Frequency Division Multiplexing (VOFDM) technology, which is optimized for use in congested city, suburban and rural environments. VOFDM overcomes line-of-sight, distance reach, subscriber coverage, installation and antenna size problems of existing proprietary wireless systems in the lower frequency microwave bands, Cisco claims.

On the wireless LAN front, the Aironet acquisition gives Cisco wireless adapter cards and “access points” that interface with wired infrastructures and manage wireless LAN traffic. Aironet also has wireless bridge products that provide point-to-point or point-to-multipoint connections among buildings.

Aironet’s customers include some of the leading Fortune 500 companies – Dell, Ford, Hewlett-Packard, IBM, Microsoft and Sears.

ABI’s Swasey says tens of millions of users worldwide will access the Internet this year using the Wireless Access Protocol (WAP). WAP is an emerging standard for using cellular phones and other wireless devices to access the Internet and advanced telephony services.

“Wireless will never carry as much data as wire-line, but all carriers will have to offer these types of services due to the increasing mobility of the work force,” Swasey says. “For Cisco, it just means 10 years of growth in this area. We’ve only seen the tip of the iceberg.”