WLAN: Freed, It Started Flowing

Even though 802.11b-based Wireless LAN (WLAN) has been in India for at least
three years now, it was only in 2002—03 that things started looking up in a
noticable manner.

The de-licensing of the 2.4 GHz frequency band–in which 802.11b operates–for
indoor use by the government was certainly one of the drivers of positive
development. Earlier, costs of buying spectrum apart, licensing also involved
other headaches. Getting a license was a long drawn and often a painful process.
Organizations deploying WLAN had to take the permission of not only the Wireless
Planning and Co-ordination (WPC) wing of Department of Telecommunications but
also that of the home ministry. An organization needed to approach WPC for
frequency allocation, every time a new user was added to the WLAN network. Still
worse, user organizations had to maintain an inventory movement register of WLAN
equipment.

The
growing awareness and acceptability of the benefits offered by the wireless
technology, coupled with a big drop in the WLAN equipment prices also made
several corporates and educational institutions deploy it for both indoor and
outdoor use.

Market Size

Although still few in number, many organizations began using WLAN as an
extension to wired LAN in FY 2002—03.

Voice&Data estimates that the market for wireless LAN products in FY 2002—03
was around Rs 12 crore. This primarily includes access points and PCMCIA cards.
Repeaters for boosting signals and outdoor antennas have not been included in
it.

Cisco was clearly the leading WLAN infrastructure vendor in the country,
commanding around 62 percent market share.

D-link, which entered the WLAN market only in 2002, came a distant second
with a 25 percent market share. Other vendors and the gray market occupied the
rest of the space. While Cisco, Ericsson and Proxim play in the high-end segment
of the market, D-link and SMC offered low-cost products.

Deployment Costs

Prices of access points and PCMCIA cards have dropped by more than 50
percent in the last one-year period. While the access point cost around Rs
40,000 in November 2002 (down from Rs 1 lakh a year ago), a PCMCIA card cost
around Rs 10,000 (down from Rs 17,000 a year ago). Access point costs further
fell to around Rs 20,000 and those of PCMCIA cards to around Rs 4,000. All this
has considerably brought down the per user cost of WLAN deployment.

Market Segments

It is still too early to define market segments in the WLAN space as the
market is in its infancy with most people largely experimenting with the
technology. However, the past year saw an emergence of three clear segments.
These include the educational institutes, enterprises (primarily software
companies), and the hospitality sector. As early adopters, these three segments
can be termed as the drivers of WLAN adoption in the country. The past year also
saw the emergence of a fad to build wireless hotspots in the country with some
restaurant chains taking the initiative.

Factors for Slow Growth

Even though WLAN deployments are now expected to grow at a faster pace,
bandwidth limitations and security concerns may still slow down the growth.
Throughput is limited to 5.5 Mbps on a shared basis on 802.11b, though
theoretically it can go up to 11 Mbps. Despite progress on the security front,
very few vendors offer a secure system. Most of the vendors have been just
selling boxes with only rudimentary security features.

The fear of interference from other networks that makes the WLAN network
unstable has also withheld many deployment decisions. A significant factor
slowing down purchase decisions has been the uncertainty created by the
emergence of other WLAN standards a la 802.11a and 802.11g offering better
throughput and security. Many buyers have been adopting a wait and watch policy
and waiting for the standards to stabilize. Constantly falling prices have also
led many people to wait.

Outlook

Even as the technology becomes more powerful, the cost of deploying it is
like to keep dropping. And as the technology stabilizes and offers higher
throughputs and enhanced security, more and more users are likely to see the
benefit of deploying WLAN as a means of enabling mobility. That is a foregone
conclusion.

From its currently small base, the Indian WLAN equipment market is likely to
grow at a significant rate in FY 2003—04. Apart from the networking market
leader Cisco (which had 22 partners specializing in wireless in FY 2002—03),
several other vendors are also looking at wireless as a high-growth area. The
market is likely to see more action in 2003—04 with Proxim, one of the global
leaders in the WLAN space, making an entry. It is much likely to eat into Cisco’s
share. This could happen because the Proxim WLAN equipment is likely to cost
less than Cisco’s despite offering equivalent quality and security features.

However, India–unlike the US, Western Europe, and the Asian countries like
Singapore and Hong Kong–is unlikely to see any significant springing up of
WLAN hot spots. This is largely because India has an insignificant laptop
penetration. Also, the availability of hotspots is one thing, and using them to
access the Internet is another. As such, hot spots that have come up or are
likely to come up in the next one to two years are likely to remain more fad and
less utility.

Ravi Shekhar Pandey