While global Wi-Fi use is set to explode over the next five years, revenue from the technology is due to shrink, leading to a consolidation of the market, according to a report released this week by Pyramid Research LLC.
Worldwide Wi-Fi users will number 707 million by 2008, Pyramid predicted, yet revenue per user will drop from around US$30 a month this year to $3 a month in five years.
The number of Wi-Fi users currently stands at about 40 million, according to Pyramid analyst John Yunker.
The low margins mean that only established providers can stay in the game, Pyramid said, and that the stand-alone Wi-Fi business is a "perilous one."
"Wi-Fi is a commodity, it's cheap to deploy and operators don't see it as a stand-alone" Yunker said.
The researcher predicted that larger players like Intel Corp. and Cisco Systems Inc. will take a lion's share of the market and communications infrastructure providers like Telefonaktiebolaget LM Ericsson, Alcatel SA and Lucent Technologies Inc. will eat up nascent Wi-Fi software and device manufacturers.
In the end, major providers will use Wi-Fi to fill out their portfolios and gain customer loyalty, Pyramid said, but it won't be the cash cow they may have hoped for.
The popularity of Wi-Fi networks at home and in the workplace will drive rapid growth, Yunker said, adding that business users are the quickest adopters.
Still, Pyramid predicts that hot spots will continue to grow, and that within five years there will be 80,000 in the U.S. alone.
More market predictions can be found in the Pyramid report, titled Worldwide Wi-Fi.