Where the Wi-Fi Money Is

The leader in this trend is Omni Hotels, a privately owned chain of 40 luxury hotels based in Texas. But other hotel chains, such as Wyndham Resorts, have followed suit, as have the McDonald's(MCD Quote) and Barnes and Noble(BKS Quote) retail chains. In February, Omni announced it had installed high-speed wireless networks at its Los Angeles, Dallas, Chicago and New York locations and planned to install it at other locations by year-end. If you don't have a notebook computer that's already equipped either with a wireless network interface card or a wireless chipset like Centrino, the hotel will lend you a wireless adapter that attaches to your Ethernet connection.

When you can pick up a piece of cutting-edge technology for the same price as a complimentary toothbrush, you have to figure that something is desperately wrong with the business model. Free wi-fi in hotels is a remarkable first step on a path that will probably progress at warp speed, much like cable TV in the 1970s. For a few years, hotels and motels advertised cable to visitors because it was a differentiating luxury, and they charged a pretty penny. Now it is a standard feature of rooms.

From High Margin to No Margin

How did wi-fi shoot down the path of high margin to no margin in record time? John Yunker, telecommunications analyst at Pyramid Research, said it happened because wi-fi is built on a standard that gives every hardware and software maker an equal opportunity to make the compliant products. You can't deviate from that standard and still have your products work in the network, so there's little opportunity to innovate cool differentiators.

Since wi-fi is one of the few growth areas for technology makers worldwide, virtually every major and most minor chip companies have crowded into the field. The competition has driven down prices for a notebook computer wi-fi card from $200-plus a year ago to around $50 today, en route to less than $30.