Where the Wi-Fi Money Is

Wilson uses Cisco routers at his head end and Orinoco-brand wi-fi radios made by Proxim; he runs the whole thing on Intel-based servers. But the whole operation, which obliterates the need for million-dollar switches made by old-school manufacturers like Lucent Technologies(LU Quote) and Ciena(LU Quote), isn't going to make equipment investors rich. The stuff is just too cheap, not to mention easy to upgrade and maintain.

Jamie Cusano, sales manager at Hyperlink Technologies, said he has Federal Communications Commission-certified kits that will allow anyone to broadcast a wi-fi signal as far as 20 miles. "You can buy $1,000 worth of equipment and circumvent hundreds of thousands of dollars in local-loop costs," he said. "This has bigger potential than most people realize."

With prices like that, it's easy to see how early efforts to charge a premium for high-speed public wi-fi "hot spots," such as the T-Mobile-powered spaces in most Starbucks(SBUX Quote) coffee shops, are likely doomed to the scrap heap of digital history. What's to prevent a mall operator from buying a high-powered antenna from Hyperlink -- perhaps one of the new ones coming from an interesting San Francisco start-up called Vivato -- and blasting wi-fi throughout its property as a loss-leading enticement for shoppers? An offer such as "Shop at the SuperMegaMall and Get Free Internet Access" would annihilate the Starbucks wi-fi model, where access currently costs a whopping $30 per month. If it's cheap and easy to make virtually every major retail location "hot" to attract diners, shoppers, readers, train riders and moviegoers, then there is no such thing as a hot spot. No spot, no geographically based service-business model as presently conceived.

Keys to Killer Apps: Security and Convenience

The killer apps for investors will probably be software that enhances security and permits seamless roaming between all types of wired and unwired networks. One company with a shot at being successful is iPass, an enterprise-focused company that aggregates a worldwide set of Ethernet, 2.5G, wi-fi and dial-up networks into a single service. iPass sells its service to companies that want traveling salesmen or executives to be able to sign into the Internet securely through one simple interface on their mobile computer, no matter whether they're in Singapore or Cincinnati.

iPass just signed a major deal with Cometa Networks -- the nascent nationwide wi-fi service backed by Intel, IBM(IBM Quote) and AT&T(T Quote) -- to share resources, and plans to make an initial public offering of its shares later this year. On Monday, Intel announced investments in four other wi-fi startups, including Vivato, that could be IPO candidates in the next couple of years.