You might never have heard of it, but Microsoft's chief executive, Bill Gates, has called it "explosive". Technology commentator Nicholas Negroponte has said it will change "everything you assumed about telecommunications". It is a technology that could upset three years of planning by Britain's mobile phone giants, not to mention at least £22.5bn of investment.

The "it" in question is Wi-Fi - or Wireless LAN. And the technology behind the bland title is being touted as the innovation that could provide the beleaguered telecoms industry or, at least, parts of it, with its brightest hope this year.

What is Wi-Fi? It is a way to access a fast internet connection without using wires. Flip open your Wi-Fi-equipped laptop in a wireless "hotspot" - some coffee shop chains or airport departure lounges already have them - and you can surf the net or collect your emails without ever plugging a cable into your computer. Better still, it can all be done at broadband speed, and the technology that enables all this is cheap and easy to install.

Although Wi-Fi is ready to become the hot thing of 2003, the technology behind Wi-Fi is nothing new. It has been around for several years in various guises, even pre-dating the internet boom years, and has solidified into an official standard called 802.11, which should mean any one piece of Wi-Fi kit works with another piece. But the time is right only now for it to reach a mass market.

The rise of the laptop as a viable alternative to desktop computers, increased demand for broadband on the move and the delays and uncertainty surrounding third generation mobile phones (or 3G) have all helped the Wi-Fi cause. The latest versions of Windows and Mac operating systems both have built-in Wi-Fi capabilities. And, last summer, the government approved the deregulation of the airwaves in which Wi-Fi operates. That meant, for the first time, network operators were allowed to charge to use Wi-Fi hotspots. Suddenly the technology was all set to break out of its hobbyist niche.

Today, BT is leading the way in the race to roll out a network of hotspots. Last week, it announced a major extension of its Wi-Fi network, taking in dozens of hotel foyers, coffee shops and motorway service stations. Access costs from £6 an hour for casual users to £85 a month for unlimited use, with the company touting its service as half the price of 3G, and three times faster. BT Broadband also announced, on Monday, a £200 Wi-Fi base station for its domestic customers, hailing the arrival of "armchair broadband" in the home.

Meanwhile, rival operator T-Mobile has a handful of public hotspots in Starbucks coffee shops, free to use at the moment (in the US, a monthly subscription for unlimited use of T-Mobile hotspots nationwide costs around £32). It is expected to announce an expansion of its UK network - and a charging structure - in March. Another company, Megabeam, also has a network of hotspots, including one at Paddington station in London.

These companies have the head start, but are unlikely to have the market to themselves for long. Mobile phone operators are getting ready to move in. They see a threat to the £22.5bn investment they made in 3G licences for the UK which allow them to provide much of what Wi-Fi is now able to deliver today, much more cheaply.

Last week in Paris, France Telecom announced plans for a network of Orange-branded hotspots, a range of Wi-Fi home kits via its Wanadoo internet service provider, and other solutions for businesses keen to get in on wireless networking. Meanwhile, O2 has a network of hotspots running in Ireland, and a spokesperson says the company is exploring opportunities in the UK and Germany. The Hutchinson-backed mobile company, 3, which will launch the UK's first 3G service next month, also says it is monitoring the situation.

The only established mobile operator not to have announced plans is Vodafone. Wi-Fi is "very complementary" to existing mobile data services, a spokesman says, but he adds: "We have no firm plans [for Wi-Fi] bar monitoring the situation." Despite the company's cool attitude to Wi-Fi in public, however, behind the scenes there is clear evidence of serious thought being devoted to it. At a packed telecoms industry event last week that focused on the rise of Wi-Fi, Vodafone sent no fewer than eight staff, including a Wireless LAN commercial developer.

All those companies that have declared their hands prefer a future where customers own a 3G subscription and a Wi-Fi subscription from the same company. Dual-mode wireless cards in laptops, which already exist for the GPRS/Wi-Fi combination today, would provide a near-seamless mobile internet experience - at a price.

Privately, they fear Wi-Fi, already faster than 3G will ever be, will gain critical mass before most 3G networks are even switched on. One of Wi-Fi's main benefits, say industry observers, is that it delivers the applications we are already using on our computers. Email, web browsing, instant communications and gaming work perfectly via Wi-Fi. Unlike 3G, there is no need to dream up new ways to use this technology, or squeeze content on to a small screen, or compensate for the lack of a keyboard or poor battery life.

Richard Dineen, a telecoms analyst at the Ovum consultancy, has been researching Wi-Fi for the past 18 months. He says mobile phone operators are "putting on a brave face" over the threat posed by the technology. "Wireless LAN is a threat," he says. "It is a high-performance, low-cost radio technology that has very low unit costs and comparatively low operating costs. It's really cheap stuff.

"From the cellular operators' point of view, there is nothing more nauseating: they spent countless billions to buy into the 3G mobile data future, and suddenly out of nowhere comes this upstart data networking technology that seems to be shaping up as direct competitor. And I think it will be in this crucial business user segment. It's going to hit them where it hurts."

The mobile operators insist this is not the case: all say that Wi-Fi will be complementary to 3G services when they eventually launch. "People don't just want to be mobile in the pause, in a coffee shop or airport lounge," says Simon Gordon, of 02. "People want a dual mode card so they can connect out of the hotspot areas, on the move or out at clients. It is not going to replace GPRS or 3G."

Dineen is also quick to add that Wi-Fi is not good for everything. "Not every application is going to be suitable for delivery over Wi-Fi," he says. "There's the convenience factor, the immediate accessibility. My laptop takes 10 minutes to start up, and you've got to be sitting down to use it, and patient, probably indoors, in a secure environment." Some applications, like messaging, will work better on a 3G handset because it will always be on, and connected to the network.

The range of Wi-Fi network coverage is likely to be a major issue. "It's of low utility if I can only use my Wi-Fi laptop in a certain number of locations," says Dineen. "It's not that useful to me unless you knit together much more extensive coverage to make the service useful."

But some of Wi-Fi's limitations could be tackled head-on, if the promises being made by a San Francisco start-up become reality.

Vivato says it has developed a Wi-Fi base station that sends out its signals in a radius of between two and seven kilometres, depending on conditions. This compares very favourably to the 200 yards of today's standard Wi-Fi kit. To prove the equipment's effectiveness, the company has a single Wi-Fi base station on its roof providing wireless broadband for downtown San Francisco.

Hobbyists have long known that wireless communications could be teased out by beaming a concentrated signal. This new technology is the first to beam it out over a wider, long-distance radius. Vivato expects to start selling its technology next month.

"The current Wi-Fi technology for access points is a very unfriendly use of spectrum," says Vivato's chief executive Ken Biba. "Smart antennas allow you to make far greater capacity in the spectrum, and allow more efficient use of the spectrum in a more friendly way to more people. We're the first to pioneer that.

"What we can do with smart antennas is take that Wi-Fi signal, which is really low power, and take its range out to several kilometres, as opposed to hundreds of metres. And because we can put multiple of these antenna patterns in different parts of the frequency, we can speak to multiple things at once, which allows us to scale capacity."

The result is a transformation in the technology, from something that can provide isolated pockets of internet access to something that could serve hundreds of users over a much larger area - and at far higher speeds than 3G services are ever likely to manage.

"Frankly," says Biba, "3G is too slow. It is just not well architected for high-speed data. I suspect it will fail on its own merits."

Biba might be confident, but analysts are cautious about the potential impact of Vivato's new technology until the company releases more information. Although it will work with any of today's computers kitted out with standard Wi-Fi technology, the price of the new kit will be crucial. With domestic Wi-Fi access points costing as little as £100, the low price remains one of Wi-Fi's biggest selling points.

"The last thing you want to do with this wonderfully cheap, disruptive technology is slap a load of extra equipment costs on top," says Ovum's Dineen. "It will have to meet some fairly rigorous cost criteria. A lot of players have had enough of investing to have the best possible quality network; they want something that's actually going to be a cost-effective proposition. That's the mood at the moment."

But now the Wi-Fi genie is out of the bottle, developments are likely to continue thick and fast. Chipmakers Intel and AMD have both decided to start including the circuitry required for Wi-Fi internet access on the motherboards of new laptops. With Intel due to launch its Centrino chips next month, Wi-Fi could soon be a standard feature on many business models by the summer. With 3G still refusing to leave the starting gates, 2003 could be the year the cheap upstart of Wi-Fi started to turn the mobile internet hype into reality.

Links

BT Openzone
www.bt.com/openzone
BT's home Wi-Fi
www.bt.com/homenetworking
T-Mobile & Starbucks
www.t-mobile.co.uk/Dispatcher?menuid= phones_wb
Free community wireless
www.consume.net

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