It was a striking combination of the old and the new. The old: a huge hot air balloon, looming high above the Ashton Court estate in Bristol last weekend. The new: the Intel branding on the side of the balloon, and the wireless internet-equipped laptops the passengers were toting.

The giant chipmaker was inviting observers to climb aboard and witness a technology it is hoping will take off under its own steam in the next few months. In the balloon's basket, without the aid of wires, the passengers could surf the net at broadband speeds.

It was all quite a wheeze, but one that Intel is betting big money on: the company is spending $300m (£187m) to persuade us that Wi-Fi - or wireless fidelity - internet access is the Next Big Thing, rather than a lot of, well, hot air. As part of their promotional effort they have embarked on a mammoth tour of the UK which has already taken in London, and continues at the Edinburgh International Festival this week.

At the centre of the fuss are the Centrino chips now being sold by Intel. They allow laptop users to log on to Wi-Fi networks, which beam out from base stations that broadcast and receive computer data wirelessly. These base stations - or hotspots - are physically connected to the internet by old-fashioned wires, completing the connection.

In practice, it means we can flip open our Centrino laptop (or any recent laptop from Apple, which pioneered consumer use of Wi-Fi) and log on over a latte in Starbucks, or have a surf while we wait for a plane, without fiddling with wires. A recent edition of this paper's G2 section was produced on Brighton beach, using Wi-Fi-equipped laptops and hotspots provided by the Brighton Pier-to-Pier project. We only need to be within around 100 metres of the base station to get a signal.

The possibilities, say the wireless pioneers, are near endless, freeing us from the desk-bound tyranny of fixed internet connections. For professionals, those people likely to buy Wi-Fi first, "the time is now", says Andy Greenhalgh, Intel's marketing director for mobile solutions in Europe.

"[Wi-Fi] gives you the ability to get in control of your life. I have had wireless laptops for about two and a half years now, and I feel I don't have to wait until I'm back in the office [to deal with] those 400 emails. I can nibble away at them when I'm in the airport, or when I'm in the taxi coming back from Heathrow. And when I get home, I've got a life again. It's stress relief."

Big money is being spent to make this dream a reality. As well as Intel's $300m, thousands of Wi-Fi hotspots are being rolled out by established names sucha s BT and T-Mobile, as well as lesser-known players like The Cloud and Broadreach Networks. They plan to make their money charging users to get online via their networks.

But, just months into this wireless revolution, alarm bells are already ringing. Critics say the technology is not going to be seized upon by computer users in the way the marketers hope. And they say the "build it and they will come" attitude of the new Wi-Fi networks is commercial suicide, especially when there are only 120,000 hotspot users in the whole of Europe.

One of the sternest critics of the Wi-Fi boom has been Lars Godell, a telecoms analyst at Forrester Research. In a recent research note, he said of some players: "It's as if the dotcom boom and bust never happened _ this bubble seems ready to burst."

Speaking this week, Godell remains sceptical about the appeal of lattes with broadband on the side. In short, he sees too many hotspots chasing too few users. "The usage rates of wireless Lan have been appallingly low," he says. He cites the case of Amsterdam's Schiphol airport, through which 41m passengers pass every year, but where there are only a dozen Wi-Fi hotspot users a day. Other hotspot operators confirm, in private, that they see similarly low usage numbers. Allied to that, Godell also doubts users' willingness to pay large amounts to join Wi-Fi networks - from £5.50 an hour with T-Mobile to £85 a month for unlimited access to BT's network of hotspots.

So, if we buy a Wi-Fi equipped laptop this autumn, could its wireless abilities suddenly become useless outside the home or office, as the companies behind the hotspots we plan to use suddenly start going out of business? The operators insist their business plans are sound.

"I have a nice dependable business that will run along well and will still be here in years to come," says George Polk, managing director of The Cloud. The Cloud plans to build the UK's largest network of Wi-Fi hotspots on top of broadband lines already installed for pub and club entertainment services, thereby cutting its costs. Even low levels of use - "a user or two a day" - are enough to cover his costs, he says, and each hotspot should see a return after 18 months of use.

Likewise, Broadreach Networks, a public net access provider backed by Virgin, is due to announce this week that it plans to roll out Wi-Fi along the west coast main line's stations and, later, in the Virgin trains themselves. Magnus McEwan King, the company's chief executive, is confident his company's approach will both engage users, and turn a profit.

"Wi-Fi is not enough - it's not a customer service," he says. "Public internet access is _ I'm addressing a fundamental need, not flogging a technology. Our product is connectivity outside the home or office." Like The Cloud, his company will provide a Wi-Fi network for other internet service providers - like Virgin.net - to sell on to its customers.

Getting exact figures on the amount being spent on building these networks, and the costs involved in maintaining them, is difficult. The big players don't break down what bits of capital expenditure go where in their accounts. The new arrivals, backed by venture capitalists, refuse to reveal how much they are investing, although analysts think around $1.5bn has been pumped into the Wi-Fi industry overall. (This figure includes companies making the hardware, as well as those building networks.)

And the investment continues. An on-train Wi-Fi announcement from GNER, on the east coast line, is expected this week. Meanwhile, The Cloud says it is running ahead of its targets for new hotspots, with more than 1,500 operational today. It expects to overshoot the 3,000 it planned for the end of December.

Will all this investment end in tears? Amish Kacker at Analysys, a telecoms consultancy, agrees there has been too much hype surrounding Wi-Fi. But he says the underlying business proposition remains sound enough. The impetus for the entire Wi-Fi world, he suggests, comes from the fact that more and more of us are getting Wi-Fi in the office, meaning our laptops are equipped and we know about the technology. "The problem is," he says, "there's always going to be a lead time between people getting equipped, and when they actually start using it.

"The challenge is that there's an amount of money going into this, and there isn't a return in the next couple of years. So the ones who are expecting a quick buck are probably going to die. But the ones who are investing a bit more prudently with this sort of time frame in mind should start seeing some return on this."

Meanwhile, Forrester's Godell is unapologetic about calling much of the Wi-Fi business into question, only months after it has started. But he is also anxious not to come across as dismissing the technology itself. "I'm going to get it at home," he protests.

"I think it will do very well in the home network environment, and with private hotspots inside company offices, university campuses and so forth," he insists. "But that is a very different setting to the area where we have seen the most hype so far, with public internet access."

With mobile phones offering email alerts, and affordable or free broadband access at home and at work, the critical question for Godell is: "How big is that need?" He continues: "I agree there is some need, but think there has been very pointed exaggeration of the need for internet access around the clock, and on top of that the willingness to pay for it. And that is the critical issue when you create a business plan."

Only in the next few months will we discover if those business plans are really ready to fly.