New, Faster Wi-Fi Hardware Commands High Prices

SAN FRANCISCO -- Fast wireless LAN gear based on a draft version of the next industry standard is making inroads into the small-office and home market despite costing more than twice as much as other products.

In the second quarter, vendors worldwide sold about $25 million worth of routers and interface cards based on the first draft of the IEEE 802.11n standard, according to a report released Monday by market research company Dell'Oro Group, in Redwood City, California. The figure covers less than the full quarter because the first of the new products didn't go on sale until after the quarter began, said Dell'Oro analyst Elmer Choy.

The 802.11n standard is intended to boost the speed and range of wireless LAN gear through techniques involving multiple antennas. It has sparked some acrimonious debate among vendors and is not expected to become final until some time next year at the earliest. In the meantime, several vendors have rolled out products based on the first draft of the specification.

How Big a Piece of the Pie?

The new products account for a fairly small portion of the market: Draft 802.11n models made up about 8 percent of the router market by revenue, and interface cards about 6 percent. But that was despite an average selling price more than twice that of gear that uses the current 802.11g standard. An average "draft-N" router costs $86, versus $36 on average for an 802.11g router, according to Dell'Oro.

By contrast, when certified 802.11g routers were new in the first quarter of 2003, they commanded 29 percent of the market, Choy said. But the price premium then was much less: $115 versus $90 for an 802.11b router.

In addition to price, uncertainty over the standard has probably also dampened second-quarter sales, but Choy expects draft-N sales to accelerate as prices fall during the remainder of the year. The typical customer is probably an early technology adopter buying the new gear to extend the range of a wireless LAN throughout a home, he said. The speed could also benefit users who transfer video or other large files around the house.

Won't Meet Final Standards

It's likely that draft-N products won't be upgradable to the final standard once it comes out--but that won't hurt current buyers too much, Choy believes.

"The prices are low enough that people can upgrade [to a new product] when the actual standard is approved. It's not like they have hundreds or thousands of clients, like they do in an enterprise," Choy said.

Cisco Systems's Linksys division, the biggest seller of home wireless LAN gear overall, has extended its preeminence in the marketplace to the new category, according to Choy.