Producer Benefits

Producer Benefits
One of the reasons many IP backbone carriers went bankrupt is that they could not deliver bandwidth to
a broad market. The bottleneck to the last mile remains the access controlled largely by telephone
companies with their ubiquitous twisted-pair copper wire. Cable TV companies now service a majority of
American homes.
Like Ethernet, Wi-Fi is not just about the technology itself-it is about what the technology empowers and
the applications that result from the technology. Understanding the indirect effects of Wi-Fi is key to an
investor's ability to profit from the technology. Figure 8-7 illustrates the Wi-Fi pull-through phenomenon
on various segments of the PC and communications tech food chain. The following pages explain in
more detail how Wi-Fi affects each technology segment discussed in the following sections. One example
is the proliferation in Wi-Fi-enabled laptops. Intel will include 802.11a and 802.11b technology on their
computer chips. Wi-Fi will probably become as common in computers as universal serial bus (USB) or
Ethernet connections are now.
Figure 8-7: The economic pull-through of wireless broadband, Source- Goldman Sachs
Wi-Fi will create a cycle of adoption that will drive technology purchases and upgrades by enterprises,
retailers, service providers, government, and individuals for the three following reasons. First, it offers a
means of delivery that is cheaper, simpler, smaller, and more convenient than a wired (telephone and
cable TV) means of delivery. Wi-Fi service requires either the presence or installation of a broadband
connection and/or traditional LAN equipment. The larger the environment-that is, the number of coverage
areas, or hot spots, the number of users supported, and so on-the more infrastructure equipment and
network bandwidth are required, thus spurring sales of APs, wireless routers, antennas, and so on.
Once Wi-Fi is available in a given area, it will spur the purchase of more mobile computers, personal
digital assistants (PDAs), and other networked devices. This is particularly relevant in the home, where
Wi-Fi enables broadband connections to be shared easily among multiple PCs and, ultimately, other
devices. Major PC vendors are beginning to include Wi-Fi support now, and PC cards can be purchased
for as low as $30, with prices continuing to drop. Chip-makers and laptop computer manufacturers now
include Wi-Fi capabilities in their products.
New applications will drive the uptake of Wi-Fi. These market drivers include home networking, home
multimedia, smart appliances, and voice over 802.11. These applications require new platforms such as
home APs and Vo802.11 telephony devices.[11]
Computer Sales The expansion of the demand for broadband will create additional demand for
computers and networked home appliances. As of June 2000, approximately 40 percent of all U.S.
households do not have a computer.[12] Clearly, these households are not equipped to connect to the
Internet at any speed. Of the 60 percent of households with computers, many will need to upgrade their
equipment to obtain greater processing speed, more random access memory (RAM), or greater harddrive
capacity. Still others will choose to buy more advanced equipment such as storage devices, MP3
players for music downloads, and liquid crystal display (LCD) projectors for viewing video downloaded via
a high-speed Wi-Fi connection. The applications that the following sections explore (video and telephony)
could very well drive much of the remaining 40 percent of households without computers to make the
leap and install a computer in their homes.
Crandall and Jackson estimate broadband's stimulus on household purchases of broadband-related
equipment would be that U.S. household spending on computer equipment, peripherals, and software
would resume its growth rate of 14.3 percent per year during 1991 through 1995, rather than continuing
at its growth rate of 10.4 percent per year during 1995 through 1999. If growth returns to its pace in 1991
to 1995, by 2006, total spending would be $80 billion, rather than $66 billion-an increase of $14 billion. By
2011, the difference would be $53 billion per year. If the broadband revolution accelerated household
equipment expenditures by another 3 percent per year to 17.3 percent annual growth, the additional
spending in 10 years would be $110 billion per year.[