2/1/2005 -- The market for Wireless Fidelity (Wi-Fi) services is still gestating, according to market research specialist Infonetics Research, but should enjoy healthy growth from 2006 on.

In the near term, however, service providers will continue to grapple with fundamental business issues, including how Wi-Fi services should be priced and bundled, as well as the size of the potential market. Because of this, Infonetics predicts, deriving revenue from Wi-Fi services will continue to pose challenges for service providers—at least, until a workable business model takes shape.

“Despite slow growth in Wi-Fi revenue, there remains optimism about the technology and confidence in wireless broadband services,” said Richard Webb, an analyst with Infonetics, in a statement. “Many service providers seem to view Wi-Fi as the thin end of the wireless data wedge, driving demand and adoption of wireless broadband services.”

As with any inchoate business technology, it’s a good bet that a killer application will emerge which helps spur widespread usage. In the case of Wi-Fi, Webb predicts, Voice over IP (VoIP) over wireless LANs will likely fill the bill, both in the near-term as well as in the medium- and long-term. According to Infonetics, 50 percent of service providers said they will offer packetized voice services in 2006.

Elsewhere, Infonetics found that while Wi-Fi usage levels are growing, service providers haven’t had much luck driving subscriber growth. That’s not surprising, however: Companies reported that cost is the most important consideration they take into account when deciding to deploy a wireless technology, followed by reach and interoperability. What’s more, not all service providers are on the same page, Infonetics says: Many carriers view hotspots as part of a wireless broadband strategy rather than as a unique service.

In any enterprise environment, management is bound to be a concern, and Wi-Fi is no different. Infonetics said that authenticating users and controlling network access is the top network management challenge.

By 2006, one-third of service providers expect to offer WiMAX services that address a number of requirements, including backhaul for Wi-Fi hotspots; replacement for broadband fixed wireless connections; portable wireless Internet access; and DSL/cable broadband replacement technology for consumers.

Not surprisingly, the North American market has been the quickest to embrace Wi-Fi, Infonetics found, although with more than 7,000 hotspots, the Asia-Pacific region is the second-largest Wi-Fi market. Most hotspot rollouts in Europe have been in Scandinavia and Central Europe, particularly Germany, Switzerland and Austria, Infonetics said. -Stephen Swoyer