Wireless heads for pricing war

A price war between wireless vendors is unfolding across the globe but is unlikely to reach Australian shores until 2005.

Crashing prices for wireless LANs and obsolete gateways is triggering the battle, according to a recent report from Unstrung Insider.

Enterprise wireless LAN solution prices are set to crash as all 802.11b access points are end-of-life designs and wireless gateways produced by the likes of Bluesocket will be superseded by wireless switches, the report said.

IDC Australia's senior mobile and wireless analyst Warren Chaisatien said that as competition grows for wireless LAN connections there will be heated competition within the Australian market.

But this isn't likely to occur for 12 months, he said, reflecting considerable lag time between the pricing movements in the US and Australia.

"A price war will benefit companies that do not currently have a wireless LAN; the only thing holding them back so far is security and the initial equipment cost which comes in two factors, equipment and operation or management," Chaisatien said.

"So far in the first quarter of 2004, 21 percent of Australian businesses had already introduced a wireless system, which is up 8 percent from last year. If all plans come true next year we expect LAN penetration to hit 30 percent locally."

Australia needs little encouragement when it comes to adopting the technology, according to Gartner's mobile communication research director Robin Simpson.

The enterprise, he said, is still measuring the value of wireless LAN technology, but agreed that pricing for access points and switch architecture is coming down all the time.

"For many years Cisco had a stranglehold on network infrastructure because what it produced was robust and reliable, but it charges for it which created an opportunity for other vendors to come along with an offer that looks compelling, solves the network management problem and is price competitive," he said.

"Now, vendors have seen the opportunity to provide a lower TCO solution by using the centralised switch approach, but you also see another aspect. Enterprises that have been around for a while and have already deployed a switch with mixed architecture have found the software overlay has a benefit as it creates a stronger driver for starting with central switch architecture."

However, Cisco consulting system engineer, Adam Radford, says there will not be a price war in the wireless market because, at the moment, it is all smoke and mirrors driven by marketing budgets.

"There are two distinct costs involved in the initial set up of a wireless system, you need site surveys, planning of power, there is a considerable chunk of cost upfront and certain physical costs managing ongoing maintenance and configuration," Adam said.

"Our view is we see the entire network as a services platform, not just a little appliance.

"The general view of wireless networks has changed since the early days; then it wasn't mission-critical and the coverage area was small, but now people are at the point where they just expect wireless access."

Other players in the market were not so forthright with Netgear Asia Pacific managing director Ian McLean simply stating that pricing is improving all the time.

Symbol Australia wireless infrastructure VP and general manager, Anthony Bortolo, said wireless mobility is one of the major developments of the decade and is one of those turning points that will have a profound effect on business.