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Mesh Shakeout Looms

Consolidation in the burgeoning municipal mesh sector is inevitable. The question is not if it will happen, but when and how. Vendors and analysts in the market all agree that, thanks to uncertain business models, a proliferation of startups, and the cost of deploying citywide networks, a shakeout is bound to occur in what is one of the hottest wireless markets around at the moment.

The concept of municipal mesh networking itself is already moving onto another stage. There are still a mass of deals to be had. (See Cisco & Pals to Unwire Silicon Valley.) Some of the larger U.S. depolyements are running into hurdles, however. (See SF Net to Go Public?.)

The recent "Wireless Mesh Equipment Tracker Market" from Heavy Reading estimates that the global WiFi mesh infrastructure market will worth be almost $1 billion by the end of 2008. The report says that there are currently nine major players [Ed. note: Some more major than others] in the market and six of those are startups. Typically, as a market matures and consolidates, public companies buy up the smaller startups that at the outset had a technology or customer edge while other large firms attempt to buy their way into the market.

Some argue that mesh shakeout has already started with Motorola Inc. (NYSE: MOT)'s purchase of Mesh Networks in 2004. (See Moto Gets Mesh.) All agree, however, that the real feeding frenzy is still to come.

"I see this market quickly becoming a three-player race between Cisco, Motorola and Nortel," says Ben Gibson, director of mobility marketing at Cisco Systems Inc. (Nasdaq: CSCO) "I believe that ultimately, Cisco's combination of WiFi, breadth of outdoor wireless portfolio and IP market leadership will carry the day."[Ed. note: Betcha didn't expect to hear that.]

"I can't see how there won't be a shakeout, as it is simply not clear to me how startups can play for the long haul in a market where having a mesh AP is just one piece of the required solution," adds Gibson.

The thinking here is that, as more carriers get involved in municipal networking, mesh will end up being just one part of the puzzle and operators will naturally gravitate to larger vendors.

That's not the only change that will alter this market, however, as Farpoint Group principal and Unstrung columnist Craig Mathias points out. He expects that that a shakeout will occur "18 to 24 months" from now.

"There's plenty of action available now," Mathias says. "The trigger will be the approval of the 802.11s [mesh standard] and lower prices, which will ruin the cost structures of the unprepared."

Executives at two of the leading startups in the marketplace -- Strix Systems Inc. and Tropos Networks Inc. -- also agree that consolidation is coming, but both expect to come out on top.

"I think that all emerging markets go through some sort of shakeout phase," says Bert Willams, VP of marketing at Tropos. "The flipside is that it may be a little early for things to shake out yet."

"The best strategy for a company is to continue to execute and innovate," says Nan Chen, VP of marketing at Strix.

Neither firm would directly say that they were in the market to be acquired. Nevertheless, the next couple of years will be a dynamic, and turbulent, second phase on the wild mesh frontier.

— Dan Jones, Site Editor, Unstrung

mhahnfeld 12/5/2012 | 3:35:52 AM
re: Mesh Shakeout Looms "I see this market quickly becoming a three-player race between Cisco, Motorola and Nortel,"

Was this really a quote worth repeating? Perhaps one of them should actually build a network first before claiming dominance... really guys, giving equipment away for free is not market domination.
joset01 12/5/2012 | 3:35:37 AM
re: Mesh Shakeout Looms Well obviously the Cisco guy is going to say that they are a player. But -- at this early stage-- would you say that they aren't going to be one of the dominant forces in this market?

Heck, it'll only take a few more large contracts. Motorola has a whole lot of public safety contracts they can exploit and Nortel has the carrier contacts. I'd say its pretty much all up for grabs at the moment but if the market evolves anything like other WiFi markets we're probably going to end up a couple of established players and one -- maybe two --owning the lion's share of mesh.

As to giving away equipmenmt, well that's the dirty little secret of the mesh market isn't it? As far as I can tell nearly every company that wants to be in this market is or has given away equipment at some point. Naturally, nobody -- startup or public -- will cop to it. Seems like its not an uncommon tactic though. Am I wrong?

Cheers,
Dan
mhahnfeld 12/5/2012 | 3:35:30 AM
re: Mesh Shakeout Looms Dan, thanks for the well thought response.

Regarding Cisco, sure they'll be a factor -- they usually are in most spaces they enter. That does not necessarily equal dominance. I think there are plenty of historical examples of their entry into a market yielding less than "dominant force" results. For starters they'll have to catch-up on the product side, as will NT and MOT. All 3 are well behind with mesh systems 1-2 generations behind. Next question, is how much focus and subject matter expertise to they really have in this space, not much so far (although your point about MOT vis-a-vis Public Safety is very fair).

As for giving away equipment, I don't think its the norm in the space. My company (SkyPilot) generates real revenues from its customers and projects. The only "give aways" we have done are exceptional cases like Boston where we put in a small proof-of-concept network. I would suspect the same is true amongst most of the other "startup" players. So, I don't believe it's as common as you might think although those with mega balance-sheets seem more inclined to take desperate steps to participate.
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