Sorry, Haters: Wireless Mesh Soldiers On
Amid the wails of disappointment and recrimination echoing around the U.S. market, one salient fact about the outdoor wireless mesh market doesn't seem to be getting a great deal of attention: The equipment market continues to see strong growth, so someone must be buying the stuff. The latest update to Heavy Reading's Wireless Mesh Equipment Market Tracker estimates that wireless mesh equipment shipments grew to 112,200 units in the 12 months to June 2007, up from 60,300 in the previous 12-month period.
These shipments certainly aren't going into muni-led buildouts in Chicago, San Francisco, or New York, nor are they going into EarthLink Inc. (Nasdaq: ELNK) – those headline-grabbing plans have been laid to rest (much less quietly than their originators would have liked). So where is all the growth coming from?
It turns out, most of it is still coming from the U.S. Vendors such as Tropos Networks Inc. and BelAir Networks Inc. have nearly doubled their shipments over the last year, with more than 70% of shipments going to North American customers. These shipments are clearly not going into the big cities. The undertaking is too large for a turbo-charged, short-range technology that uses unlicensed spectrum. In built-up cities that are home to hundreds of thousands or even millions of highly mobile people – and with 3G, cable, and broadband DSL alternatives to choose from – that was never going to fly.
Instead, demand is coming from mid-sized towns and cities with smaller populations, kinder building topographies, and in some cases more streamlined and effective local government policy makers. For example, some of Tropos's customers include Milipitas, Calif., Oklahoma City, Savannah, Ga., and Tucson, Ariz. Demand is also coming from private companies building out small 10- and 20-node networks for private and public use. One interesting model that Tropos reports seeing is that of universities in the U.S. and Mexico buying its equipment, deploying it on campus, and then extending coverage into the local town. The downtown networks are primarily for the students, but potentially for local residents as well.
Meanwhile, other markets such as Europe and Asia continue to see growth. The world's largest wireless mesh network has been deployed by Golden Telecom Inc. in Moscow. Nortel Networks Ltd. claims to have shipped more than 15,000 wireless mesh nodes into Golden Telecom, with around 10,000 actually deployed. Launched earlier this year, the network now has more than 30,000 subscribers, with Nortel rolling out voice QOS features that allows Muscovites to use the WiFi mode on dual-mode phones. It's the same principle as the U.S. muni WiFi vision, but without much competition from cable and DSL, and none at all from 3G.
Emerging markets remain the big growth opportunity for wireless mesh going forward. Strix Systems Inc. , for example, has deployed more than 200 units in Mumbai (India) and more than 100 with Kenya Data Networks in Nairobi. Proxim Wireless Corp. is supplying wireless mesh kit to China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906) in Gansu. LocustWorld Ltd. has had its mesh product certified by India's Bharat Sanchar Nigam Ltd. (BSNL) . With all this growth coming overseas, Heavy Reading predicts that North America will account for just 31% of global mesh equipment shipments in 2009, and will likely be surpassed as the largest market by Asia in 2010.
This shift in the market opportunity is reflected in the entry of new vendors into the equipment market. Altai Technologies Ltd. and Azalea Networks Inc. are two mesh vendors that have emerged from Asia in the last year, making their first deployments in China, Taiwan, and Malaysia. In addition, such companies Hopling Technologies B.V. , MeshDynamics Inc. , and Proxim have entered the market and are shipping in volume.
These new entrants, combined with the relatively late start of SkyPilot Networks Inc. and Cisco Systems Inc. (Nasdaq: CSCO), mean that while the total market has almost doubled in the last year, all of the early market leaders have actually lost market share. The early market leaders may not show up in the same bids as some of these newer vendors, but like it or not, they all share the same global market.
This market can now be thought of as divided into three types of vendors – small North American, large North American, and others. As international markets account for an ever larger share of shipments, it will be interesting to see who squeezes the current leaders the most: The big North American vendors that, as a group, have been only toying with this market until now? Or the new Asian vendors, which may look to Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) as development models? Among the smaller North American vendors, a number of the later entrants, such as Strix and Proxim, are much more focused on international markets than, for example, BelAir and Tropos. They know where the market is heading. But do BelAir and Tropos?
— Patrick Donegan, Senior Analyst, Heavy Reading
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Sales Director, Heavy Reading