As Bluetooth nibbles, competition lurks

The hyped technology--which lets people wirelessly link cell phones, pagers, handhelds and laptops into a "personal area network" that connects to the Internet--still enjoys substantial support within the industry, but success may prove more difficult than expected. Bluetooth products are emerging from labs slowly. And perhaps more significantly, the industry has begun to put more of its energy into another radio technology.

Though it lacks a catchy name, another radio frequency technology, 802.11B, is gaining acceptance with hardware manufacturers, say analysts and PC makers. The technology is already being incorporated in notebooks and in products for the education market. By contrast, Bluetooth products won't start hitting in numbers until 2002.

Technically, the two standards perform different functions and actually can complement each other. But as more effort goes into 802.11B, the question arises as to how much time and money will go toward Bluetooth.

"With Bluetooth right now, there is a lot of hype, but that is about all there is," Cahners In-Stat Group analyst Rebecca Diercks said.

The promise of Bluetooth has always been alluring: Using the technology, a notebook does not need a wireless modem or independent wireless Internet account. Instead, data from the portable can be sent by radio to a cell phone, which can then transmit the data. The same applies to handhelds.

Toshiba later this month will start selling the first option allowing notebooks to communicate with Bluetooth-enabled devices--but most of those devices won't come to market for months.

"Next year, 2001, is the year of Bluetooth, so in reality it won't be here for a year or two," said Steven Andler, Toshiba's computer systems vice president of marketing.

Even as the first Bluetooth options hit the market, consumers and businesses will find little to do with them. The first communications devices, such as cellular handsets, aren't expected to hit the market before the first quarter of next year, according to Gartner analyst Martin Reynolds.

"Bluetooth will let you connect to your network or cell phone to synchronize your network, but it's not as compelling as 802.11," he said. "Next year, we're going to see 802.11 get really hot, and then in 2002 we'll see Bluetooth really begin to take off." Eventually, the two standards will live side by side, he added, but indicated that even this will create problems for Bluetooth.

The technology's appeal
The 802.11B standard is compelling for at least two reasons. As an older, more mature wireless technology, it has moved beyond the start-up problems dogging Bluetooth. And while the newer technology is good for wireless connections to devices within a few feet, 802.11B lets portable devices connect to corporate networks or the Internet over distances as great as 300 feet.

The range of 802.11B could enable employees to move their notebooks from, say, the cubicle to the conference room while remaining connected to the company network. Typically notebooks are outfitted with a PC Card antenna that connects over the air to a transceiver, or base station, attached to a corporate network at speeds up to 11 megabits per second (mbps).

Bluetooth has some weaknesses, however. Bluetooth transmitters reportedly cut down portable battery life more than expected, which is a potential hardship for Palm and other handhelds as well as for notebooks.

The more serious deterrent is the cost of components used to add Bluetooth capabilities to cellular handsets and other mobile devices.

"The prices have not come down to what people thought they would by this time," Diercks said. "Primarily what we're seeing is $50 for Bluetooth components, or as little as $25 if you buy them in quantities of thousands or more."

Even mass-market Bluetooth options cost more than anticipated. While Bluetooth PC Cards--like the one Toshiba is shipping later this month and IBM in October--were expected to go for around $100, they initially will be much more. IBM's card will sell for $189, and Toshiba's is expected to be comparably priced.

An established player
While computer and communications manufacturers come to grips with Bluetooth, 802.11B has already established itself.

Apple Computer was the first major PC maker to jump on wireless networking in a significant way. In July 1999, it started by offering wireless 802.11B under the AirPort brand, built into iBook portables. Apple now offers wireless networking on every system it sells, including new iBooks unveiled Wednesday.

Other PC makers have got the integrated wireless bug too. Dell Computer next week will show off new corporate Latitude notebooks with built-in 802.11B antennas. IBM also is moving to integrated wireless networking with its new ThinkPad i Series, coming next month.

"It's a very obvious thing for the OEMs (original equipment manufacturers) to integrate 802.11," Reynolds said. He and Toshiba's Andler predict the bulk of PC makers will offer integrated wireless networking sometime next year.

Demand for the technology is booming in every sector but is strongest in the education, manufacturing, retail and health care markets.

On the corporate side, Cahners forecasts the wireless networking market will grow to $2.2 billion in 2004 from $771 million. Windfall demand is expected among frequent travelers, as airports and hotels add 802.11B wireless base stations, enabling notebooks to connect to the Internet or back to corporate networks.

No market has embraced wireless networking like education.

"The adoption rate for wireless Ethernet--802.11B--is nothing short of phenomenal," Andler said. "You can't talk to a high school or college without it. They're throwing up 802.11 Ethernets as fast as they can."

One reason Apple started offering 802.11B is the demand in the education market, and that has paid off big, said Greg Aogwiak, Apple's director of portable and communications products.

Challenges to address
As 802.11B picks up, other issues hang over both technologies: interference and security. Both technologies operate in the same 2.4-GHz radio band.

"There's the potential for interference," Diercks said, "Anyone can make a technology that runs in that band--garage doors, baby monitors, wireless cordless phones, anything you can think of."

More serious are security issues affecting both technologies. Wireless networking's strength is strong encryption, but if base stations are not assigned good passwords a backdoor is created into the network.

"They've just breached the firewall, and anyone sitting in the parking lot can now come onto the network," Gartner's Reynolds said.

Gartner is more concerned about Bluetooth, which has a security structure too easily misunderstood and not strong enough for critical data. In fact, the market researcher recommends corporations beef up encryption before using Bluetooth to transmit sensitive data.

"Bluetooth is a disaster waiting to happen, from a security perspective," Reynolds said. "The specs cover (security), but unless you know what you're doing, it's possible to implement the spec in such as fashion (that) you aren't doing anything worthwhile. Even worse, you may have run the spec so that there's no security at all."