GigaOM

Business 2.0: Intel’s hype machine is working overtime to promote WiMax. Here’s why the new standard won’t be a huge hit. (Sub. rqd)

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WiMax is based on the 802.16 wireless networking standard, which uses the unlicensed wireless spectrum to transmit data across metrowide networks. It covers far more territory than Wi-Fi, which is essentially a local area network technology. Thus far Intel has set aside a relative pittance, $150 million, for developing and promoting WiMax and other wireless technologies. But its dream for WiMax is huge.

Intel is touting a three-step plan for turning WiMax into a cable and DSL killer. First it will be used as a transport technology — a way to connect Wi-Fi hotspots to the Internet cheaply. Here WiMax is likely to have an advantage over current offerings that use proprietary architectures, but this is a minuscule market that will have a nearly imperceptible impact on Intel’s bottom line.

In the second stage, WiMax will replace DSL and cable. But the question here is, Do consumers really want broadband wireless access? Intel’s own research suggests that there will be about 7 million broadband wireless subscribers worldwide in 2007 — a tiny fraction of the 124 million DSL connections expected in 2007, according to International Data Corp. (DSL is more popular worldwide than cable, which is mainly a U.S. phenomenon.) Are 7 million subscribers by 2007 enough to entice service providers to spend billions to put the infrastructure in place? So far only British Telecom has signed up for trials.

In the third and final stage of Intel’s vision, WiMax will become an omnipresent high-speed Internet connection that turns whole cities into hotspots. In order for this scenario to play out, Intel will have to get the cellular industry to install 802.16 base stations on every tower. But cellular companies have already shelled out billions to put together their third-generation networks, and it’s unlikely that they have the stomach for another high-stakes gamble.

So while Intel continues to invest in WiMax startups and talk up the technology, there’s plenty of reason to believe that WiMax will remain little more than a dream among the visionaries at Intel.