Hotspot maker Ruckus Wireless, however, has developed a kind of ad-hoc security system for open hotspots, which it plans to release next week with the next version of its access point management software. Called Open Secure Hotspot, the technology automatically generates encryption keys for any user who logs into an open Ruckus hotspot, granting them a secure connection within moments, Ruckus VP of marketing David Callisch told GigaOM.

Ruckus started out as a supplier of IPTV wireless streaming nodes and enterprise wireless LANs, over which security measures were much easier to enforce. But as Ruckus’s public access network business grew it found itself supplying more Wi-Fi gear that enterprises and service providers simply wanted open to the public, Callisch said. Those customers didn’t want their open networks turning into playgrounds for Firesheep, man-in-the-middle attackers and other internet nasties, Callisch said, so they pressed Ruckus to develop a secure form of open Wi-Fi.

The rather confusing diagram above details how the security software works, but here’s what it boils down to: Anytime an unknown user connects to an upgraded Ruckus hotspot he or she will receive the option of establishing a secure connection to the network. If the user opts in, Ruckus’s network gateway will generate what Ruckus is calling a dynamic pre-shared key, randomly generated for each device. Users can either input the key by launching an executable file sent by the gateway, or they can manually enter the key into their Wi-Fi settings.

It may not seem like the most elegant way of getting online in a hotel lobby or public square, but Callisch but it’s still a relatively simple process, and it beats the alternative – surfing the internet over a naked connection or installing virtual private network (VPN) software on the fly.

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Ruckus has been a rather hot item of speculation ever since Ericsson scooped up Ruckus’s primary competitor BelAir Networks in February (a story GigaOM broke a month beforehand). Both Ruckus and BelAir have been building out massive outdoor Wi-Fi hotspots grids for wireless, wireline and cable operators around the world, and in many ways Ruckus has been more successful than BelAir. In Japan alone, Ruckus has deployed 100,000 hotspots alone for KDDI, which the operator uses to offload traffic from its cellular networks.

Ruckus also sells enterprise and indoor Wi-Fi gear and it has begun partnering with big vendors like Nokia Siemens Networks to incorporate its Wi-Fi technology into their future heterogeneous network architectures.

We reached out to VP of corporate marketing David Callisch, but he said he could give no comment on the IPO. In previous interviews, though, Callisch said that Ruckus was more interested in remaining a standalone company than be purchased by one of the big vendors. While an acquisition is still a possibility either pre-or post-IPO, Ruckus appears to be sticking to its word.

Update: Ruckus’s S-1 filing paints a picture of rapid growth. Annual revenues increased from $44 million in 2009 to $120 million in 2011, and in the first six months of 2012, Ruckus has already entered $94 million into its ledger. The company turned its first profit of $4.2 million in 2011, and in the first two quarters of 2012 its already recorded a net profit of $24 million. The new company would trade under the ticker RKUS.

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Ruckus vice president of corporate marketing David Callisch confirmed the deal in an interview, saying that NSN planned to announce the tie-up in the coming days. The deal is particularly significant for NSN because archrival Ericsson recently rounded out its own HetNet portfolio by acquiring BelAir Networks, Ruckus’s primary competitor in the carrier Wi-Fi space. NSN and fellow big wireless vendor Alcatel-Lucent either needed to partner with a Wi-Fi company or buy one outright, and Ruckus was the prime candidate.

“When Ericsson took BelAir off the playing field, a lot of people came to us,” Callisch said. “NSN was the most aggressive, but it’s not an exclusive agreement.”

As mobile operators get Wi-Fi religion, the handful of infrastructure vendors specializing in outdoor metro-Wi-Fi gear have started getting a lot of attention, and lately Ruckus has been separating itself from the pack. The Sunnyvale, Calif.,-based vendor has landed one of the single-largest mobile offload contracts to date, a 120,000-access point network with KDDI in Japan, and U.K. hotspot provider The Cloud is using Ruckus gear to blanket London with Wi-Fi ahead of the 2012 Summer Olympics.

What’s more, Ruckus’s profile seems to be increasing at the expense of BelAir/Ericsson. Its London deployment supersedes an existing BelAir rollout. On Tuesday Ruckus plans to announce at CTIA that it has become Time Warner Cable’s second wireless vendor, which until recently built its public Wi-Fi hotspots solely with BelAir gear. Callisch said it will supply Time Warner with its strand-mounted access points, which connect directly to the cable lines from which they’re hung. He added that Time Warner will also use Ruckus gear to expand its hotspot network into indoor public spaces like malls and stadiums, a market Callisch said Ericsson doesn’t currently serve.

Ruckus is exploring IPO options and just closed a $21.7 million funding round, but those may just be diversions. NSN’s partnership may be just the first step to an acquisition. If NSN isn’t interested, its competitors may well be: independent metro-Wi-Fi vendors are becoming scarce, given that Israeli mobile broadband vendor Alvarion bought up Wavion in November.

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Ruckus VP of corporate marketing David Callisch wouldn’t comment on whether the company was in any current acquisition discussions, but he did tell me that the attention focused on the BelAir acquisition has been nothing but good news for Ruckus. The week after Ericsson officially confirmed the BelAir (GigaOM broke the story a month earlier), Ruckus revealed a new $21.7 million in funding, bringing its total raised in 4 years to $72.7 million.

But just as important, the BelAir deal, coupled with the attention poured on Wi-Fi at Mobile World Congress last month, has raised the profile of its technology, Callisch said. Carriers now see Wi-Fi is an effective means of shunting huge quantities of smartphone, tablet and laptop data traffic onto unlicensed airwaves and more inexpensive equipment, and the big mobile infrastructure vendors have taken notice. In an email interview with GigaOM, Callisch wrote:

“BelAir was the last of the old metro Wi-Fi crowd that has struggled to make ends meet.  But they are shrewd and understand the carrier Wi-Fi market better than most. The only problem is that they are approaching a fundamentally new carrier architecture, with the introduction of small cells, with dated technology and little to no value-add with respect to Wi-Fi.  Ericsson’s purchase of BelAir is clearly a harbinger and a sign that carriers have changed their tune and want to now integrate Wi-Fi as a standard radio access method into their mobile networks. That’s just good news for everyone.”

Good for everyone, but particularly for Ruckus. According to Callisch, where BelAir merely succeeded, Ruckus has excelled, making it the best-positioned vendor in the market to capitalize on the smartphone Wi-Fi offload craze.

Staking claims across the Wi-Fi market

Ruckus already has the world’s single-largest mobile data offload network to its credit: KDDI is deploying a 120,000-access point network throughout Japan, which amounts to a one hotspot for every 266 of its customers. In the U.K., Ruckus is building a dense metropolitan network throughout London – replacing an existing BelAir network – just ahead of the 2012 Olympics. In the U.S., Ruckus is working with the cable operators to build their hotspot networks. and last week it  announced a deal with the city of San Jose, Calif., to blanket its downtown with access points.

Ruckus also has a sizable enterprise WLAN business. Though it’s nowhere near the size of market leader Cisco Systems, in the fourth quarter it shipped 132,000 business access points, according to Gartner, putting in the third place just behind Aruba Networks.

While Ruckus’ strength is in Wi-Fi it’s also attempting to build a business in the converged small cell market, following in BelAir’s footsteps. At Mobile World Congress, it took the covers off its new LTE-Wi-Fi small cell, which combines an unlicensed access point and a 4G radio into a single unit connecting back to the operator’s mobile network through a mesh of Wi-Fi links.

But with LTE, Ruckus is stepping well outside of its comfort zone. It has a lot of experience building dense high-powered metro and indoor Wi-Fi networks, but cellular base stations are highly specialized products produced by just a handful of global vendors. If Ruckus has ambitions of building more than souped-up outdoor femtocells, then it will almost certainly need the help of a major mobile infrastructure vendor. That was BelAir’s strategy as well, which ultimately led to it being acquired.

Who would be interested in Ruckus?

Two vendors that may very well be sniffing around Ruckus are Alcatel-Lucent and Nokia Siemens Networks. Both have announced aggressive small cell strategies integrating Wi-Fi directly into their future cellular network architectures. But neither company builds its own Wi-Fi gear, relying instead on partners to supply the actual hotspot infrastructure.

Ruckus won’t talk about the possibility acquisition. Instead Callisch said that Ruckus believes it has a bright future as a stand-alone company. While the last round of funding gives the vendor a nice boost, he added, Ruckus won’t be seeking any more private investment. Instead, the company’s next planned step is an IPO, which Callisch said Ruckus would file for by the end of the year.

We’ll see if Ruckus actually gets that far. It’s looking more and more like Wi-Fi will be a critical element to future mobile broadband networks, and Ruckus, like BelAir before it, holds a lot of the key expertise and technology necessary to get those networks built.

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