While global Wi-Fi use is set to explode over the next five years, revenue from the technology is due to shrink, leading to a consolidation of the market, according to a report released by Pyramid Research.
Worldwide Wi-Fi users would number 707 million by 2008, Pyramid predicted, yet revenue per user would drop from around $US30 a month this year to $US3 a month in five years.
The number of Wi-Fi users currently stands at about 40 million, according to Pyramid analyst John Yunker.
The low margins meant that only established providers could stay in the game, Pyramid said, and that the standalone Wi-Fi business was a "perilous one."
"Wi-Fi is a commodity, it's cheap to deploy and operators don't see it as a stand-alone" Yunker said.
The researcher predicted that larger players such as Intel and Cisco Systems would take a lion's share of the market and communications infrastructure providers such as Ericsson, Alcatel and Lucent Technologies would eat up nascent Wi-Fi software and device manufacturers.
In the end, major providers will use Wi-Fi to fill out their portfolios and gain customer loyalty, Pyramid said, but it won't be the cash cow they may have hoped for.
The popularity of Wi-Fi networks at home and in the workplace would drive rapid growth, Yunker said, adding that business users were the quickest adopters.
Still, Pyramid predicts that hot spots will continue to grow, and that within five years there will be 80,000 in the US alone.