Rainbow on the Horizon?

Intel Corp. (Nasdaq: INTC) and friends are planning to put some more meat on the bones of "Project Rainbow" -- the major drive to build a nationwide system of wireless LAN hot spots that could be linked to cellular networks across the U.S. (see WLAN USA? and Rainbow to Link WiFi & WAN).

The Rainbow ("Radio Access Independent Broadband on Wireless") consortium -- which consists of Intel, IBM Global Services, AT&T Wireless Services Inc. (NYSE: AWE), and Cingular Wireless -- is going to attempt to kickstart the initiative, with some announcements later this week or next.

"I think what they're going to announce is some basic investment in technology and initial rollouts," says Doug Klein, CEO of Vernier Networks Inc.

The group is said to be planning to install a nationwide network of wireless LAN public access points across the U.S. and is rumored to be working on technology that allows users to roam between the WLAN hotspots and GPRS and CDMA2000 1xRTT networks. However, there have been no announcements about who will supply wireless LAN hot spots and the infrastructure that might connect them to existing cellular networks.

"I've heard Nokia's name mentioned," says one analyst source that we spoke to. Nokia Corp. (NYSE: NOK) has been talking up integrating wireless LAN and WAN capabilities this year. Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Corp. (NYSE/Toronto: NT) also have integrated systems in the works.

AT&T Wireless is also doing some discrete testing with small-scale wireless LAN systems in Seattle. "They have been chasing customers for the last six months," says the analyst source.

Although more announcements are expected soon it is not clear exactly when. "You're going to see an announcement on Thursday," a source familiar with the initiative tells Unstrung. However, the aforementioned analyst source suggests that any announcements about Project Rainbow are likely to be tied to news about Intel's Banias processor, the first Intel chip to incorporate 802.11 connectivity on the motherboard, which is expected next week.

"I can't deny that we're involved with something called Project Rainbow," a spokesperson from the chipmaker says. "But I'm afraid I can't give you any further details."

AT&T also refused to comment. IBM and Cingular had not returned our calls by press time.

The idea of carriers building out a network that combines 802.11 access points with cellular connectivity is one that appeals to Yankee Group. The research firm last week predicted that service revenues from public WLAN access points will hit $1.63 billion in 2007 (see Yankee's Hot Spot ) -- but only if carriers start to offer such services as part of their portfolio.

However, some analysts think that Project Rainbow won't be the service that finds that pot of gold. "It's really more of a marketing deal," says Ken Dulaney, analyst at Gartner/Dataquest."Somebody brought it up, and now they're figuring they have to do something with it."

"I think that Project Rainbow could be a bit of a disaster," says Seamus McAteer, principal analyst at the Zelos Group LLC. "Just because its a new access technology doesn't mean that people will run to take advantage of it. As these guys are rolling out Project Rainbow, [other] carriers are beginning to put together hedges in the sector. Project Rainbow will be another carrier among about six or seven of any size seeking tenancy at major airports and hotels."

— Dan Jones, Senior Editor, Unstrung www.unstrung.com