Shipments of Wi-Fi-enabled cellular handsets will double in volume by the end of 2010, compared to January 2008, and that growth curve is expected to continue through 2013, according to a report by ABI Research market tracking agency. But there are obstacles for local wireless network technology too.

“This past year there has been an explosion of Wi-Fi capable phones. Due to operator and customer demand, and handset manufacturers trying to deliver more product value, Wi-Fi is quickly becoming ‘table stakes’ for smartphones,” said analyst Michael Morgan.

This data, contained in a new ABI Research study, shows how driven by increasing consumer awareness and demand, new operator business models, and increased value for handset manufacturers, Wi-Fi technology will continue to penetrate deeper into mobile handsets over the next five years.

The user’s experience appears to be critical in handset Wi-Fi adoption. While Nokia leads the market in Wi-Fi-enabled handsets due to the sheer volume of its portfolio, Wi-Fi models only represent a small fraction of the range. In contrast, every Apple iPhone has Wi-Fi, and due to its ease of use and the seamless iTunes experience, more iPhone users – as many as 75% – are using their Wi-Fi regularly. Contrasting again, HTC’s handset lineup is 80% Wi-Fi-equipped, but only 10% of its users are employing the Wi-Fi capability.

Despite the rosy outlook, Mr. Morgan cautions, there are challenges to Wi-Fi’s growth.

“One obstacle is the glacial pace of IEEE standardization in the areas that address voice over Wi-Fi usage. Another is the growing carrier interest in femtocells (a small cellular base station, typically designed for use in residential or small business environments). While they have their problems, femtocells do provide an alternative to improving in-building coverage without the need for Wi-Fi capable handsets. Although Wi-Fi access points are already installed in many homes and business, the carriers may ultimately push to have femtocells installed at these key locations,” said Mr. Morgan.

Rather rapid growth of WiMAX coverage is also a threat to Wi-Fi.

In Wi-Fi’s favor: as flat rate data plans increase, wireless operators can leverage Wi-Fi capable handsets to offload data intensive applications, improve in-building coverage, and offer new services to new markets.

Tags: Wi-Fi, WiMAX, 3G