Micrologic Research reports that the OEM cost to implement a Bluetooth node in 2001 is $26.65, ramping down to $13.15 by 2005. The end-user shelf price is a multiple, depending on levels of distribution, profit margins, and threshold market prices (TMPs) consumers are willing to pay.

TMP is one of the most important factors for high-volume consumer products such as MP3 players, cell phones, videogame systems, wireless headsets, PDAs and in-the-car information systems. The $199, $99, $39 and $19.99 watermarks make instant decisions possible for high-tech consumer products. When there is drift above the watermark consumers wait, assuming prices will ultimately come down.

It takes two to tango, or two wireless nodes to define a point-to-point network like a wireless headset and cell phone. The OEM cost for two nodes of Bluetooth is then $53.30 ($26.30 in 2005), which translates to a shelf price of $148 ($73 in 2005) at 40 percent OEM margin and one level of distribution (40 percent) margin. That's a lot just to cut the cord.

A Bluetooth-enabled wireless headset accessory for cell phones has hit the shelf at about five times the price of competing, non-Bluetooth wireless solutions. It requires two wireless nodes for the point-to-point network: a Bluetooth base unit that plugs into the bottom of the phone and the headset.

Products above TMP have a difficult time driving the market if suitable competing products are already at or below TMP. There is a pent-up demand to cut the cord, so consumers will be willing to pay some premiums over wired solutions. As the market drives TMP down over time, it remains uncertain that Bluetooth-enabled products will ever intersect the declining TMP for high-volume, low-cost, consumer products.

Competing or coexisting technologies, depending on the application, are primarily based on infrared, IEEE 802.11, IEEE 802.15 and a new non-RF magnetic-induction-based communication system. IR is a line-of-sight technology for point-and-shoot applications with no multipoint capability. LAN products based on the IEEE specifications are well positioned to meet their high-bandwidth and moderate-distance goals. Magnetic induction is a good fit for PAN applications where low power, small form factor and low price are the drivers.

The PAN is a unique space within the world of wireless connectivity and needs new technology if wireless solutions are to slip below TMP. Success requires breaking down technological barriers and creating affordable solutions.

Alan Swahn is Vice President of sales and marketing at Aura Communications Inc. (Wilmington, Mass.).