Remember when technology-based start-ups were going to put established companies out of business? The surviving incumbents are now having a last laugh. But their schadenfreude may be short-lived in the telecommunications industry because a new technology called Wi-Fi (wireless fidelity) is threatening the business models of the mobile carriers, the phone gear makers, and the providers of high-speed DSL and cable modem services.

Wi-Fi—known among techies as 802.11, a reference to its underlying technology standard—is an alternative means of Internet access. Simply hook up an inexpensive Wi-Fi base station (chip plus transceiver) to a high-speed Internet connection such as DSL, a cable modem, or a T1 line and place this base station within a couple of hundred feet of a house. All users in the vicinity who have a very inexpensive Wi-Fi device in their PCs or PDAs can then share low-cost, high-speed access to the Internet, without having to pay individually for more expensive dedicated DSL or cable modem service.

Even better, with exciting new technologies such as mesh and ad hoc networks, improved Wi-Fi devices could create overlapping Wi-Fi networks in hotels, airports, office buildings, and malls. Strings of linked Wi-Fi networks can stretch through apartment buildings,...