The Wi-Fi Alliance announced a new wireless networking specification which will enable devices to establish simple peer-to-peer wireless connections without the need for a wireless router or hotspot. Wi-Fi Direct has a wide array of potential uses, many of which encroach on Bluetooth territory and threaten to make the competing wireless protocol obsolete.

The new spec, previously referred to by the codename ‘Wi-Fi peer-to-peer’ (does it count as a ‘codename’ if it is just called what it is in the simplest possible terms?), will be finalized soon and the Wi-Fi Alliance expects to begin certifying devices as Wi-Fi Direct compliant by mid-2010.

“Wi-Fi Direct represents a leap forward for our industry. Wi-Fi users worldwide will benefit from a single-technology solution to transfer content and share applications quickly and easily among devices, even when a Wi-Fi access point isn’t available,” said Wi-Fi Alliance executive director Edgar Figueroa. “The impact is that Wi-Fi will become even more pervasive and useful for consumers and across the enterprise.”

In theory peer-to-peer wireless networking already exists. In addition to connecting to wireless routers or hotspot networks, many wireless devices are capable of creating an ad hoc network– basically a peer-to-peer wireless network between two devices.

Ad hoc wireless networking has always been more complex and cumbersome than it is worth, and it maxes out at 11 mbps. Wi-Fi Direct will connect at existing Wi-Fi speeds– up to 250 mbps. Wi-Fi Direct devices will also be able to broadcast their availability and seek out other Wi-Fi Direct devices.

Wi-Fi Direct devices can connect in pairs or in groups. With Wi-Fi Direct only one of the devices needs to be compliant with Wi-Fi Direct to establish the peer-to-peer connection. So, for example, a Wi-Fi Direct-enabled mobile phone could establish a connection with a non-Wi-Fi Direct notebook computer to transfer files between the two.

Wi-Fi Direct overlaps into Bluetooth territory. Bluetooth is a virtually ubiquitous technology used for wireless connection of devices like headphones, mice, or the ever-popular Bluetooth earpiece sticking out of everyone’s head. Bluetooth uses less power, but also has a much shorter range and slower transfer speeds. Wi-Fi Direct can enable the same device connectivity as Bluetooth, but at ranges and speeds equivalent to what users experience with existing Wi-Fi connections.

There are potential security concerns that come with a technology like Wi-Fi Direct. Bluetooth has been the subject of security issues like Bluejacking which enables an attacker to connect anonymously with an insecure Bluetooth device and hijack it or compromise its data. Bluejacking is only a threat in a radius of 20 or 30 feet. Wi-Fi ranges are much greater which opens the possibility of attackers making anonymous connections from the parking lot or across the street.

The Wi-Fi Alliance, which includes members like Cisco and Intel, is aware of the security concerns as well as the risks Wi-Fi Direct could introduce for enterprise networks. Wi-Fi Direct will include support for WPA2 (Wi-Fi Protected Access 2) and AES encryption for more secure connections and measures are being developed to enable IT admins to exert some control over Wi-Fi Direct networks within their environment.

I think Bluetooth’s days could be numbered. If Wi-Fi Direct can provide the same short range, ad hoc device connectivity as Bluetooth (and more) using the same wireless networking hardware that is already included in virtually every notebook, netbook, mobile phone, and other device, why bother adding a Bluetooth adapter and dealing with Bluetooth drivers on top of that?

For consumers concerned about wireless network congestion, hope may be at hand. That’s the message from a group of tech companies backing wireless fidelity, or Wi-Fi, a way to get online without having to go through a traditional mobile-phone network.

The Wi-Fi Alliance, an industry group that includes Intel (INTC), Marvell Technology Group (MRVL), and dozens of other electronics companies, was at the Consumer Electronics Show in Las Vegas to tout a new technology called Wi-Fi Direct as a way to relieve bottlenecks in wireless networks caused by increased use of mobile devices to access the Internet.

Wi-Fi, available in computers and other electronics for years, lets users get onto the Internet when they’re near a Wi-Fi-enabled router, in a so-called hotspot. Users of an Apple (AAPL) iPod touch, for instance, can get online without having to be on a wireless plan.

Yet Wi-Fi has limits—such as when a user is out of the hotspot’s range. What’s more, the more people connected to a hotspot, whether it’s in a home or a local Starbucks (SBUX), the slower the Wi-Fi connection can become.

Those drawbacks have led Intel and other companies to develop standards for Wi-Fi Direct, which lets devices wirelessly connect to one another, bypassing not only a wireless network but the Wi-Fi hotspot, as well. A single device that supports the new technology can act as a hub for other Wi-Fi devices, letting them freely transfer video, digital music, and photos between them. “It’s a huge breakthrough that will create a paradigm shift in consumer electronics,” Kelly Davis-Felner, marketing director for the group, says in an interview. The Wi-Fi Alliance approved standards for Wi-Fi Direct in December.

Strained Mobile-Phone Networks
Consumer electronics makers plan to deliver the first Wi-Fi Direct devices by June. Software updates for the installed base of Wi-Fi devices, including cell phones, may be available sooner.

For years, wireless carriers such as Sprint (S) and Verizon Wireless, owned by Verizon Communications (VZ) and Vodafone Group (VOD), had misgivings about Wi-Fi, concerned that its rising popularity might slow demand for their own wireless technologies. Now, Wi-Fi may represent a salve for carriers whose networks have become taxed by the surging use of smartphones, such as Apple’s iPhone and those based on Google’s (GOOG) Android operating system, that function as mini computers and give users access to all manner of bandwidth-hogging games, tools, and features.

Researcher IDC predicts that more than 1 billion mobile devices will be sold and used to access the Internet in 2010.

Wi-Fi Direct isn’t the first technology aimed at helping electronics directly connect with each other. On Jan. 6, Sony (SNE) unveiled new digital cameras and laptop computers that use a very near-range technology called TransferJet to share photos. The following day, Intel CEO Paul Otellini outlined details of technology that would let computers and other consumer electronics more easily transmit video and other content, without having to use cables. Recently introduced laptops from Lenovo, Dell (DELL), and Hewlett-Packard (HPQ) will use another tool from Intel, known as My Wi-Fi, that lets a host PC share its wireless connection with as many as eight nearby devices.

For now, Wi-Fi Direct may have the best chance of being widely adopted because many consumers already are familiar with technology Intel helped popularize with its Centrino marketing campaign in 2003.