Subject: [NEXTEL-1] Some Wi-Fi Firms Move Toward Profits While Others Fail

From: Marcel <[email-masked]>
Date: Fri, 25 Apr 2003 16:07:47 -0400

Some Wi-Fi Firms Move Toward Profits While Others Fail

Use of Wi-Fi wireless networking is growing in the Washington-Baltimore area.  Companies
providing the services are still learning what works and what doesn't in attracting users
for the service. Wayport, for example, provides Wi-Fi wireless access to the Internet in
30 Washington, D.C.-area hotels. It says that 9.8 percent of guests use the wireless
access, above the national average of six percent. With 170,000 daily or monthly
subscribers, Wayport said it would soon generate enough cash to cover expenses. East
Statford Wireless Internet Service is a home-based business serving a Leesburg, Va.,
subdivision, and it is making a small profit. Baltimore's Oneder LLC said it is on the
edge of profitability, but these for-fee firms are competing with Wi-Fi providers who
offer the service for free. Lack of enough paying subscribers caused New York's Joltage
Networks to close, and T-Mobile USA recently lowered its per-minute access prices in an
effort to attract more customers. The Washington Post featured a series of articles on
Wi-Fi in its Sunday edition.
======================================================================================

A New Wave of Wireless
'WiFi' Networks Are Expanding Internet's Reach, Profit Opportunities
By Yuki Noguchi
Washington Post Staff Writer
Sunday, April 20, 2003; Page H01

It's Saturday afternoon, and Art Slater sits at his perch in the bay window of the
Cyberstop Cafe.
The thin card he slides into the side of his laptop detects a wireless signal, an icon
pops up on the bottom of the screen, and
Slater clicks on it to connect to the signal coming from the Dupont Circle cafe's back
offices 20 feet away.
With that, he's on the Internet, with a connection faster than anything at home.

Outside on the patio, Matt O'Neill is transmitting files of art over the same airwaves as
Slater.
Across town near Eastern Market, Nicholas Cho just installed a similar wireless connection
in his own cafe, Murky Coffee. A
for-fee version of the same technology is available in 145 Starbucks coffee bars around
the area.
And in a Leesburg subdivision 40 miles from downtown, Laurie and Rich Dunham are making a
tiny profit selling a wireless
Internet service broadcast from their rooftop to their neighbors' homes.

The WiFi networking all these people are using could not have been purchased for any price
10 years ago. Five years ago it
was just arriving in the market, advertised solely as a cheap way to network computers in
individual homes and classrooms.
But WiFi (short for "wireless fidelity," and sometimes referred to by the technical
description "802.11b") is going lots of other
places. It began life as an alternative to wired Ethernet networks, but it has grown into
a tool to expand the boundaries of the
Internet. WiFi has allowed an invisible web of wireless networks to creep across the
Washington area, offering Internet access
to anyone with the right hardware.

The number of locations with WiFi service -- or "hot spots" -- quadrupled last year, to
just under 4,000 nationwide, according
to the research firm Instat/MDR.

At home, a WiFi setup can be quite simple. A typical rig consists of a $100-or-less access
point, plus under-$50 receivers in
each computer. The access point takes a broadband or dial-up Internet connection and
shares it with any authorized computer
within range.

To take WiFi out of the home and provide Internet access to strangers involves a few
changes. Sometimes, the WiFi antenna
has to be moved to rooftops to allow the signal to go farther, with other antennas on
nearby buildings to relay it.
Companies that charge for service, and therefore don't want freeloaders riding their
airwaves, also have to deploy software to
control access by subscribers. For-pay WiFi services may also provide extra security with
"virtual private network" software
that encrypts network traffic.

Many companies think they can make a profit from this -- even while some of them have
already gone bust in the attempt. The
best-known WiFi businesses consist of networks in cafes, hotels and airports that are
marketed to business travelers and
Internet addicts who might subscribe to a second Internet access service to get that
connectivity away from home. Some are
start-ups (Boingo Wireless, Cometa Networks, Wayport and Wise Technologies, to name a
few), while others, such the
wireless-phone firm T-Mobile USA, market WiFi as an adjunct to existing services.

Wayport has installed WiFi in 30 Washington area hotels and saw traffic double in
Washington and around the country last
year, said Daniel Lowden, vice president of marketing for the Austin-based company. An
average of 9.8 percent of people
staying in those hotels use their wireless service -- lower than the 25 percent usage rate
in the San Francisco area but above the
national average of 6 percent, he said.

Wayport now has 170,000 daily or monthly subscribers, up from 50,000 a year ago, Lowden
said, and will generate enough
cash to cover operating expenses within a few months. Prices range from $6.95 for one-time
usage within an airport, to $49.95
monthly unlimited service at any Wayport access point.

Wise Technologies is making its own attempt to blanket the Washington area with WiFi; so
far it has 50 hot spots deployed in
places from Baltimore-Washington International Airport to the Zanzibar nightclub in
Southwest, said Gary S. Murray II,
president of the privately held Landover firm. Wise was founded in 2001; it has more than
2,200 users and is growing by 10
percent a month, he said.

For the moment, Wise isn't interested in expanding beyond Washington -- its target is to
double its number of hot spots by the
end of the year, Murray said.

A separate set of firms, mostly smaller local companies, are using WiFi to transmit
high-speed Internet connections to areas that
lack alternatives to slow, dial-up modem access.

Laurie Dunham founded East Statford Wireless Internet Service LLC out of her Leesburg home
last July, when neither
cable-modem nor digital-subscriber-line service was available in her subdivision.

"Let's take the bull by the horns," she said. After sending leaflets to neighbors, she and
her engineer husband, Rich, discovered
they had enough nearby interest to set up their own Internet service. They set up
specialized antennas on rooftops and now
provide access at $45 a month to 30 neighbors who live within a one-mile radius of their
home.

Oneder LLC is also selling WiFi in areas that don't get much high-speed access. The
Baltimore firm uses high-powered
antennas to broadcast wireless Internet connections throughout residential buildings,
retirement homes and, more recently, in the
Baltimore City Fire Department.

"We're teetering on the edge of profitability," said the company's president, Keith
Walter. Breaking even would be a milestone
for the year-old firm.

Several other firms never made it that far. Wireless communications -- not just WiFi, but
in general -- has turned out to be a tar
pit for many start-ups.

"Companies like MobileStar and Metricom went out of business for a reason -- because the
market was not large enough for
those networks to be profitable," said Jane Zweig, chief executive of the Shosteck Group,
a Wheaton-based market-research
firm. "Those reasons still exist."

It's unclear how many laptop users want to use the service and would be willing to pay for
it, Zweig said. "The question is not:
Will people use it? It is: Is that market large enough to make business sense?"

In February, New York-based Joltage Networks shut its doors because it didn't attract
enough users. Earlier this month,
T-Mobile, the company responsible for installing wireless service in Starbucks stores,
slashed its prices from 25 cents to 10
cents per minute, an indication that usage hasn't taken off as quickly as anticipated.

One reason might be the many locations that, like Starbucks competitors Cyberstop and
Murky Coffee, offer WiFi free.
Cho, the owner of Murky Coffee, said he never considered charging for WiFi. He said he
recoups the $70-a-month cost
through coffee and sandwich sales.

"What this has been able to do is bring in people in the evening, and they buy a cup of
coffee," Cho said. "I figure, if you're
savvy enough to use it, then you're probably savvy enough to . . . find a different
connection for free."
Also, he added, "it helps the image of our shop as a forward-thinking business."

Some WiFi access comes from simple idealism. A few blocks in downtown Bethesda have free
WiFi courtesy of Tangerine
Unwired, a Bethesda consulting business. Co-founder Philip Leif Bjerknes, an 18-year-old
student at the University of
Maryland, said there ought to be more free community WiFi services like his in the area."I
was on Market Street in downtown
San Francisco and there were seven different networks open," he said. "In D.C., I have yet
to stumble across any public access
networks."

Slater, a database administrator who likes to use the free Internet connection at
Cyberstop Cafe, offered his own insight into
the for-pay wireless business: "I think there are so many other monthly costs you pay for,
I feel like it should be free. That's part
of the Internet culture: We're accustomed to wanting things for free."

http://www.washingtonpost.com/wp-dyn/articles/A54030-2003Apr18.html

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