Subject: [NEXTEL-1] Verizon To Make Wi-Fi Play

From: Marcel <[email-masked]>
Date: Tue, 13 May 2003 14:12:08 -0400

Telecom
Verizon To Make Wi-Fi Play
Arik Hesseldahl, 05.12.03, 5:30 PM ET

NEW YORK - Telecom provider Verizon Communications may be close to
announcing plans to deploy wireless networking "hotspots" at its pay phones
in some areas.

In a speech last week, Verizon (nyse: VZ - news - people ) President
Lawrence Babbio said the company will soon deploy Wi-Fi with its
payphones in a plan similar one launched by Bell Canada, a unit of BCE
(nyse: BCE - news - people ), earlier this year. A spokesman for the company
says a formal announcement on the service is expected Tuesday.

Verizon's plans call for outfitting public pay
phones with Wi-Fi networking equipment.
It's not clear exactly how Verizon will market
the service, though it seems likely that it will
be aimed at business customers as an
extension of existing Verizon business
telecom services, but not to general
consumers.

By launching such a service, Verizon is
certainly catching the Wi-Fi wave. No
notebook PC is seemingly complete these
days without the ability to wirelessly
connect to the Internet using the
technology. But companies that have
sought to develop a business around
public "hot spots" have spun their wheels
looking for ways to make money on it. It is,
after all, difficult to charge for something
that is often available for free.

Free wireless access is widely available in
many cities in the U.S. and around the
world. Just have a quick look at
PersonalTelco.net, a Web site listing free
wireless networks around the world. There
are about 100 organizations in North
America offering a free connection to
anyone who wants one, and about as many
in Europe.

But free network nodes have a habit of disappearing almost as quickly as
they appear. Verizon is likely betting that business customers will pay a
premium for inexpensive but reliable access in places they frequent often,
including airport lounges, train stations and elsewhere.

Aside from Verizon, other ventures such as Deutsche Telekom's (nyse: DT -
news - people ). T-Mobile wireless unit and Boingo, a startup launched by
Earthlink (nasdaq: ELNK - news - people ) founder Sky Dayton, are trying to
figure out how to make money on Wi-Fi. Cometa Networks, a startup funded
by chipmaker Intel (nasdaq: INTC - news - people ), telecom giant AT&T
(nyse: T - news - people ), IBM (nyse: IBM - news - people ) and others, earlier
this year announced plans to deploy Wi-Fi services to McDonald's (nyse:
MCD - news - people ) restaurants. And Japan's Toshiba (otc: TOSBF - news
- people ) has plans to launch its own service that will be available to
resellers.

But most Wi-Fi ventures will have trouble competing against Verizon--and
other telecom providers such as SBC Communications (nyse: SBC - news -
people ) and BellSouth (nyse: BLS - news - people )--should they decide to
go down a similar road, says John Donovan, president and CEO of InCode, a
San Diego-based wireless business and technology consulting firm.

Take the example of T-Mobile and its hotspots at Starbucks (nasdaq: SBUX -
news - people ) locations around the U.S. More than one-third of the revenue
generated by T-Mobile goes to Starbucks, Donovan says. Phone companies
such as Verizon who operate their own pay telephones have little if any real
estate obligations to the buildings in which they're often placed.

Secondly, at least in T-Mobile's case, the company has outfitted each hot spot
with its own T1 Internet connection, the average cost of which is about $1,000
per month if not higher. By using its own ability to backhaul data on it own
infrastructure Verizon will save another 30%.

"Anyone who is building hot spots is going to be hard-pressed to compete
with wireline providers like Verizon," Donovan says.

News of the service comes as both T-Mobile and Boingo have restructured
their service fees. T-Mobile has opted to bundle its hot spot access service
with its mobile phone services for an additional monthly charge of about $20.
Boingo has recently trimmed its price for unlimited access to about $50 per
month from $75.

Analyst Amy Cravens of Instat/MDR in Scottsdale, Ariz., says that research
shows that customers show little interest in paying for the service regular
until the price for access drops to between $20 and $40 per month.

Reaching average customers has proved fruitless to date, she says. "So far,
usage has been a lot lower than expected. We're still seeing coffee-shop-type
locations that are getting only one or two users a day."

Donovan says any provider wanting to make money on Wi-Fi hot spots
should probably ignore general consumers entirely, at least initially.

"If you want to reach the mobile consumer you can do it with a wireless phone
using GPRS or something like that," he say. "It doesn't make sense to build
consumer hot spots that span the nation. With Wi-Fi you're really going after
the nomadic customer. Someone who tends to move predictably from one
place to another."

http://www.forbes.com/business/2003/05/12/cx_ah_0512wifi.html

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