Subject: [NEXTEL-1] Study questions Wi-Fi business model

From: [email-masked]
Date: Mon, 02 Jun 2003 15:18:01 -0400

Study questions Wi-Fi business model

By John Ribeiro, IDG News Service
JUNE 02, 2003

The Wi-Fi wireless LAN "hot-spot" industry could go the way of the dot-coms unless there is grass-roots market acceptance of the technology, according to a report this week by Tempe, Ariz.-based electronic research firm Forward Concepts Co.
Although a Wi-Fi hot-spot "land-grab" is in full swing, only a few venues will be profitable, according to the report, titled "Wi-Fi Hotspot Opportunities: Exploiting the New Phenomenon."

"We see the emergence of hotspots as almost a textbook case of effective repurposing of technology, but a closer look reveals some troubling deficits in the market thus far," the study's author, Daniel Sweeney, said in a statement.
"In most cases where repurposed technology has succeeded in a big way, such as the Internet, it has exhibited a strong grass roots component in terms of the user base," Sweeney said.  "In hotspots to date, the grass roots aspect of the phenomenon resides in the service providers themselves, which are often very small, single-location businesses linked in a franchise arrangement with a hot spot aggregator or platform developer."
Unless hot spots inspire a similar degree of enthusiasm among subscribers, the hot-spot industry could suffer the same fate as e-commerce, where similar vendor enthusiasm far outstripped market acceptance, Sweeney said.
A land-grab frenzy will propel the U.S. hot-spot market to grow by an estimated 46,000 new locations this year, according to the report. 

By 2004, however, there will be a dramatic slowdown in the creation of hot spots as the industry seeks to identify appropriate applications, content and terminal designs for existing capacity. But the report predicts that growth in the number of hot spots will resume in 2005, with 530,000 hot spots in the U.S. by 2007.
The report also predicts that in Europe, almost 800,000 hot spots will be installed by 2007, while in Asia, by even the most pessimistic estimates, there will be more than 1 million hot spots by 2007. A more optimistic estimate places that figure at almost 4 million by that year, according to the report.

Forward Concepts predicts that by 2007, revenue from hot spots in the U.S. will be $8 billion, or about $15,000 per hot spot. At such revenue levels, margins will be tight and profitability for the industry as a whole will be contingent upon the lowest possible infrastructure costs, which will force service provider incumbents to re-evaluate their business plans, according to the report.
There will be winners and losers among the hot spots depending on the kind of venues in which they are located. Different venues will have different profit potentials and liabilities, according to the report.
The average for hot spots in the U.S. is estimated to be about 190 sessions per year, with a disproportionate share going to business hotels and major airports.

http://www.computerworld.com/mobiletopics/mobile/story/0,10801,81728,00.html?nas=AM-81728
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