Subject: [NEXTEL-1] A hot spot can increase sales, access

From: [email-masked]
Date: Mon, 02 Jun 2003 17:46:18 -0400

A hot spot can increase sales, access

By KENNETH AARON, Business writer
First published: Sunday, June 1, 2003

BETHLEHEM -- When a Hudson Valley company approached
Roberta Bastow to put wireless Internet access into her new Delmar
coffee shop, Perfect Blend, she turned them down.

Another hot-spot operator got there first.

"They were surprised that we were already set," said Bastow, whose
Four Corners shop opened in April. "They thought they were on the
cutting edge."

In the tech world, though, lots of entrepreneurs are looking for a chunk
of Wi-Fi, a nickname for wireless fidelity. And as quickly as customers
buy laptops that can surf the Web using radio waves, not wires, myriad
business models are popping up for Internet providers to make money
off the technology.

"It's a wide-open playing field," said Brian Epstein, an Albany
businessman who has started two new Wi-Fi companies and signed up
Bastow's shop.

One of those companies, Tech Valley Wireless, sets up hot spots with
Wi-Fi equipment. The other, WiFiFee, is aggregating hot-spot networks
for its subscribers to use. (Think of it like a customer with one cellphone
company making a phone call in another cellphone company's territory.)

In many ways, this rush to Wi-Fi feels like 1997 all over again. Back
then, a new technology called the World Wide Web inspired droves to
come up with wild ways to make money off it.

Today, tech insiders have lofty expectations for Wi-Fi, which many
regard as the best selling tool in years to rebuild the moribund
technology economy. In 2002, venture capitalists injected $2.8 billion
into 296 wireless and data communication companies, according to
New Jersey research firm Thomson Venture Economics. And by 2007,
hot-spot revenue is expected to reach $873 million, according to
Arizona researcher In-Stat/MDR.

But which business models will win remains a huge issue.

"It's got to be the most difficult question right now in this market," said
Tim Shelton, senior analyst at Allied Business Intelligence, a Long Island
researcher.

Hot-spot operators as small as Tech Valley Wireless and as large as
telecommunications giant T-Mobile are trying to build networks. The
difference: Epstein is trying to connect his small network to others with
roaming agreements. T-Mobile, which has installed its network in 2,300
locations, currently is available only to other T-Mobile subscribers.

Businesses that agree to host hot spots typically get some sort of
payment from the site operator. Epstein, for example, gives half the
revenue generated from a Web-surfing session to businesses.

Aggregators, such as WiFiFee and Boingo Wireless Inc., collect small
networks under their umbrella and give customers access to each of
them. While Tech Valley Wireless has signed up just a handful of sites,
including Albany International Airport in Colonie and the Armory
Automotive dealership in Albany, WiFiFee's agreements mean
subscribers can tap 214 hot spots.

Eventually, Epstein expects the big providers to dominate. He just wants
to amass a network quickly enough to sell it to one of those big
providers in a few years.

"Someone else is going to build it," Epstein said. "Hopefully me."

Despite all the hype, so far there are only about 7,000 hot spots in the
country, according to In-Stat/MDR. And today, even the busiest
locations don't get too much traffic. Just 20 to 30 users tap into the
busiest airports on a daily basis, "which isn't huge," said Amy Cravens,
In-Stat/MDR senior analyst.

"The revenue from pure wireless access isn't really there," Cravens said.
At this point, "it's real important" for providers to have other sources of
revenue, she added.

Pricing for the services is also an issue. While customers can get either a
monthly plan or pay by the session, the lack of available networks --
and the lack of roaming agreements among those -- are blocking
growth, some experts say.

"I still don't think that many users are seeing the value in paying an extra
$30 or $40 a month," Cravens said.

They might someday, but the number of places offering the service will
have to grow, said Shelton of Allied Business Intelligence.

"I'm at a Starbucks, I need a T-Mobile subscription. I'm at the airport, I
need a Wayport subscription. The list goes on," he said. "Roaming is
going to be a necessity for the market. It's not really an option."

As service providers try coming up with ways to make money, the
businesses making Wi-Fi available to their customers see the technology
as a way to differentiate themselves from competitors -- not as a way to
generate piles of new revenue.

For Borders Group Inc., officials hope Wi-Fi extends the typical
hour-long visit an average shopper makes to the bookstore chain. A
T-Mobile hot spot went online at Borders' Wolf Road store in May.

The investment is within reach for most businesses. Bastow, who
operates Perfect Blend, needs to spend $130 a month on Road Runner
access and has spent $2,000 setting up the system.

Revenue is nice, but it's not the goal, she said. adding, "I wanted Internet
access here as a value-added for my customers."

That's the right attitude, Epstein said. "A hot spot is not going to get
rich," he said. "If you're a bar, you're going to make a lot more money
selling drinks."

But then again, a Wi-Fi-enabled bar might draw more drinkers than one
without.

http://www.timesunion.com/AspStories/story.asp?storyID=139068&category=BUSINESS&newsdate=6/1/2003

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