Subject: [NEXTEL-1] Wi-Fi: Who Profits is a Mystery

From: [email-masked]
Date: Mon, 21 Jul 2003 18:43:12 -0400

Wi-Fi: Who Profits is a Mystery

The only thing analysts agree on when it comes to Wi-Fi is the number of hot
spots are growing and there are many different business plans out there that
indicate Wi-Fi will be a revenue stream for someone. The point of dissagrement
is whether or not to charge for Wi-Fi access. A number of business models are
being tested, and only time will tell whether a pay-as-you-go; wireless plus
Wi-Fi access package; or free business model will succeed. Some say that
Wi-Fi may spur the sales of more Starbucks coffee, wine and books than
actual revenue from Wi-Fi access fees. (Source: USA Today)
=============================================================================
Posted 7/18/2003 2:01 PM

As wireless hot spots proliferate,
commercial windfall in doubt
NEW YORK (AP) — Take my Wi-Fi,
please.

That might as well be the motto of the increasing number of people
who set up wireless Internet networks in their homes and
businesses and — sometimes unwittingly — leave them open for
anyone to share.

Then there are colleges, geeks and city officials who are making
Wi-Fi as free as the foliage in public plazas. And now you can use
Wi-Fi gratis in New York if you're a Verizon Internet subscriber or
eating an Extra Value Meal at some McDonald's restaurants.

Add it all up, and there's a significant number of places where
people with a properly outfitted laptop or handheld computer can get
wireless Internet access without reaching for a credit card.

That could spell danger for burgeoning efforts to charge big bucks
for the use of public Wi-Fi "hot spots." While Wi-Fi is shaping up as
a true growth engine for chip-maker Intel and other technology
companies, the idea of luring people to pay for it in public could be a
flop — outside of select places like airports that have a captive
audience of business travelers.

"Carriers going in and making money simply offering Wi-Fi service
to customers in coffee shops — the reality of that is, it's not going to
be that big," said David Chamberlain, an analyst with Probe
Research.

Wi-Fi, short for wireless fidelity, radiates an Internet connection that
multiple computers can share, at very fast speeds, for about 300
feet — a single hot spot.

Because it uses unlicensed radio frequencies, Wi-Fi is relatively
easy and inexpensive to operate. Many new laptop computers
automatically detect Wi-Fi networks, while others easily can be
made to do so by plugging in a wireless card.

Beyond widespread Wi-Fi use in homes and offices, the United
States has some 5,000 public hot spots. That includes 2,700
operated by wireless phone carrier T-Mobile, mainly in Starbucks
coffee shops and Borders bookstores. T-Mobile charges 10 cents a
minute (the minimum cost is $6, however), $40 a month or $360 a
year, though existing T-Mobile customers can sign up for $20 a
month.

Analyst Tim Shelton of Allied Business Intelligence envisions
12,400 hot spots in the United States and Canada by year's end and
78,000 by 2008.

But he says the industry needs to get much better at attracting
average consumers. After all, there are only so many business
travelers and tech addicts who lug around laptops and are willing to
pay to go online while out and about.

Though notebook computer sales jumped 17% in the United States
and 14% worldwide in the first quarter, Gartner Inc. analyst Ken
Dulaney attributes the rise to lower prices and better laptop
performance rather than the buzz over Wi-Fi.

And Parks Associates, a market research firm in Dallas, recently
found that only 3% of Internet users have logged on through Wi-Fi
hot spots. Only 5% of that small group took out a subscription to a
Wi-Fi service.

"If you don't really travel nationwide, what's the need for hot spots?" said Parks
Associates analyst Yuanzhe "Michael"
Cai. "If you are just the average consumer, why do you want to go to a Starbucks
or a hotel lobby when you can just
use your DSL at home?"In hopes of stimulating demand, Wi-Fi proponents at Boingo
Wireless Inc. are linking otherwise unrelated hot spots so users can roam, the way
cell phone callers do when they leave their provider's range.

But even now, without widespread roaming, Boingo founder Sky Dayton believes
there's more than enough demand to make for-fee hot spots successful. "In Wi-Fi,
getting to profitability just doesn't require that much traffic," he said.
T-Mobile won't release subscriber numbers, but spokeswoman Kim Thompson says its
Wi-Fi usage is growing.
Still, she concedes "there are a lot of different (business) models out there."

"In terms of which one of those is going to win out, who knows?" she said.
Assuming mainstream demand picks up, how much of it will be consumed by
community-based free hot spots, like the ones volunteer techies run in New York,
San Francisco and other cities? The fashionable answer among commercial Wi-Fi
purveyors is: not much.

There are too few free spots, their argument goes, and frequent users will be
willing to pay for customer service and encryption that can protect wirelessly
transmitted data from snoops.

Indeed, security fears have prompted several companies to prohibit employees from
accessing corporate networks from home or community hot spots. Some, like Dow
Jones, prohibit work-related access from any wireless network at all.
The knock on free networks doesn't fly with Ossip Kaehr, who uses the free Wi-Fi
in midtown Manhattan's Bryant Park. Sitting with his laptop and his son at a table
in the park one wet, gray afternoon, Kaehr said he doesn't believe security is any
better on a Starbucks network. In either place, Kaehr, chief technical officer for
FirstGate Internet, only logs on through a virtual private network (VPN), which
provides a secure tunnel to his office for data.

"I like a spot like this, to combine work and leisure," Kaehr said as
four-story-high trees ruffled in the breeze and rambunctious organ chords drifted
from a small carousel in the distance. "I browse free at home and in the office,
so why pay serious money to use it in Starbucks?" If that belief grows, so could
hybrid Wi-Fi service plans. For example, Verizon is turning 1,000 New York pay
phones into hot spots that can be used only by people who get DSL or dial-up
Internet from Verizon. (As for security, Verizon doesn't employ encryption,
advising wireless surfers to avoid sending sensitive information or to use VPN
software.)

Probe Research's Chamberlain predicts similar models eventually will dominate. In
that scenario, an Internet company like America Online would buy wholesale hot
spot access for its customers from a provider like Cometa Networks, a joint
venture backed by Intel, AT&T and IBM.

Another possibility, as Wi-Fi-capable handheld computers and cell phones
proliferate, is for bookstores, coffee houses and other retail establishments to
eat the few hundred bucks it takes to operate a hot spot, and offer Wi-Fi for free
in hopes of getting customers to linger or return frequently.

Nine businesses along Boston's Newbury Street have shelled out $350 each to share
a high-speed data line that feeds their stores so they can transmit free Wi-Fi.
The network has been running for more than a year, and no store has dropped out in
disappointment, according to its organizer, computing consultant Michael Oh.
"There's much more money to be had in selling more books, more coffee, many more
bottles of wine, rather than trying to sell (Wi-Fi) access," Oh said. "The
traditional payment plan of by the hour, or by the month, is eventually going to
go away."

http://www.usatoday.com/tech/techinvestor/2003-07-18-wireless-windfall_x.htm

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