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Ontario Technoblog

Ontario Emperor technology blog.

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Tuesday, October 18, 2005

Free Wi Fi and the Business Model

This is being posted from Rico Coffee, 2320-A Foothill Blvd., La Verne, CA 91750. (Hey, it's not as automated as Where's Tim Hibbard, but it works.) I need to check my work e-mail before 8:00 Pacific time to see if I received an important e-mail from the East Coast, and for personal reasons I find myself in the La Verne area. After a bit of hunting, I was able to locate a free wi-fi location (well, if you don't count the medium coffee and the blueberry muffin, but it's still a lot cheaper than six dollars an hour or whatever the going rate is).

Granted that La Verne, California isn't San Francisco, California, or even Hermiston, Oregon, but even here we have a potential challenge to the business model of Wayport and the rest that charge large amounts for wi-fi access.

From Wi-Fi Planet:

...While wireless companies are busy building out fee-based services in such myriad locations as hotels, coffee shops, RV parks and truck stops, local community-based hotspots are being thrown up on the cheap as either marketing gimmicks or because the owners believe that the Internet should be untethered, ubiquitous and free. The free hotspot movement may seem a bit naove and quixotic, but it does pose a serious threat to the business case of the for-pay hotspot movement.

"At the very least," said John Yunker, an analyst at Pyramid Research, "the free hotspots will put downward pressure on the price of the for-pay services." The research firm believes that there will be more than 21,000 hotspots in the United States and 45,000 globally by the end of 2004, and that the price for the services will begin to fall soon thereafter. "[T]he rapid growth in Wi-Fi users will be coupled with equally rapid price erosion," Yunker said. "Average revenue per user will drop from $30 per month this year to $3 per month in 2008."

The operators of the community-based free sites receive $0 per user, yet show no signs of abandoning their nodes. For them, Wi-Fi is a valuable marketing tool. Phil Lavigna, who operates Little Italy WiFi in San Diego, says that setting up a Wi-Fi node is fairly cheap, and with it comes the opportunity to communicate with users via the splash page, the first Web page users see when signing on. What's more, free Wi-Fi offers good public relations to the community Lavigna's business, Color Graphics, serves....

But this doesn't necessarily mean that wireless ISPs (WISPs) are doomed. Pyramid's Yunker believes that Wi-Fi will be offered as an amenity at many locations, especially in hotels and chain restaurants, and while amenity services may technically be free to the end user, some company has to exist in the background to work out the roaming agreements and security concerns for public-space, business-class wireless access. Users will seek out a service that provides a consistent look and feel across its many locations, and one that shields them from configuration burdens, he said. "In a couple of years, I wouldn't be surprised to see business travelers choosing their hotels based on the availability of a particular Wi-Fi service."


This concern may be overrated. While it took me some time to find this location, once I started up my computer, I was literally connected to the 'Net in a few seconds. Configuration, schmonfiguration. (And yes, I'm using a VPN to check that important e-mail.)

However, I'll grant that the article above was written in October, 2003, and I'm still not seeing any big decrease in that "$30 per month" service.

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