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Monetizing Wi-Fi Starts Here
Monetizing Wi-Fi Starts Here

WBT's Wi-Fi editor reports on a recent conference that was devoted to examining the value, profit prospects, and real-world obstacles inherent in deploying and maintaining wireless public Internet access networks ­ commonly called "hotspots." In light of the estimate that there will be over 10,000 public wireless access points by the end of 2002, Ron profiles the players in the hotspot market today, and explains some of the flavors of the 802.11 standard that's fueling the growth of Wi-Fi.

My mind often defies logic. My wife will attest to that. I'm more likely to dream about the desired result than the work required to get there. The first time I looked at a Web browser I immediately wanted to download audio and video files. I didn't think about the infrastructure challenges, the privacy/security problems, and the slow access speeds that would need to be overcome in order to make it happen. I wanted music and video!

I had the same experience with Wi-Fi hotspots. The first time I used it I knew what I wanted: "To be connected to the Internet all the time." Fortunately, the presenters at the Wireless Hotspots Conference and Expo, held this past September in San Jose, CA, have been working on how to get there.

Wi-Fi is a revolutionary grassroots movement, but it's not free. In fact, the possibility of making money is one of the main drivers for Wi-Fi's explosive growth. Another is saving money. Companies can realize significant savings by incorporating wireless access into their corporate network schemes. Increased productivity is also an important driver because an "always connected" worker is, in theory, a more productive worker. For users, the fundamental driver is access ­ anytime, anywhere.

Traveling Road Warriors
This was a conference about the business of Wi-Fi. The potential market, just for traveling road warriors, is staggering. There are 60,000 hotels in the U.S. alone, visited by 275 million business travelers every year, and 62% of those travelers carry laptops. There are 200 convention centers, 200 airports, and thousands of travel rest stops, shopping centers, bus/train stations, cruise ships and airplanes, all candidates for adding Wi-Fi to make the life of a business traveler easier.

Laptop and PDA makers are already providing the tools for the unwired user. According to one of the first speakers, Gary Singh, director of marketing, Wireless Networking Group, Symbol Technologies, Inc., laptops that have 802.11 built in are taking off. Estimates are that 9 out of 10 new laptops will be Wi-Fi enabled by 2006; and any laptop can accept a third-party PC card. Toshiba is the first PDA maker with a "Wi-Fi ready" model, and the other PDA makers are not far behind.

Gary introduced the concept of "data fueling" for road warriors. When a road warrior stops for gasoline, a flight change, or a hotel, his or her laptop can "fuel up" with the latest inventory changes, company news, and other information. Gary called this data the "Mobile Enterprise Fabric" (MEF). Data fueling can even occur in a customer's lobby while the road warrior is waiting for the next meeting.

Eric Blaufarb, market development manager, Americas ­ Wireless Networking Business Unit, Cisco Systems, Inc., compared the shift from desktop to laptop to the shift from wired to wireless. Both are a big shift in mobility. Mobile workers need mobile data. Cisco calls this data the "Corporate Mobility Framework" (CMF).

CMF and MEF are, of course, trying to describe the same thing ­ the information and applications mobile workers need in order to do their jobs better. It doesn't really matter what you call it. What's important is that all the companies focusing on the enterprise know what it is and are trying to supply it. In other words, Wi-Fi customers are like me ­ the technology is close enough to reality that they can visualize what they want. It's up to the companies at this conference (and others) to make it happen.

'Just Make the Battery Last Longer'
Part of the 802.11 revolution is the technology standard, but a "user experience standard" has also been set. Everyone agrees on what users want. They want to be connected to the Internet all the time! Cisco calls it, "seamless mobility where users can ubiquitously access rich content, applications, and services."

Sean Wargo, senior industry analyst, Consumer Electronics Association, provided some excellent consumer and market growth information, but it was mostly about cellphones. Based on his surveys, over 31 million phones will be bought next year in the U.S. That's a lot of digital access, even though most of it is voice.

Mobile phone marketing information is useful to wireless users because, Sean said, "The number one feature consumers want in their mobile phone is a better battery." More important than better reception, Internet access, or nifty designer colors, consumers are saying, "Just make the thing last longer." I saw this consumer need in action at the conference, and I'll tell you about it in a moment.

Kurt Sehnert, director, Mobile Infrastructure Programs, Mobile Platform Group, Intel Corporation, said that Intel corporate is at 80% notebook usage and wireless networking was a priority. "Intel's mobility vision," said Kurt, "is about computing and connecting anytime, anywhere. Battery life and performance are equally important to laptop users." However, these two needs are often at odds. As machines add performance and functionality, the energy drain goes up and battery life goes down.

Kurt opened up about Intel's next-generation mobile PC platform, code-named "Banias," an entirely new chip architecture designed to be faster, thinner, and lighter, and to extend battery life. 802.11a and 802.11b capability will be built-in, and will work in concert with existing and future microprocessors. But don't expect to buy a "Banias" laptop now ­ the release date is next year. Still, Intel and the analysts are on the right track about battery life. Here's why.

I brought an old Windows 98 laptop to the conference, which has never had a wireless card in it. Its poor old battery lasts only half an hour. I got a loaner card, from Proxim, put it in the computer, brought up a Web browser and Shazam! I was connected to the wireless network provided by Symbol. I didn't need to change anything or use an access code because there was no security set at all. A free network is a beautiful thing, as long as you don't mind the eavesdropping.

But my poor battery ran down in five minutes flat. Then I noticed the attendees clumping around wall sockets like moths at a light bulb. And most of them were using the latest and greatest long-life laptops. Anyone who is contemplating a commercial hotspot better think about providing lots of power outlets no matter what new technology comes out!

Searching for the Rainbow: Monetizing Hotspots
During the Q&A, Kurt was asked about the "Rainbow Coalition," the rumored nationwide hotspot company being created by Intel, IBM, AT&T Wireless, Verizon Communications, and Cingular Wireless, but he had no comment. The Rainbow Coalition has been characterized as everything from a discussion at a poker game to a top-secret project, but we didn't learn anything new about it here. (For additional background on "Project Rainbow," see "The End of Telecom As We Know It?" WBT, v.2, n.8.) Do you have any information? Please see my reader requests at the end of this article.

Breakout sessions at the conference went over the nuts and bolts of revenue sharing, contract negotiations, and business models. One thing is sure. A "Doing Business Standard" comparable to the 802.11 technology standard does not exist yet. Many first-generation wireless companies have already bitten the dust because they based their business model on unreal expectations and forecasts. The current crop is trying lots of different approaches to providing hardware, software, and wireless services to hotspot owners.

At one end, there's the "It's All Free" approach. All the hardware, software, installation, and services are free! Sounds good, but all the revenues go to the wireless access provider, leaving hotspot owners with very little incentive to educate their employees or customers about their Wi-Fi network. Also, if uptake is slow and revenues are low, the WISP can disappear.

At the other extreme is the "Do It Yourself" hotspot. A small business can hire a techie to rig up a wireless hub to the DSL line and cut deals with Boingo and Joltage ­ or even set up a homemade fee system. And a large business probably already has its IT department looking into setting up a wireless network. Adding public access to a private network is just another task for a large project like that.

Most realistic hotspot deals being cut today have the hotspot owners sharing some of the expenses, some of the risk, and some of the revenues that are generated by the wireless network. Things like equipment maintenance, server logs, roaming charges, and working with Internet access and service providers stay in the realm of the WISP, and everyone tries to make a little money as the number of hotspot users approaches some sort of critical mass.

Even aggregators, like Boingo, are broadening their offerings with "Hotspot in a Box," a hardware/software package for hotspot owners, and "WISP in a Box," for empire builders who want to sign up all the bowling alleys in their area (or the nation) under one banner.

Boingo's Hagen Says Everyone Needs to Pull Together
Coverage is a challenge, where Wi-Fi is concerned; the other big challenge is pricing. A wireless network for the home or small office is relatively cheap. Wandering around wirelessly can get expensive if you study the plans at Boingo and Joltage. The business model will have to change to data rate rather than daily rate, along with smaller data buckets for pricing. Consumers will want to pay for 15 minutes of usage when they use it ­ not for 24 hours whether they use it or not.

These challenges are going to get solved. Wi-Fi is still a tiny business, but Cisco, Intel, and Microsoft are betting hundreds of millions of dollars on the potential. And according to Dave Hagen, president of Boingo, it's going to take all companies, large and small, to pull it off. He talked about Wi-Fi and 3G networks working together. How great it would be to speed up data access when you're in a hotspot, then back down to 3G speeds (like 56K or so) when you are between hotspots. A lot of coordination is required for this to be a relatively transparent experience for the user. It can be done now, but there is a great deal of unplugging and plugging, signing off and logging on that must be done for it to work. I speak from experience.

How about the future? I spoke with Magnus Gunnarsson, director, product management, CDMA Systems, Ericsson, who reminded me of the 2.4Mbps wireless phone data system Ericsson demonstrated in 2001. Ericsson already has a phone (using Bluetooth technology) that needs no wires to connect to the earpiece or to a laptop to provide Internet access.

Now that's what I'm talking about! Take that phone, add 802.11 capability for the hotspots, a "transparent access interface," and I'd be a happy mobile camper. One thing is sure. The technology and business models I saw at the Wireless Hotspots Conference and Expo represented a snapshot of a fast-moving target. I came away more convinced that we are moving rapidly toward "ABC" or Always Being Connected, as Magnus Gunnarsson called it. We are going to experience a lot more change and upheaval, and accumulate a lot more stuff for my spare parts closet before we get there.

Feedback, Please...
Now, dear reader, it's your turn to stay in touch with me. I enjoy and reply to e-mail. This time I'm interested in your thoughts about Wi-Fi­enabled PDAs versus laptops. Are you planning to use a Wi-Fi­enabled PDA? Which one, and for what reasons? Also, any rumors you've heard about the Rainbow Coalition for wireless? Any other information you'd like to share or get off your chest? Send your mail to me, at: rdennis@sys-con.com.

SIDEBAR
Hotspot Players
Hotspot operators are at the leading edge of the grassroots movement. Airports, coffee shops, hotels, and convention centers are always mentioned as likely prospects for hotspots. Other examples include laundromats, doctors offices, gas stations, and cafés. Any place where well-heeled customers would spend more time and hopefully buy more products is a good candidate. There are also public hotspots like libraries, parks, and rest stops.

Note: Hotspot operators should not expect to make money from the hotspot, but rather from whatever products and services are at the core of their business.

On the other hand, here are the potential big moneymakers:

  • Access providers (AKA operators, carriers, and phone companies) like Sprint and AT&T make money by providing high-speed access to the Internet. This is "through the wires" access that others use to provide wireless access.
  • Internet Service Providers (ISPs) like Sprint, but also like Earthlink Network and Covad, provide Internet access coupled with services like an e-mail address, installation, and billing. They make money from your $50 monthly access fee, and they pay part of that fee to the Access Providers. ISPs often do not provide the actual phone lines, servers, and modems. They share revenue or make a lease arrangement with the access providers.
  • Hardware and software vendors sell to everyone. They charge for Wi-Fi router hardware and server software that connects to the Internet connection (such as a DSL line). Companies include big firms like Cisco (hardware) and Microsoft (software), and smaller companies like Sputnik (software).
  • Wireless ISPs (WISPs) like Wayport focus on the wireless connection for enterprise customers and for hotspot operators. WISPs provide access (through ISPs), applications, and services like billing and security for hotspot operators.
  • Aggregators bring customers to hotspots. Companies like Boingo and Joltage provide client software that sniffs out hotspots. If they are free, the software helps you connect to the wireless network. If the hotspot is "pay to play" the software negotiates a connection for a fee (one time or monthly). Hotspot operators are cutting deals with all of the aggregators, and share the revenue from their customers. ­R.D.

    SIDEBAR
    Who's Who and What's What in Wi-Fi: Two Current Entrepreneurs
    I visited the Funk Software booth at the expo. Funk offers a very cool access control and policy management software product called "Steel Belted Radius" for wireless service providers and the enterprise. Check it out at www.funk.com. They also provide a good white paper on security that is free to download.

    Back in the early 1980's, Funk Software's claim to fame was "Sideways," a utility that printed documents in landscape mode. It was a big deal at the time because word-processing software only printed in portrait mode. "Sideways" was a short-lived success because landscape printing became a normal feature. This should be a lesson that Funk Software remembers, and all the firms in the Wi-Fi space should take to heart. Wireless network technology is going through a revolution and there's plenty of upheaval left. Today's most popular software/hardware may well be tomorrow's doorstop. But "Sideways" was in the right time and the right space, and so is "Steel Belted Radius."

    You can check what hotspots are near you at www.wifinder.com. Liz Kerton, VP Marketing, WiFinder, Inc., launched WiFinder in 2001 when there were 400 hotspots in the U.S. She estimates there will be over 10,000 public wireless access points by the end of 2002. You hear a lot about hotspots covering the world, but at 150 feet per hotspot, that's about the size of four Las Vegas Convention Centers. Coverage is a challenge. ­ R.D.

    SIDEBAR
    802.11 Datapoints
    In 1990 the Institute of Electrical and Electronics Engineers (IEEE) began work on a new wireless networking standard. Seven years later, in 1997, 802.11 was released to the world. IEEE continues to refine the standard to improve features like speed, compatibility, and security. There are many flavors of 802.11, all designated by an end letter, but these are the ones that will impact hotspots over the next year.

    For speed comparisons, your laptop modem is probably rated at 54Kbps (kilobits per second); a low-end DSL is about twice as fast (128Kbps), and high-end DSL and T1 access can reach 1.5Mbps (megabits per second) or about 27 times faster than a laptop modem. 802.11 speeds are much faster, but remember ­ a network runs as fast as its slowest access speed. So, if your DSL line is bringing in the Internet at 700 Kbps and your wireless network is running at 11Mbps, Web pages are loading at a maximum rate of 700Kbps.

  • 802.11b is the most popular wireless LAN standard, providing 11Mbps of data. The effective range is about 150 feet (all 802.11 standards are short-range, that's why they call them "hotspots"). The success of 802.11b is due to a vendor agreement to make equipment and PC cards that are compatible with each other. Look for a certification from the Wireless Ethernet Capability Alliance (WECA).
  • 802.11a is a high-speed WLAN standard (up to 54Mbps). Commercial products are now available, but 802.11a products are not compatible with 802.11b products. The two WLANs can work in the same area since they operate in different bands. 802.11a has a shorter range, but higher speed and capacity.
  • 802.11g is the high-speed (54Mbps) extension of 802.11b. It is "backward-compatible" with 802.11b which means 802.11g devices can interoperate with existing 802.11b devices, but it is not standardized yet. Products for 802.11g are expected to be available in 2003.
  • 802.11d is "International Wi-Fi" designed to promote worldwide use of 802.11 WLANs. Different countries have different radio requirements. Rather than produce country-specific products and a bag full of country-specific Wi-Fi cards, this standard allows a single card (or built-in capability) in the laptop to communicate on the permitted radio channels at acceptable power levels.
  • 802.11e is also called "Multimedia Wi-Fi" ­ enabling voice communication over a network and streaming multimedia services, 802.11 standards a, b, and g. Products for this standard are also expected in 2003.
  • 802.11h is an enhancement to 802.11a that is significant in European deployment. Again, no products until 2003.
  • 802.11i replaces the security scheme for 802.11b, called Wired Equivalent Privacy (WEP), that has been found to have several security holes. The new standard is called Temporal Key Integrity Protocol (TKIP). The 802.11i standard should be ratified sometime this year. ­ R.D.
    About Ron Dennis
    Ron Dennis, Wi-Fi editor of Wireless Business & Technology, is a technology pioneer and a Palm fanatic. He's now reporting for WBT from the islands of Hawaii. He cofounded Livemind, Inc., led the third-party developers group at AOL, and created AOL's Web Hosting Service and Software Greenhouse. He has also guided several Internet startups.

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    Reader Feedback: Page 1 of 1

    ...has officially been re-born as the Cometa Networks butterfly, we're all aware for the first time that founding CEO Lawrence Brilliant is determined to have no fewer than 25,000 to 50,000 Wi-Fi access points in 10 major metropolitan areas by the end of 2003. An incredibly ambitious goal.

    That would put hotspot access within five minutes of every individual in the top 50 U.S. metro areas.


    Your Feedback
    jgeelan wrote: ...has officially been re-born as the Cometa Networks butterfly, we're all aware for the first time that founding CEO Lawrence Brilliant is determined to have no fewer than 25,000 to 50,000 Wi-Fi access points in 10 major metropolitan areas by the end of 2003. An incredibly ambitious goal. That would put hotspot access within five minutes of every individual in the top 50 U.S. metro areas.
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