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Wi-Fi Hotspots: Slow Progress

The brief appearance of corporate-financed Wi-Fi wholesalers like Cometa
seemed to suggest that it was possible to make money building out
thousands of hotspot venues nationwide and making those services
available to multiple Wi-Fi retailers. While proponents cited economies
of scale, the model had many of us scratching our heads from the start.
When Cometa lost the bid to build out McDonald's Wi-Fi service to
Wayport, the company quietly folded.

As the market has matured, the risks associated with failure have
increased. Delivering a satisfying hotspot experience is not easy,
especially when the only assumption you can safely make about client
devices is support for 802.11b and the availability of a Web browser.
It's not cheap, either. Every site is unique. Hotels, for example, have
found that the build-out costs are very high when you try to deliver
service to every room, leading many to consider newer high-coverage
solutions from vendors like Vivato and BelAir. Rather than making money
from the service, some have decided to simply eat the cost of providing
service. And doing it wrong can be costly. A recent study by Jupiter
Research, commissioned by British Telecom (BT), found that Wi-Fi service
problems had a significant negative impact on the likelihood of a return
visit. As you might suspect, BT thinks it can solve those problems
through an outsourced managed-services arrangement.

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Outsourcing hotspot service makes sense for most venues. Providing
broadband data services is not a core competency of most public and
private venue operators, including hotels, convention centers, airports
and restaurants. But it's still not clear who will be the market
leaders. Wayport got a big boost when it won the McDonald's deal. But
were it not for the money the company makes on the wired network
services it provides in many hotels, it's doubtful Wayport would have
made it this far on just Wi-Fi revenue.

The most obvious long-term build-out strategy has to include the major
cellular carriers. Two years ago, none of them had any skin in the game
whatsoever. Today, with the exception of Nextel, all of them are active,
and at least in the United States T-Mobile has laid legitimate claim to
the role of industry leader. With over 4,700 locations, including
Starbuck's, Borders, Kinko's and many airports, T-Mobile can
legitimately state that you're often only a short walk or drive from one
of its hotpots. The company also deserves credit for leading in hotspot
technology, in terms of the packaging of service options ($20 per month
unlimited service for voice subscribers), the delivery of new devices
(the iPAQ h6315, which combines GSM/GPRS with Wi-Fi and Bluetooth) and,
most recently, with the rollout of new secure-access capabilities based
on 802.1x.

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