Reiter has got a detailed analysis of pricing and costs of WiFi hotspots with comment from Andy Syebold and Sky Dayton (of Boingo). Like him (and them, and the whole industry) I'm still trying to work out exactly where the added value is in running a hotspot or network of hotspots and so where the settling point is for price. One problem wiith this is the tension I've mentioned before between the Mom and Pop operation where WiFi inernet access is given away fro free as a loss leader and the commercial organization that needs all the infrastructure and hence has to charge "business" rates to cover their costs. One other issue is the lack of any obvious added value that can be used to justify "business" rates. So far I've only been able to find two both of which are threatened by other sources. The first is an email system that makes it possible to send and receive emails without exposing your passwords. The second is a VPN from the consumer's laptop to some secure point on the net. This is not to provide complete security because onwards from there would be insecure but it does at least make WiFi access no more dangerous than a fixed line into the internet. The threat to these as a business model justification is that they are both easily replicated using first or third party services from someone else.

Right now the WiFi hotspot market feels like the early days of cellphones. There's no market leader. There's no roaming agreements. There's wild variations in pricing. The BigCos are throwing capital investment at it in the hopes of grabbing all the land and mindshare. And the early consumer adopters are finding it very difficult to get through this and are making it up as they go along. What makes this interesting and which will make it play out rather differently from cellphones is the low barrier to entry at the bottom end and the lack of enforced regulation from government or national level bodies.

Given all this, it would be easy for me to recommend to the big players that a traditional approach of "business pricing", lock in and corporate deals is a dead end and a better approach would be to swamp the market with a dirt cheap, franchised model. And I have done this. But I also know that this is probably never going to generate the return measuring tens or hundreds of million dollars that they're looking for and so it's not an option. So they'll go down the easy well trodden path and in the process most of them will probably never get the return they're looking for and will have spent untold millions on capital costs in the process that they'll never recuperate.

There's also some marketing comment in the article. He points out that typical WiFi deals involve two parties. So we have T-Mobile linking with Starbucks or BT linking with Costa. The industry is young enough that there is a major element of education needed here. This means that the venue needs to be well stocked with information, signs and notices, knowledgeable staff and so on. Reality is that all too often there's one sign on the wall or a bunch of leaflets near the chocolate sprinkler station and that's it. So the marketing from the venue organiser is essentially failing. Now look at the web sites from the network organisers. The information is thin and often misleading. So that I'm not accused of bias (we have links with OpenZone) take a look at T-Mobile, Megabeam, and Openzone. I'm in the business and even I have trouble working out what their respective offerings are, what the risks are and what I have to do to connect up. Now imagine yourself into the shoes of their prospective customer. Say a moderately tech savvy businessman who spends a lot of time on the road. Are they going to be able to work it out, or deliberately seek out one coffee shop or hotel over another so they can use it?

This all reminds me of many many sponsorship and marketing deals I've been involved in over the years. All too often the deal is all that matters to both parties and little work is done afterwards by either side to make the most of it. It's as though both sides are expecting the other to do all the work. And where some work is done, it's passed down the chain of command to someone who is more interested in keeping their job than maximising return. A horribly cynical view, I know, but that's my experience.  [from: JB Wifi]


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[ 12-Dec-02 11:26am ]