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Can Towerstream Make $$ With Free Wi-Fi?

Kaps Korner
Kaps Korner
Kaps Korner
11/4/2011
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11:00 AM -- SAN FRANCISCO -- Open Mobile Summit 2011 -- Now that Towerstream Corp. (Nasdaq: TWER) has built the world's biggest hot spot, how can the company tap the heat to generate profits?

That's the chicken-and-egg question facing the wireless supplier, which is looking for a way to increase its potential beyond its historic practice of providing low-cost broadband to businesses as a T-1 replacement. At the Open Mobile Summit on Wednesday, Towerstream CEO Jeff Thompson gave a presentation on the public Wi-Fi network Towerstream launched in New York City this summer, which has eye-popping stats like being able to deliver downstream data rates of almost 80 Mbit/s to a laptop right outside the entrance to Penn Station. He also chatted with Light Reading Mobile's Sarah Reedy:

Using its WiMax-based technology -- the same technology Towerstream uses to deliver fixed-wireless broadband services to businesses in 12 large metro markets around the country -- Towerstream first built a backbone "ring" around Manhattan's man-made canyons and then linked its microwave antennas to more than 1,000 Wi-Fi access points to deliver Internet service to ground level. Through an advertising partner this summer Towerstream traded four hours of free service to users who would agree to a marketing transaction -- downloading an app, using a "daily deal" coupon or watching some ads on their phone.

Though Thompson wouldn't divulge exact performance numbers -- we may learn more on Towerstream's quarterly earnings call next week -- Towerstream is already moving ahead with plans to launch similar networks in San Francisco and Chicago sometime soon. According to Thompson the Wi-Fi strategy is targeted at a desirable if not exactly affluent demographic -- the 18-to-34-year-old user who may not have a lot of disposable income, but is Internet-savvy and knows how to find the best deals when it comes to connectivity.

"There are a lot of people between 18 and 34 who know how to get online for cheap," Thompson said. While big carriers don't like to talk about low-end pricing, Thompson sees the bottom part of the wireless market as a place that is ripe for growth -- and it won't come from so-called "4G" plans from the big carriers, especially since almost all those plans now come with a data-use cap.

"Frankly, a lot of those plans are just too expensive for a lot of people to use," Thompson said. "These are people who will walk a half an hour to use free Wi-Fi, or walk a half hour to a retail outlet where they can pay cash for their cellular phone."

Yet that same demographic, along with the rest of the world, is hungry for more mobile data -- a need users are increasingly satisfying via a Wi-Fi connection, either at a business that offers the hookup for free or via a subscription plan through a service like Boingo or iPass. Towerstream's plan is to allow advertisers to pay Towerstream so that users can access the Wi-Fi for free, simply by doing a quick transaction at the log-in screen. In addition to being able to reach a large audience quickly -- Towerstream had one day this summer with more than 500,000 sessions on its network -- Towerstream can offer advertisers extremely granular location-based control due to the proximity of user to an access point.

"You can have a daily deal ad that only reaches someone who is 300 feet away from the store," Thompson said. On the other end of the scale, Towerstream is also a potential partner for large service providers like AT&T or Verizon, who are now building their own public Wi-Fi hot spots to alleviate cellular coverage pressure, both in urban areas and in high-congestion spots like sports stadiums. Though Towerstream hasn't announced any big-carrier deals, the potential for a bigger revenue stream has been one potential reason why Wall Street players have juiced the company's stock price over the past year or so, moving from around a dollar a share for most of 2009 to a $3-to-$5 range throughout 2011.

If it fails to nab a big-name partner, Towerstream might also just start branding the service under its own name, bringing a new twist to the business that Thompson and his team started way back in 2001, well before the current mobile data craze could have been imagined. But with low costs of entry -- Thompson said it cost Towerstream less than $10 million to build its New York network, and with just about every device having a Wi-Fi chip these days Towerstream doesn't have to supply users with any new hardware or devices -- it's an experiment that's worth at least trying, and could be worth a lot more if Towerstream can attract both advertisers and users to the "data oases" it is building.

— Paul Kapustka is editor and founder of Sidecut Reports, an independent research firm that specializes in wireless technologies. Special to Light Reading. He is also the editor of Mobile Sports Report, a new site that lives at the intersection of mobile-social technologies and sports.

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shygye75
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shygye75,
User Rank: Light Sabre
12/5/2012 | 4:49:37 PM
re: Can Towerstream Make $$ With Free Wi-Fi?


OK, it's Friday afternoon. The coffee pot has been drained. Leftover Baby Ruths consumed. But I'm having some trouble following the money here. So the idea is to get advertisers to spend money to attract people who either can't or won't pay for mobile data service, and are frugal and time-rich enough to "walk a half-hour to use free Wi-Fi"?

kaps
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kaps,
User Rank: Light Beer
12/5/2012 | 4:49:37 PM
re: Can Towerstream Make $$ With Free Wi-Fi?


Is that such a bad idea? Frugal doesn't mean broke. Why not a daily deal ad from Old Navy, or from other discount retailers?


I think Thompson (and other providers like MetroPCS) is wise to go after the part of the market the Verizons of the world are leaving behind. Each deal may not be worth a lot of ARPU but Walmart makes a lot of money selling stuff for cheap.


Hell, why not have Walmart step up and advertise? It would go hand in hand with their cheap cellphone plans.

kaps
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kaps,
User Rank: Light Beer
12/5/2012 | 4:49:37 PM
re: Can Towerstream Make $$ With Free Wi-Fi?


Is that such a bad idea? Frugal doesn't mean broke. Why not a daily deal ad from Old Navy, or from other discount retailers?


I think Thompson (and other providers like MetroPCS) is wise to go after the part of the market the Verizons of the world are leaving behind. Each deal may not be worth a lot of ARPU but Walmart makes a lot of money selling stuff for cheap.


Hell, why not have Walmart step up and advertise? It would go hand in hand with their cheap cellphone plans.

shygye75
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shygye75,
User Rank: Light Sabre
12/5/2012 | 4:49:36 PM
re: Can Towerstream Make $$ With Free Wi-Fi?


Given today's run-up on Groupon shares, it's obvious that any idea can be made to seem attractive to some "savvy" investors for a certain period of time. Plying cheap people with loss-leader deals does sound like a winner in that context.

techstocker
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techstocker,
User Rank: Light Beer
12/5/2012 | 4:49:26 PM
re: Can Towerstream Make $$ With Free Wi-Fi?


Good analysis PK. Stock number has hovered BELOW 3 (2.80 close 11/9) rather than the 3-5 that it has been. It's shaky. Towerstream spent a lot of money on the Wi-Fi network in NYC and it certainly remains to be seen if any money can be made on it. With LTE and AT&T and Verizon building their OWN WiFi with deep pockets, it seems tenuous. Maybe some money can be made in the concrete canyons but enough to make it profitable?......Not as it stands.

CraigPlunkett
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CraigPlunkett,
User Rank: Moderator
12/5/2012 | 4:46:50 PM
re: Can Towerstream Make $$ With Free Wi-Fi?


I took the network for a spin at the corner of Broadway and Canal last week.  I have a data plan, but use Wi-Fi alot.  I connected to the Blis NY Wi-Fi SSID, and opened a web browser.  I was asked to download either of two apps.  I chose the Audible.com app, and downloaded a sample chapter of Farewell to Arms.  I then had a couple hours of free Wi-Fi.  I only used a couple of minutes worth to download the app and check out the network performance.  But the audible.com app is now on my phone, and every once in a while I think about buying something from them. 


Performance was pretty good, much better than the HSPA network for my phone.


The trouble is is that you have to know to open a browser to use the network.  I'm not sure what the conversion is between attachment to the SSID and actual logins, AKA tryers vs. buyers.

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