The majority of Western Europe’s wireless Internet service providers (WISPs) and specialized hotspot players will disappear in the next few years, as incumbent carriers dominate a public wireless LAN market that may fail to live up to earlier revenue forecasts.

That is the opinion of market analysts at IDC, who claim that companies already established in the market with prime location hotspots will be acquired or integrated into the networks of larger players.

According to Evelien Wiggers, senior research analyst and author of IDC’s latest report -- Western European Wireless Hotspot Forecasts 2002-2007 -- difficulties in generating significant revenues from single hotspot locations will result in global carriers entering the market and swallowing up niche businesses in a repeat of earlier acquisitions (see Swisscom Buys a Bevy of PWLAN and KPN Signs Piddly Deals).

“It is far easier for the larger players to enter the market, because they have other revenue streams to fall back on and have a large existing customer base,” Wiggers tells Unstrung. “It is going to be very difficult to make money if your entire business model is based on public wireless LAN hotspots. Without the roaming possibilities offered by carriers it will be hard to sell subscriptions and create a large enough customer base.”

Such a scenario could spell the end for European players like eWave, Wifix, WiFiSpot, and Visacom. “We have already seen HubHop, Aervik, and Megabeam acquired in the last few weeks,” says Wiggers, "and I expect other WISPs and smaller players to follow."

Despite earlier hotspot revenue forecasts from Analysys of approximately $2.5 billion dollars in 2007 (see Hotspots: Getting Hotter? ), IDC has a more conservative estimate of only $1.4 billion, as shown in the table below.

Table 1: Western European Hotspot Growth

The research house also expects average revenue per hotspot to decrease in 2005, as declining subscription prices combine with the effect of a larger proportion of low-spending consumers in café bars and shop hotspots, as opposed to tech-savvy business users in hotels and airports.

“This market won’t become really lucrative,” stresses Wiggers. “It is a source of revenue, but $1.4 billion is not a great deal of money when spread across the whole market. This isn’t a license to print money.”

— Justin Springham, Senior Editor, Europe, Unstrung