Carrier WiFi

Yankee's Hot Spot

The Yankee Group says that service revenues from worldwide public wireless LAN (WLAN) access services will hit $1.63 billion in 2007. However, the research firm does not see public WLAN services as a viable standalone business, predicting instead that it will become an adjunct to wireless carriers' existing cellular services (see US WLAN Hits $1.63B in 2007).

"For most service providers, PWLAN [that's public wireless LAN access, folks!] does not represent a viable, standalone business," says the report's author Roberta Wiggins, wireless and mobile services director at Yankee. "Carriers are well positioned for this space by providing both hotspot access and WAN/WLAN integrated service to their subscriber base. They can offset deployment costs by leveraging existing investments in the core network, billing systems, customer database, and network management. WLAN is complementary to 2.5G and 3G WAN technologies when used for wireless data services in local hotspot areas."

Wiggins says that adding WLAN services to their portfolios should provide carriers with an additional revenue source and give them another way to service treasured business customers. However, she thinks that what a carrier can bill for WLAN public access services will represent a small portion of their overall revenue.

"It won't be big enough to build a standalone business on," she says. This could be bad news for companies that are currently trying to do just that, like Boingo Wireless Inc. and Joltage Networks.

Even some of the biggest players in the U.S. WLAN access market couldn't operate unless they had other sources of revenue. Wayport Inc., she says, is a big player in wirelessly enabling hotels and airports, but they still make most of their money from their wireline dial-up services.

Wiggins predicts there will be 5.36 million users of PWLAN services by 2007. She reckons that the pricing model will tend towards a flat-rate monthly fee, like that offered by T-Mobile USA. In contrast, she expects there will be per megabyte pricing plans offered in Europe.

Wiggins is expecting that more carriers will get involved in WLAN services before 2007. "AT&T is testing out there… but they're being very cautious," she says. AT&T Wireless Services Inc. (NYSE: AWE) has been linked in the past to "Project Rainbow" -- the plan to put WLAN hotspots all over the U.S. (see WLAN USA?).

Verizon Communications Inc. (NYSE: VZ) has also just announced plans to help corporate customers with installing WLAN systems in their offices. We asked the carrier if it planned to follow this up with a hot spot service. A spokesperson for the company told us it's looking at public access service but she says that Verizon is worried about the security of such systems and wants to work those issues out before it starts a public WLAN service.

Of course, even if all these systems are launched, in some ways it is questionable how much any carrier will be able to charge for wireless LAN access. Another recent report from Frost & Sullivan says there will be so much competition in the WLAN equipment market that it will worth less in 2009 than it is now (see WLAN Will Eat Itself).

There are already plenty of volunteer groups working to wirelessly enable public spaces for free; for instance NYC Wireless is working to make Bryant Park a node on its free network. As equipment prices fall, more and more cafes and stores are likely to buy WLAN kit to offer access as a perk, not a privilege.

So perhaps a big question for carriers is how to enter this market with services that offer significant additional extras over the "freenets" that will allow them to charge more. The trouble is, the kind of infrastructure that would support such services -- the ability to offer one-stop billing, additional security, and the ability to roam onto wide area networks -- is probably a few years away from being commonplace. And as we have seen with the Internet, people get used to accessing stuff for free, even if it does have its flaws.

— Dan Jones, Senior Editor, Unstrung
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