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NYT: Making Free Wireless Wi-Fi Internet Pay
securitas writes "The New York Times' Matt Richtel writes about the the challenges of finding a sustainable business model for 802.11 Wi-Fi wireless Internet. The problem for entrepreneurs, telecom companies and others is that the proliferation of free wireless access hotspots at the municipal and grassroots level has obviated commercial carriers' revenue and profit models in many cases. One user quoted in the story sums up the attitude of many wireless users: 'The Internet is free here.... Why would I pay?' IHT, published by the New York Times in Paris, is carrying an abbreviated version of the story."
Many reasons. For example, a whole lot of information is free, but many people pay for information.
*Reliability - Someone guarantees that it's going to be there for you.
*Convenience - More hot spots. Less time configuring. Paid services are often suited towards the mainstream user--one who might be scared of the prospect of finding hotspots.
*Speed - Don't these free hotspots get bogged down and/or are throttled?
*Security - I actually don't know a single thing about this, someone please help me out on this one.
Obviously you're not going to get everyone to pay, but that's okay. Not only are there those who don't mind paying, remember that there are plenty of places still left with non free WiFi. (I'm talking about people who intentionally leave their AP open)
Just because something is free doesn't mean that it's bad. The failing businesses just didn't do their homework on the market. I was disapointed, though, to see a leading pay WiFi provider spread this piece of FUD:
Mr. Sims said he is not worried about the growth in free hot spots because he believes commercial networks can offer more reliable, more secure Internet access. Free service is fine for casual and periodic use, he said, but "when you absolutely, positively have to get that report downloaded or get access to your company system to conduct business, free probably isn't going to cut it."
Even if that statement is completely false, it will probably hit a chord in that Reliability bullet point above for the "mainstream" user.
I'm not sure that this is a "Tech" story as much as a Business story. The article's basic thesis is that the opportunity for pay WiFi businesses is getting dimmer. That's a message to short the stock of some of these guys or to not go and do my own version of T-Mobile Hotspot.
I think there are some (smaller) opportunities left, though, so I'm interested to hear what kind of niche businesses slashdot readers are profiting from. Final quote, which predicts the commodititization of WiFi:
While Wi-Fi "offers a revenue generating opportunity," he said, "it's real benefit to SBC is as a customer retention and acquisition tool."
Sounds quite a bit like what that Sun guy said about hardware last week.
Current business models of non-free public hotspots assume that the HotSpot is operated by a Wireless Internet Service provider, with some kind of revenue sharing with the venue owner. In other words the business relationship is not between the end-user and the venue owner, but instead between the end-user and a third party (the WISP).
This business model is in strong contrast to other goods and services which are sold at the venue. At a hotel everything from breakfast to video on demand is sold directly from the hotel to the hotel guest. This gives the hotel a strong incentive to promote the products and make sure that the product works. With WiFi today most of the revenue goes to the WISP which also has the support obligation towards the end-user.
Wifi access needs to be sold directly by the venue owner to the end-user, and the venue owner also needs to be the primary responsible for the quality of the product.
Have a look at personal telco which has a great review of open source HotSpot software.
... with the info in this recent slashdot article.
Visit http://ringbreak.dnd.utwente.nl/~mrjb/growingbettersoftware to download your free copy of the book
http://www.wififreespot.com/
Typically here in London I can go into an internet cafe for 1 pound per hour, or maybe 2 pounds maximum in expensive locations. For that the owner of the cafe gives me an internet connection, a place to sit, and the use of a PC for an hour.
If I bring my own laptop, I simply want the internet connection and maybe a place to sit. Providing this is much cheaper than providing me with a PC as well, and the cost to me should be cheaper.
If I go into Starbucks and order a coffee, then the place to sit is included in the price of the coffee. So all that I want is the internet access. If it costs anything, it should be cheaper than the cost of using an internet cafe, because it is so much cheaper for the provider to offer it to me. However, in Starbucks an hour costs something like 6 pounds (it works out cheaper per hour if I buy a "day pass" or something, but I genuinely don't want more than an hour).
While all this remains the case, for pay services aren't going to make money, and it is really that simple. There are circumstances where I will pay for convenience and reliability, but not this much.
I think that is right.
I don't have the numbers, but I have to believe that it is cheaper to provide reasonable speed wi-fi to an entire motel/hotel than it is to provide air conditioning -- the initial hardware, maintenance, and electricity costs of AC are all much higher. The cost of commercial DSL or cable can't really make up the difference.
The $20/day for internet access that some are quoting is ludicrous. That's a crazy amount of profit (assuming anyone is willing to pay) akin to the hostage pricing of beverages at theatres and concerts. Unfortunately for the profiteers, unlike the drink stands in the lines of amusement park rides, people don't really need wi-fi, and it can be fairly simply to find other, cheaper (free) access points without even moving. Hard to hold people hostage in that situation.
"Wah! Wah! People don't want to pay out the arse for something that's so cheap many are offering it for free! I won't be able to retire until I'm fifty at this rate, and it's not fair!" It sickens me. It's one thing to charge "what the market will bear" even if its a lot higher than your own costs, but to whine when people don't fall for your "$20 for $0.50 of service" scam is just pathetic.
Sustainable business model for wi-fi: stop screwing people.
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