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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.
1. Make free wireless Wi-Fi
2. ???
3. PAY!!
A free internet wifi connection... but then you are buying coffee and a muffin, so you ARE paying. The cost is absorbed by the cafe. A big business might be able to run at a loss to gain customers, your local cafe sure as hell can't. And really, if you think about it, how much is a coffee and muffin? Is it cheaper than 1 paid hour for web access? Sure, you might have bought a cappacino anyway, but its the little extras you buy that make it worth the cafes while to offer *free* internet.
Do you need a website upgrade?
I'm not sure where I read it the first time, but the model I keep coming across for wifi is that it will follow the same business model as air conditioning.
Businesses will offer it because it would simply be bad for business not to.
I had one person tell me I had no right to lock down my WiFi access points at my home and the 3 WiFi at my church because the internet should be free, and I was dening people access to the internet by not alowing them access to a pipe they were not paying for.
The article makes no mention of security which, it seems to me, will be the best way to make money in the hot-spot business. When I use a public, non-WEP hotspot, all I ever do is SSL to my command-line account and run pine or some such. (My internet provider hasn't done secure POP yet, but they're working on it.)
On the other hand, maybe there's no money in security either. When traveling for work, I can use secure VPN into the company system, and it doesn't matter whether my hotspot is secure or a total cesspool. So there's no reason to pay extra for T-Mobile on the company dime, and I'm certainly too cheap to pay extra when on my own dime -- I'll just use SSL to check email.
It is a conundrum. Perhaps WPA is the solution, but I'm not waiting up nights for it to be widely implemented.
If you can't find "a sustainable business model" lobby to make free hotspots illegal.
Everything costs money...deal with it. The "Internet" was never free and never will be. Fiber optics, switch gear, etc...all cost money. I am a network enigeer by trade...I know first hand how much equipiment and staffing can cost. The saying "you get what you pay for" is very true in the networking world.
I was staying at a hotel a few weeks back and I had my laptop with me. For $10, I could get wired broadband in the room for 24 hours. Seemed a bit steep to me so I waited until I came to a point where I absolutely needed the internet. I was sitting at the desk on the other side of the room (near the window) when my laptop, an old G3 Powerbook with a Linksys Wireless-G card, told me that a wireless network was suddenly available, 50% strength. Curiously, I connected to it and it didn't require a password. As soon as iChat signed on, I noticed that someone using the router had a Mac too and was signed on Rendezvous IM. I started up a chat and explained my predicament to him. He said it was great to meet me and I could use his new wireless access point as much as I wanted, as long as I kept my bandwidth use under control.
And that's pretty much how a lot of people feel about wireless broadband. As long as you don't inconvenience them, you're free to use their network. It's that attitude that basically makes paying for wireless access an unsustainable business model. I wonder how long until ISPs band together to make open connection sharing illegal and scare everyone into thinking that sharing their connection is morally wrong.
This is the kind of thing that happens when much of your customers are also your engineers (or interchangable with them.)
Its what happens when your service-providing hardware becomes commodity.
Have we ever been able to benefit from such a super-scaled economy before? I don't think so; it will take some getting used to.
Welcome the new generation, no longer hostage to high setup costs; We can do it ourselves.
- OK, admittedly because the hi-tec industry keeps churning out the pieces; this is the bottom of the technology/market food chain, but its never looked so good before.
Everything is marginal and there are enough people to eat the margin.
Sam
blog.sam.liddicott.com
So, how long has 802.xx equipment been available? I would understand if this were a budding technology that was just breaking, but I have had a wireless router for 2 years, and I am certainly not an early adopter. The truth is that businesses that should have been on this bandwagon all along are only now seeing the potential for profit. Sorry guys you missed the boat on this one. Also, I would argue that there is already a great business model in use. Free wi-fi for customers of your restaurant/cafe/bookstore etc.
For whatever reason, market economy is always assumed to solve all problems related to electronic infrastructure. And that assumption is the reason why dsl services are still embarassingly overpriced in the US.
To compete you must add value, or offer a lower price.
Competing with free removes the price driver.
I don't see that many options to add value. But it isn't my job to dream up business models for others.
This is a repost of a comment I made that nobody modded :-)
Free hotspots are acceptable in places where it's not much of a marginal cost, and where people wouldn't be able to 'leech' very much (i.e., hotels and such.) But in places where there are a lot of randoms, that is no good.
I've also seen pay-to-access credit card methods, but I wouldn't want to use them -- that is mainly for business users.
An advertising based hotspot as in this article seems very annoying, but it would also be pretty easy to hack Mozilla and get around the advertising overall.
How else can we pay for wireless? Here -- My idea, never heard it elsewhere, I think it's good:
A wireless hotspot 'jukebox' (or parking meter, or vending machine, or whatever metaphor you would like).
It is simply a box with a coin deposit -- anyone can go up and put a coin in, and the machine gives everyone in range Internet access for X amount of time. (1 dollar for 15 minutes? If people actually USED dollar coins, it would be good, I think).
Anyway, I believe the social model of this would be interesting: the person who needs it most and who can probably afford it the easiest (doing business or whatever) will end up paying for everyone as long as they want to use it. If there is no 'business user' at the time, the people who just want to use it casually will probably just volunteer to pay for one unit at a time.
This method is convenient, easy to implement, cheap to build, and easy to use. Admittedly, business users would probably rather have a credit card and authentication system that would allow them to charge it to the company, but I think that casual users would spend quite a bit more than they currently do. It is pretty cheap for them.
Anybody hear of anything like this implemented anywhere else?
Maybe theres a future in mesh Wi-Fi as a possible help to business models. Im not sure about the legalities of reselling services, but say a bunch of businesses get together and offer coverage of a 2km radius in a town, they could get other businesses to chip in and spread the cost so it becomes very little per business. I saw somewhere that a local tourist board were subsidising such a venture so they could call claim to be a 'Wi-Fi Internet enabled town'. I know its not traditional business, but ideas like this are needed to help spread the cost of free public access.
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.
Free is not the future so long as it is run by private entities. There are several reasons why this is so:
-security -- sure someone isn't sniffing your data and/or hammering your system for vulnerabilities while you surf?
-reliability -- when the access point you are connecting to locks up, who do you call?
-quality of service -- does the person operating the AP you are connected to have SSH blocked? What about FTP? SMTP? You just don't know.
It seems to me what is REALLY happening is that free wireless Internet is making plain access a comodity such that high premiums won't last. Look for services beyond Internet access to appear widespread.
Also look for one of two things to happen -- either providers using the free spectrum will have to charge tax for providing service OR wired companies will become exempt from having to charge them.
http://www.wififreespot.com/
Until someone comes up with an Internationally Recognized symbol that you can paint on the wall, put up in the window, or otherwise make known, which means "WI-FI ACCESSIBLE HERE ... USE DHCP TO GET AN IP ADDRESS", and by 'recognized' I mean on the same order as that of other major international symbols ... then, WI-FI is forever going to be a 'fringe' service.
... but until then, users of WI-FI are still going to have to be experts of the ether in order to 'know' when and where they can get on the 'net ...
I'd use WI-FI, everywhere it was available, and I'd pay for it too, if only it was really easy to see where WI-FI was going to be accessible. Someone come up with a good WI-FI branding strategy first and then we'll see successful WI-FI economic models come into place
; -- the corruption of government starts with its secrets. a truly free people keep no secrets. --
It's not binary choice; it's a duality. As I write about all the time on my Wi-Fi weblog, a certain category of Wi-Fi hotspot user will wait for reasonable roaming plans and then pay for it (or their business will more likely pay) because it gives them a predictable, consistent, high-speed experience.
Free is great, and free doesn't have to be inconsistent or mom and pop. For instance, look at Austin Wireless City or Marriott's budget hotel chain (free wired or Wi-Fi in all of their mid-level hotels by the end of 2005).
But for business venues and business districts and a consistency in access, people will pay. If every McDonald's has branded Wi-Fi and it's just $20 per month, then certain travelers--perhaps millions--will take advantage of that.
When roaming kicks in full scale, and all US hotspots are covered by a $20 per month fee from Comcast or Qwest or Boingo or other consumer firms reselling access, then for consumers who need it, there's no question. Businesses will pay $200 per month cell bills; a $20 per month surcharge for more productivity through unlimited US roaming won't be a big deal.
Freelance tech journalist for the Economist, MIT Technology Review, Macworld, and others
I used to use SurfAndSip way back when it started in San Francisco. $20/Month for unlimited internet access is not bad, especially if you have a cell phone (save $10 on land line) and spend a lot of time in or around cafes anyway.
But last week, i saw the death of this model. I went into the Canvas Cafe - free wireless access from 8 am - 6 pm, and the typical hipster atmosphere we all love and loathe. I sat down with my latte, and saw in front of me 30 (thirty!) laptops. Everybody in this place had a laptop. All of them with WiFi (new and shiny PCs and 50% macs). I think i saw maybe two people without computer. The whole cafe had turned into some kind of office. It was packed.
Now, this cafe was popular to begin with, but this was a weekday, and this was sometime in the afternoon.
The euquation is simple: Free WiFi = more customers!. Once that begins to sink in, imagine how many Cafes would _not_ be able to affort $50 per month for a serious DSL line. Exactly Zero. Any business can afford that. The cost is negligible.
This isn't some theory or opinion. This is reality: It's happening right now, it already happened, it's working, and there is no stopping it or turning back the clock.
I am sorry for SurfAndSip (which always had excellent service and good prices) and less sorry for others (e.g. t-mobile with their attempts to sell the internet as something close to Gold). But the reality is: The future is free wireless access. Paid-for hotspots will be gone in no time. The only way i can imagine these companies making money is by reselling DSL and installing the equipment.
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.
Several hotel chains in the US are now advertising free WiFi connectivity when you stay at the hotel. This is where I see free hotspots as a business model -- a value add on an existing market. Given a choice between two hotels (all things being equal), which would you select, the one with the WiFi or the one without? Similar to advertising free cable TV, a pool, or even air conditioning, free WiFi can be used to attract customers at low cost for the establishment. Now that some are offering the incentive, I expect free WiFi to be an across-the-board service provided by any decent hotel.
Other environments, where you may only be using the service for an hour or less (cafe, airport, etc.) will have a hard time justifying a cost that makes the credit card processing worthwhile. A subscription model may work in this environment, but that just means another company is taking a chunk of any profit.
I have to think that WiFi (or some form of Internet access) will be considered a low cost utility or courtesy at some point -- like a water fountain, electrical outlet or even a public restroom. Most people take those for granted now, and I expect that the same will be true of WiFi in only a few years.
Paying for WiFi access now is paying for the deployment of the hotspots. Once they are reasonably ubiquitous, they will be "free" (included in the cost of doing business).
Can You Say Linux? I Knew That You Could.
Do your customers pay by the minute for the lights in your store? The air conditioning?
There are a dozen different payment methods, data rates, flat rate payment, by the megabyte payment, by the minute payment, encryption keys, it's almost not worth the hassle. If an ISP were to come along and standardise the lot it might be worth it.
At the moment without the standardisation, the only way wireless is going to work is as an infrastructure cost, perhaps with limited bandwidth and access, encourage people to come in and smell the coffee so to speak.
Government of the people, by corporate executives, for corporate profits.
However, this is the first one to offer it and turned me into a loyal and repeat customer. In fact this morning I will answer emails and do some work and probably stay for lunch and order a sandwich and they make another $5 off me.
As a stand alone pay service, its doomed to failed, however as an incentive to get people into your place of business, especially one serving food and drinks, it can be a cheap and effective marketing tool.
"The problem with socialism is eventually you run out of other people's money" - Thatcher.
A small group of mountain residents, west of Boulder Colorado formed the Magnolia Road Internet Coop (http://www.mric.coop) nearly 3 years ago with our 1st paying members going online about 2 years ago. As a rural community, there is no access to cable modem service nor DSL. ISDN is very expensive for limited bandwidth. Satellite options have proven unsatisfactory and expensive.
Currently we have nearly 200 subscbribers and cover about 250 square miles of mountainous terrain. The cooperative is run by volunteers, which we feel is the only way to keep costs down and subsequently, subscriber fees. The current rates are $50/mo for up to 3 mbit/sec bandwidth and $85 for 802.11a service. We expect to be debt free early next year at which time fees will be reduced.
We have a very viable business model where commercial ventures in the area are struggling with high debt loads.
"Gentlemen, you can't fight in here! This is the War Room!" -- Dr. Strangelove
Its very hard to get people to pay to use a road - sure there are .1% toll roads - and maybe we will end up with .1% toll WiFi Spots.
But as a people - we need to realize that communication, like travel, is a net benefit, and the cost/benefit is highest when use is convienent and costs are shared.
Making WiFi a national project - like going to the moon - really has more merit, more justification, and would in the end provide more benefit - at a ridiculously low price.
Sure - some argue they don't want to pay - because they don't "USE" it.
But I suggest that even those who think they don't use it - would still reap the benefits.
Fedex-like tracking systems would be very inexpensive - almost everyone gets mail somehow.
Appliances like smart sprinkler system which could save water by responding to the weather forecast could be commercialized successfully.
Water savings helps everyone.
Almost everyon recieves a service which in some way involves computer transactions which could be carried over the internet.
Thus the most logical way to pay for it is - the national treasury.
Unlike cars which pollute - using the internet has very little negative externalities - and so they is little reason to extract a price at the point of use.
AIK
Melbourne wireless is a group of people building their own network. Its not connected to the net mostly because the local telco charges per megabyte and all the other tier two providers (who claim their tier 1) bill the same way so the net is too expensive to give away connections....
Except.... the local telcos have annoyed me a great deal. I'm tired of seeing bills in the thousands of dollars a month for work's pathetic connection which does a less than a hundred gig a month. So I called up every local provder through their offices in the US and got price quotes there for service here. I've now got a spare bandwidth on an unlimited pricing plan. So lets see here, I'm mad the local telco, I've got roof space on the 129th tallest building in the world as well as a few other choice spots, I've got a few nice 120 degree max-rad antennas, I've got spare bandwidth that won't cost me anything if I give it away and a service contract that lets me resell or share it. I wonder what I should do.
My friend has a little coffee shop near our campus. I installed a wifi hotspot for him with a Comcast business connection and an access point. His cost for the first year was about 1200USD. His business tripled. So, anecdotally, giving wifi away as a loss-leader works.
--toby
Comparing it to Windows will be a moot point, since El Dorado is going to have a 40% larger code base than XP.
I feel I should put in my 2 cents as I have been working on a wifi project for about a year now.
Why pay $6 an hour for internet service when most people would rather catch a movie for the same price and get an hour an forty minutes of entertainment.
So the model has changed, instead of charging the coffee drinkers of america- charge the cafes of america.
This model happened naturally because companies compete with each other and try to add more value to their products and services. For example, restaurants, bars and grocery stores are buying wifi installations (from us) to offer free wifi at their locations.
Most are choosing to offer just a plain, bare wifi access. No portal or billing. This is because there is a rather high cost for a small company that is offering wireless service as an amenity to deploy a "captive portal" with a billing back end.
We deploy Colubris for a few customers, but even that which is a one unit solution is well over $500+ and isn't what most places recommend. Usually, most places recommend a three unit system, one unit the "ipzone" or firewall is located on the premise- the other are the authentication server and a billing back end. This gets costly.
Most places are gonna just buy a sub $200 wap and offer free wifi.