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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.
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.
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
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?
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.
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
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.