Have Wi-Fi, will travel
Just a few years ago, if you wanted to log on to the Internet, you were pretty much stuck in one place: your home, your office, and maybe your hotel room or the airport. But Wi-Fi is quickly changing all that. Anyone with a laptop or PDA equipped with a radio antenna or PC card that uses the local area wireless networking standard can now wander into a slew of public places and hop onto the Internet for a few dollars an hour.
Over the next few years, the ranks of those hot spots will grow significantly. Even the National Mall in Washington, D.C., is getting Wi-Fi access. Research house Gartner predicts that more than 50 percent of all laptops will feature built-in wireless networking capability by the end of the year, and the number of hot spot users will triple to roughly 30 million worldwide. There's a wide range of companies planting Wi-Fi seeds. "Wi-Fi is truly democratic because there's no licensing process," says Pyramid Research analyst John Yunker. Wi-Fi providers run the gamut from mom and pop wireless shops to local wireless providers run by communities or entrepreneurs to national wireless carriers like T-Mobile.
With 4,600 public hot spots, or roughly 40 percent of the total number in the United States, T-Mobile is by far the industry leader. That's thanks largely to its relationship with Starbucks. The wireless carrier has outfitted nearly 3,000 of the chain's coffee shops with Wi-Fi. Customers can buy a day pass for $9.99 or purchase a T-Mobile Wi-Fi account for $29.99 per month for unlimited access (T-Mobile cellular customers pay even less). For T-Mobile, Wi-Fi is a major part of the company's overall strategy. About a third of its Wi-Fi users are also cellular phone service subscribers, and Wi-Fi garners an average of $20 in additional revenue each month from those customers. T-Mobile also provides Wi-Fi access at more than 100 airline clubs for American, Delta, and United, more than 400 Borders Books and Music stores, and 1,100 Kinko's outlets.
A refill, please. For Starbucks and other retailers, Wi-Fi is all about encouraging customers, especially the business customers that many retailers covet--executives jetting across the country, salespeople covering a territory by car, and freelance creative types traversing the neighborhood on foot--to spend more time in their shops, restaurants, hotels, airports, and office service centers. After all, the longer the visitor stays, the more money he or she is apt to spend on coffee, burgers, books, CDs, copies, or whatever else the retailer happens to be peddling. It's all about time: time spent checking E-mail, calling up Web sites, and sipping more cafe lattes. "The average Starbucks customer stays in the store five to seven minutes," says Joe Sims, vice president and general manager of T-Mobile HotSpot, the Wi-Fi division of T-Mobile USA. "The average T-Mobile HotSpot customer spends more than an hour."Indeed, Starbucks credits Wi-Fi with contributing to the chain's increased revenues.
Equipping retailers with Wi-Fi can be an extremely complicated endeavor, particularly when the retailer has a seemingly endless supply of storefronts. Take McDonald's, which is rolling out Internet access ($2.95 for two hours) at many of its Golden Arches. "There's much more involved than just setting up access points and hoping customers will come," says Dan Lowden, vice president of marketing for Austin, Texas-based Wayport, which beat out Toshiba and Cometa for the McDonald's account. Each would-be hot spot must be surveyed to determine how many access points are needed and how to set them up without interfering with other nearby points. High-speed land lines must also be installed.
Once the technology is in place, Wayport provides 24-hour monitoring, security, and customer service. In addition, the firm supports a wide array of back-office systems such as billing and credit-card authentication and marketing and promotion. Wayport also provides wireless access in more than 1,000 locations, including major hotels such as the Four Seasons, Marriott, Doubletree, and Embassy Suites, airports including Dallas-Fort Worth and Seattle-Tacoma, and UPS stores.
Large chains aren't the only ones being targeted by Wi-Fi providers. For example, Boingo Wireless, a Santa Monica-based Wi-Fi company known for linking disparate networks including Wayport's, recently came out with a new version of its "Hot Spot in a Box,"which helps small businesses offer Wi-Fi access to their customers. It takes advantage of an existing broadband connection and adds an inexpensive Wi-Fi router made by Linksys, a division of Cisco Systems, and Web-based software to administer it. "There's no need for on-site technical expertise," says Daniel Senie, president of an Internet services firm called Amaranth Networks in Bolton, Mass., who recently used the product to outfit a local cafe.
Easy does it. Businesses looking to set up networks of 25 to 100 hot spots can turn to a new Sun Microsystems product made by Pleasanton, Calif.-based Pronto Networks, which makes operational support systems for network operators. The iForce Wi-Fi Hotspot Appliance aims to simplify back-office functions for medium-sized Wi-Fi networks.
Still, Wi-Fi is an infant technology, and the industry is scrambling to figure out exactly what Internet users want from a hot spot. Last week, the Internet Home Alliance, a group of companies working to advance the home technology market including Cisco, HP, IBM, Microsoft, and Panasonic, launched an ambitious project at the Shops at Willow Bend in Plano, Texas. Modeled after a mall's food court, "Connection Court" is the ultimate Internet cafe, providing wireless and broadband Internet access, laptops (albeit only a handful), business services such as copying and faxing, business news and stock reports on 52-inch plasma screens, and conference tables and funky furniture designed especially for mobile workers by chic office furniture maker Herman Miller. Everything is free of charge--except the coffee and scones. The companies, which have spent nearly $400,000 on the project, hope to find out the secret of using Wi-Fi and other techno wizardry to lure more people to the shopping mall.
Ultimately, plugging into the Internet may go mobile. Connexion by Boeing, a division of the airplane manufacturer that won approval from the International Telecommunication Union to use satellite data communications, has deals with several major international airlines, such as Lufthansa, to outfit planes with Wi-Fi. Connexion recently began offering high-speed in-flight Internet service, with prices ranging from about $10 for half an hour to $30 for long-haul flights of six or more hours. Other companies are even experimenting with Wi-Fi access in cars and commuter trains. Because Wi-Fi has a limit of about 100 feet, Pyramid Research's Yunker and other experts see more promise for in-vehicle Internet access coming from an emerging wireless networking standard called Wi-Max, which is designed for greater distances. Big Wi-Max trials are expected later this year.
Perhaps along the way these myriad companies will work out some of Wi-Fi's kinks. Traveling from one hot spot to another, for example, isn't easy nor is it cheap. Users who bop from, say, hotel room to Starbucks to airport will likely have to log on and perhaps enter a credit-card number multiple times in the same day.
In the future, the key to truly mobile Wi-Fi access will lie in roaming agreements. Boingo Wireless has already assembled a roaming system of thousands of hot spots throughout the world and sells it to other companies, including MCI. Wayport has agreements with several companies, including AT&T Wireless, Verizon Wireless, and Sprint PCS. Other limited agreements are in place, such as the one between T-Mobile and AT&T Wireless, which allows roaming at the Denver, Philadelphia, and San Francisco airports. Once Wi-Fi roaming becomes the norm and Wi-Max starts to fill in the gaps, you may be able to log on to the Internet from just about anywhere.
Rapid Ascent
Wi-Fi revenues are expected to grow quickly in the United States.
Wi-Fi revenues
(in millions of dollars)
2004 $33
'05 $173
'06 $197
'07 $605
'08 $1,591
Source: Pyramid Research
This story appears in the May 10, 2004 print edition of U.S. News & World Report.