Kate Bulkley, Media Analyst.

No Socket Required

By Kate Bulkley

The Guardian

Monday October 13, 2003

Could wireless internet access be the high-tech cash cow that firms like BT, T-Mobile and Broadreach Networks think it is? Kate Bulkley reports on moves to make the net accessible from train stations, coffee shops and pubs

The modern communications revolution has never lacked a latest technology. The development paths of televisions, computers, mobile phones, PDAs and the rest are all littered with exciting yet subtle innovations - mobility, interactivity, texting and such like. Some variations work and others never see the light outside the R&D meeting room.

But if innovations reach the consumer, there comes a time when the industry asks this question: Is this great new technology going to make money?

The 3G mobile phone business has that problem, and interactive television is still struggling as well. The latest example is wi-fi, also called "wireless local area networking" (WLAN). The technology has been around for several years but telecoms companies like BT and T-Mobile are now busy installing the technology in public locations such as train stations and coffee shops. Meanwhile, many newer PCs are coming with wi-fi built in.

The idea is that when you wander into a wi-fi hotspot location, your PC will detect the signal and you can surf the net, check your emails, download a presentation or join a chat room - anything, in fact, that you would do if you were using your machine at home or in the office. The problem with wi-fi is that it is still relatively expensive, and the hotspots that exist are all run by different operators with varying market approaches. Think of the early days of text messaging when you could only send a text to someone who was on the same network. That is broadly equivalent to the current state of wi-fi today.

The chief marketing officer of T-Mobile, Nikesh Arora, says his company currently has only 300 hotspots in Europe (with about 100 in the UK), and he believes that he needs a "critical mass" of wi-fi hotspots - between 1,000 and 2,000 across Europe and approximately 500 in the UK - to make the business work.

"The US is the lead market right now in wi-fi and it's where we have been able to sniff success," says Arora. "The learning from the US is that you need a critical mass of hotspots before people will lug their PCs around with them." T-Mobile has 2,000 hotspots across America.

But turning on a large number of hotspots is not the only way to make wi-fi a booming business right now, at least according to Broadreach Networks, an independent provider of public internet-access services which was established by a couple of ex-Arthur D Little management consultants. The firm believes there is a "stepping stone" period that will include offering consumers wired internet access from public PCs in the same coffee shops and train stations where wi-fi is being rolled out.

Magnus McEwen-King, the company's CEO and founder, says his idea is of a more mixed business model. "Wi-fi in the UK is only a year old and it's going nicely, but don't believe all the hype you hear from the big company players. The truth is you've got to have a better strategy than 'Build the biggest network and they will come'."

T-Mobile wi-fi hotspots exist in 56 Starbucks coffee shops around the UK. Only T-Mobile customers can sit down and log on. Everyone else has to buy a voucher at the counter. The voucher has a code number that is keyed into the wi-fi log-on page on the customer's PC and provides the user with a set amount of surfing time in any T-Mobile hotspot. The cost for an hour of surfing in a T-Mobile Starbucks is 5.50, but a month-long pass only costs 47.

Critics say T-Mobile's approach is limiting. Not only is there the hassle of buying a voucher rather than being able to bill the session to your own service provider, but the voucher expires if you don't use it up in time.

"We are not seeing that billing is a relevant issue," says Arora. "We are only in phase one of wi-fi, and I want to see if I can encourage you to lug your laptop into a Starbucks."

BT, meanwhile, has 400 BT Openzone hotspots in the UK in places from phone boxes to Hilton hotels, airports, Costa Coffee shops, and some motorway service stations, as well as another 1,000 sites in pubs (run by wi-fi group The Cloud), and charges a monthly unlimited price of 85. BT is making a big push into wi-fi, and projects it will have 4,000 wi-fi enabled sites by the summer of next year.

But unlike T-Mobile, BT wants its wi-fi hotspots to be used by customers of rival ISPs and mobile operators. In fact last month BT opened its hotspots to users from other networks, initially signing a deal with Vodafone which means that from next year, customers will be able to log on to wi-fi in Openzone hotspots and bill it to their Vodafone account. This should help get the wi-fi ball rolling.

The model is easy for BT: it charges rivals in the same way that it charges them to use its wired copper network in order to provide internet access into UK homes.

The big players like BT and T-Mobile are in the wi-fi game for the long term, with hope of profits much further down the line when usage increases. Broadreach Networks, however, says that there are profits to be made from wi-fi hotspots right now, if you partner them up with fixed PC terminals that use the same technology infrastructure.

Broadreach operates hotspots in six Virgin Megastores (with six more planned by the end of the year), several Heathrow hotels, as well as many smaller coffee shops around the UK. The company is also providing hotspots on Virgin trains and in health clubs. But along with the wi-fi capability, all of Broadreach's hotspots also have public PC terminals so that even if you do not have your PC with you, you can log on and bill it to your own ISP or mobile account. So far, Broadreach has ISP roaming deals with BT Openworld (BT's ISP), Virgin.net as well as roaming deals with mobile operators O2, Orange and Bouyges Telecom, a French mobile operator. A Vodafone roaming deal is also in the works.

The Broadreach hotspot usage fee is calculated by the second (about 3-4 for an hour online) and if you do have to buy an in-store voucher, it works much like a pay-as-you-go mobile phone, where the unused minutes never expire.

Broadreach has also taken its wi-fi evangelism to another level: "We are offering wi-fi access for free in every one of our hotspots until the end of the year to get that part of the market moving," says McEwen-King. "We can afford to because we are not only banking on the success of wi-fi."

He says the big operators are still putting up unnecessary barriers to faster wi-fi adoption because they are still trying to make the business pay by charging high log-on fees that are time-sensitive and that only business customers can afford. "We should lower the hurdle rate and get the customers," he says.


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