Views from the Hotspot Pundits
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It's a sure sign that a technology or business idea is gaining acceptance when market research and consulting firms fall all over themselves publishing studies on it. In the last several months industry watching organizations have been intensely studying the Wi-Fi hotspot phenomenon, and writing about it endlessly -- especially overseas.
We looked at three recent reports that emanate from the other side of the pond but have global implications:
- Pricing and Marketing Hotspots, an in-depth, 109-page report by Philip Low, managing consultant at UK-based start-up BroadGroup. It sells for about $1,400.
- 10 Ways to Profit from Public Access Wi-Fi, a four-page white paper by Anthony Behan of Am-Beo Ltd., an Irish rating and revenue settlement software firm. It's available free to registered visitors at the company's Web site.
- A WLAN Primer from UK-based consulting firm FirstPartner maps and taxonomizes the emerging WLAN and hotspot industries. It's written by Philip Bates, founder of WLAN security firm Bluesocket, and consultant Kurt Lyall. This study is available free at the firm's Web site.
The BroadGroup study by Low, a veteran telecom consultant and researcher in
Pricing, the report argues, along with marketing models, will be key differentiators and key determinants of success for hotspot service providers. Well, no big surprise there. Low identifies three broad approaches to pricing -- mobile (mimicking mobile carrier pricing models), location specific, and fixed Internet (mimicking ISP pricing models) -- and analyses pros and cons and risks of each.
Current trends are probably preliminary indicators at best, but the study found that a significant proportion of service providers -- 37 percent -- are offering monthly subscriptions, an indication, Low suggests, that providers are most "prone" to adopting fixed Internet marketing and pricing models.
The BroadGroup report also provides some interesting analysis of current pricing
data from survey participants. It found, for example, that
The report examines a number of possible future market scenarios and their implications for pricing. The evolution from hotspots to hot zones (entire neighborhoods with Wi-Fi coverage), for example, will likely produce more mobile-type "behavior" among users and put downward pressure on prices as hot zone services are bundled with ISP and mobile carrier offerings.
On the other hand, because of demands on service providers for increased interoperability, improved security, ease of access and ubiquity, it isn't practical for them to bring their prices down very far in the short term, Low says -- unless a "loss leader entrant" forces their hands.
It seems unlikely that kind of pressure would come from major telcos and mobile carriers, but the report notes that the imminent entry of these players will radically alter the hotspot market in the coming months.
A related scenario BroadGroup believes will play an important role in the evolution of the market is the entry of content providers offering content specific to the environment and personalized to the end user -- similar to content providers in the mobile data market.
Ubiquity of location and download speed may be the primary differentiators and generators of business value in the hotspot market right now, but Low suggests content will likely be a key differentiator in the future.
Who knew there were as many as ten ways to profit from hotspots? Behan, whose company Am-Beo wants to sell its billing and settlement solutions to anyone generating revenues directly or indirectly from hotspots, brings together some interesting ideas.
Number one on the list is, of course, access, and number two roaming -- both to your own customers and others' -- but then the list gets more interesting. Advertising is next, both on the splash screens on the products customers use to enter the network and attached to local services or content delivered by the access provider.
Services and content themselves -- Behan cites short message service (SMS), multimedia message service (MMS) and location-based content as possibilities -- can also be offered at the gateways through which all hotspot traffic must pass.
The list goes on. Revenue-sharing partnerships with other service providers. Bundling with other services and products -- mobile services, of course, but also coffee shop products. Wholesaling use of hotspot network infrastructure rather than trying to create a brand. Helping site owners install and manage hotspot infrastructure. Selling or trading backhaul services.
"Wi-Fi offers an opportunity to make significant revenues on a low cost base, and an ideal way to increase ARPU [Average Revenue Per User] on existing customers in wireless and wireline networks," Behan concludes.
"Whatever strategy your company pursues, the Wi-Fi opportunity will grow and grow through the next few years. It may represent a threat to your current business, but moving quickly can render it into an opportunity from which your business can grow and expand."
FirstPartner's WLAN Primer is a useful tool for new participants and observers trying to get a grip on the complexity of the current WLAN market. It also summarizes market share and market growth data available elsewhere.
One of its most interesting top-level observations is that despite strong growth, the enterprise WLAN market -- which obviously has an impact on the hotspot market -- has been held back by macroeconomic factors. However, the authors expect this market to "catalyze" in 2004 -- consulting-ese for "take off."
The report notes that while hotspots have gained the most publicity, they actually represent the smallest share in the WLAN market. Maybe so, but after the predominantly hardware markets -- enterprise and home -- are saturated, revenues from hotspots should continue to grow.
Finally, despite the authors' and the report's Euro focus, FirstPartner concludes
The most useful part of the report may be its WLAN industry taxonomy, an analysis of the different types of companies involved, how they interact and who the main players are in each category. It even includes a perhaps overly-complex flow diagram designed to show those roles and relationships at a glance.
You could print it and pin it up on your bulletin board.