Scandinavia's Low-Octane Wireless
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Telenor, the former Norwegian monopoly PTT, is not exactly breaking new ground with its project to put Wi-Fi hotspots in 300 service stations owned by Norwegian oil company Statoil this year, but it is threatening to pull out in front in the race to unwire the gas stations of the world.
In September 2001, Shell Oil Company announced it was creating prototypes of what it called a wireless e-station that would use "Internet-based wireless technology" to help operate the station and provide new services to clients. Shell was hiring IBM to lead the integration effort to create a prototype station in the U.S.
We could find nothing more about the project at either Shell's or IBM's Web sites.
Then in November 2002, a U.S.-based Toshiba reseller, WorkingWild Inc., announced it had a deal with ConocoPhillips to put hotspots in the oil company's Circle K Convenience stores, most of which are at Phillips66, Conoco, Union76 and Mobil gas stations.
The project was supposed to have 300 stores installed by 1Q03, but nothing has been heard of it since and WorkingWild doesn't even have a working Web site at the moment.
Telenor, on the other hand, already has 76 Statoil stations up and running. Just three weeks after launch, it had signed up 700 subscribers and was adding new subscribers at a rate of 30 per day. Clearly there is pent up demand for a gas station-based hotspot service -- or at least there is in Norway.
Stein-Andre Larner, the company's product manager for wireless technology, doesn't believe the take-up rate will slow anytime soon either. As the company adds more and more stations up to the year-end total of 300, the service should become more and more attractive, he says.
The Statoil project is not the company's first Wi-Fi venture. Telenor, which operates local, long distance and GSM mobile phone services in Norway and other Scandinavian countries, has been putting hotspots in business hotels for two and a half years and has 130 up and running, some with coverage in public areas only, some with guest room coverage.
The earlier initiative featured no major deals with hotel chains, however, and Telenor's focus has now shifted to the gas station project. "Statoil is our first large-scale agreement," says Larner.
Others are in the works, including two that may come to fruition before the end of the year, each with a little over 100 sites -- "interesting" locations is all Larner will say about them.
The current plan calls for Telenor to have 500 hotspots up and running by the end of 2003, a combination of the Statoil stations, existing hotels and other new sites. It's too early to predict the hotspot count for year end 2004, he says, but guesstimates between 1,000 and 2,000. "It depends on the revenues from the Statoil deal."
Indeed, the Statoil deal will be a bellwether for the business. "The [gas station] deployment will give us a lot of answers in terms of what kind of business there is in this [i.e. Wi-Fi] area," Larner says.
He believes the service station strategy will be a valuable differentiator for Telenor as the Wi-Fi market in Scandinavia opens up. The key is that the coverage is "predictable," Larner says. Customers know there will likely be a Statoil station just around the corner.
"In Norway, Statoil stations are quite well distributed all over the country," he says. "You can get maps that show that if you're driving, say, from Oslo to Bergen, you'll be passing maybe ten Statoil gas stations."
"This is most important. Earlier, people were building WLAN networks in unpredictable ways. The hotspots were more or less randomly placed. You wouldn't build one [mobile] base station and expect to sign customers up. It's the same thing here -- you need predictable coverage before customers will use it."
The 300 stations to be installed by year-end represent all of the Statoil stations in Norway that are within range of DSL service -- Telenor's DSL service, of course. There are another 200 in Norway without DSL access. Statoil also has 500 more stations elsewhere in Scandinavia, which it may want to install with hotspots eventually, Larner says.
Telenor has an interesting pricing strategy. Customers of the hotel-based service can buy scratch cards for about $20 that give them 24 hours of access time -- consecutive time, not bankable. Telenor mobile customers, however, can get access using their mobile ID and password and pay by the megabyte downloaded.
Customers of the gas station service, however, will only be able to use volume based pricing. They'll pay about $1.20 per megabyte for the first 20 MB, $1 per megabyte up to 50 MB and 50 cents for each megabyte above 50.
Statoil's strategy is clear. "They're trying to be the preferred stop-over for people while they're on the road," Larner says. Telenor and Statoil are also pondering offering the oil company's loyalty card holders a special, subsidized rate, but nothing has been decided yet, he says.
Statoil was asked if they are concerned at all about congestion at its gas stations, with customers pulling in to fill up with gas and then lingering to surf the Web -- or pulling in with a full tank just to collect their e-mail.
"Absolutely we have discussed it," Larner says. "Hopefully there will be traffic jams. It will mean the service is a success. But no, for now, we have on average maybe one or two simultaneous users only."
Telenor has few serious competitors for the time being, according to Larner. Telia, the Swedish PTT entered the Norwegian hotspot market two years ago but has tailed off more recently. "They're not very aggressive these days," he says. Then there are some still small start-ups.
Telenor sounds good to go. It has an intriguing location strategy, an equally intriguing pricing strategy and some early indications that it's got both right. One thing is clear from the experience of others that dabbled in the gas Wi-Fi business, though, it's all about follow through.