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Hotspot Spotlight: Carriers Will Drive Growth

While the growth in hotspots during 2002 might not be what the public access Wi-Fi providers hoped, the growth world wide -- from 2,000 locations to over 12,000 -- made for what In-Stat/MDR is called an overall "extraordinary year" for the hotspot market.

The Scottsdale, AZ-based high-tech research firm has a new report out this week entitled "Hot, or Not: the Market Evolution of Hotspots as a Remote Connectivity Solution" that takes a look at the state of the technology, strategy and players in the world of for-fee hotspots (this research does not take freenets like the Bay Area Wireless User Group (BAWUG) or any of the small mom-and-pops shops that have setup free access for customers.)

While the growth worldwide is significant, even higher than what In-Stat itself predicted in early 2002, In-Stat analyst Amy Cravens says that the numbers weren't what many of the hotspot providers were expecting. Site aggregator Boingo Wireless, for example, ends the month of November with only 1,000 locations, but expected as many as 5,000 by the end of the year.

"As in most new markets the companies are over zealous in the expectations of growth," says Cravens. "Not just Boingo, but others in the cafi market like Joltage expected rapid growth, and it wasn't quite there."

In fact, by the end of the year there are only about 3,000 hotspots in the United States, up from 750 at the end of 2001. Cravens expects the number will double to 6,000 locations by the end of 2003.

The main growth in hotspots will be driven by the carriers like Verizon, AT&T Wireless and Cingular embracing the Wi-Fi market, according to the report (of the current hotspots in the U.S., two-thirds are operated by carrier T-Mobile). The recent launch of Cometa Networks by AT&T, IBM and investors was singled out as the major factor for North American growth, but Europe and the Asia Pacific region are expected to continue to show high levels of interest in Wi-Fi. Cravens notes that Korea probably already has the largest rollout of hotspots. Announcements last week from Gemtek Systems show that China Mobile Communications Corp. (CMCC), the largest mobile operator in the world, is beginning a nationwide rollout of hotspots, starting in the Guangdong Province. Gemtek will provide the carrier-equipment to the Guangdong subsidiary of CMCC, which has about 15 million wireless subscribers.

Most of hotspots today are reporting a user to venue ratio of 7:1 on average, which is too low to sustain any growth.

"20 or 25 to 1 is needed depending on the cost of the infrastructure and how they have the network set up," says Cravens. To get there, the report says business models must shift so prices can realign to fit the expectations of end-users. Those expectation, like it or not, are set by the cellular phone service market. Costs for regional and local hotspot providers could be $20 a month, while national providers like Boingo are around $70 a month. The bull's eye would be around $30 to $40 for national coverage -- that's what the business travelers that will drive the market expect services to cost.

Because business travelers will drive hotspot market stability, expect to see them mostly in airports, hotels, and convention centers, in that order.

What about roaming from your cellular network on to the Wi-Fi network? That's going to take more time. While the carriers are certainly going to push in that direction, she says "I don't see that as significant until 2004 or 2005.

Eric Griffith is the managing editor of 802.11 Planet.

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