Ryan Jarvis, co-founder and CEO of United Kingdom-based wholesale hotspot service
provider Megabeam Networks, is feeling sweetly vindicated these days.
First, Forrester Research gave his start-up company its good-business-model
seal of approval last month. Then IBM, AT&T and Intel — the latter perhaps
not coincidentally also a Megabeam partner — announced Cometa Networks, their
North American hotspot joint venture with a strategy similar to Megabeam’s.
Cometa aims to sell hotspot infrastructure services to telcos, ISPs, cable
operators and wireless carriers — much as Megabeam is already doing in Europe.
"It sounds quite a bit like us, doesn’t it," Jarvis says of Cometa.
Megabeam was originally formed in 2000 to provide broadband wireless access
in public places. Initially the idea was to use Bluetooth, but it soon became
clear that Wi-Fi was the superior platform.
The company stayed in stealth mode for almost two years, using the time to
build the company, cement relationships with partner-resellers such as Intel
and Toshiba, and secure prime hotspot locations such as the airport at Brussels,
Belgium, a political and business hub for the European community.
In November 2001, Megabeam launched a pilot trial involving twenty big-league
corporate customers, including major European banks and technology firms.
At that time, the UK still did not allow operators to charge for use of 2.4GHz
radio frequency band in public places. It was a safe bet the British Radiocommunications
Agency would change the regulations, though, Jarvis says — which it eventually
did, in August 2002.
"[Commercial hotspots were] legal in most other European jurisdictions,"
Jarvis notes, "so [these restrictions] could potentially have left the
UK behind. The German market is more advanced today, for example, because the
regulatory restrictions there were removed much earlier."
The pilot trial was the company’s public coming-out. It would be another year,
however, before it began offering commercial service. It launched on November
14, 2002 with more than 30 hotspots in airports, hotels and conference centers
in six European countries: the UK, Italy, Germany, Belgium, the Netherlands
and Denmark. (The company has sales offices in four of those countries.)
Two roaming agreements — with Aptilo
Networks in Denmark and Mikom in Turkey — add more sites, including the
airports in Copenhagen and Istanbul. The company has also signed another three
roaming agreements, but had not officially announced them at the time of writing.
With these and other roaming agreements in the works, and its own roll-out
of hotspots, the company expects to have 50 sites by the end of 2002, 120 by
mid-2003 and 200 by the end of 2003.
In most locations it will be installing a turnkey WISP solution from strategic
partner ServiceFactory, a Swedish firm. (It also
has a partnership agreement with hardware provider Symbol Technologies.)
The ServiceFactory system allows customers with computers already configured
for WLAN access — whether they’re signed up with Megabeam or not — to connect
simply by launching their browser and entering an ID and password on the pop-up
screen, or clicking to go to a sign-up screen.
So far the company has managed to secure mostly premier locations. Sites already
up and running include airports in key business cities: Copenhagen, Brussels,
Rome, Milan. Other airports already signed up but not yet live include Munich,
London, Liverpool, Oslo, Turin, Venice and Istanbul.
Megabeam has signed up 25 properties in the upscale Queens Moat House hotel
group, including Moat House hotels in the UK, Queens hotels in Germany and Bildenberg
hotels in the Netherlands. It also has deals with Holiday Inns across Europe.
Megabeam is really only interested in premier sites and for good reason.
"We serve the remote access needs of corporate customers — in
the airports, hotels, rail stations and conference centers where corporate customers
spend time," Jarvis explains. "We’re building our network around these
corporate travelers. We are not targeting the small-medium enterprise or consumer
market at all."
Megabeam is clearly differentiating itself in this regard from other European
hotspot pioneers, including British Telecom and Telia, which are making an early
play for the mass market.
Megabeam believes that the corporate market will develop first and be easier
to serve. Many corporate customers are already using 802.11 networks in the
office, so they have Wi-Fi cards or laptops with built-in wireless modems. The
office WLAN market in Europe is evolving at about the same pace as in North
America, Jarvis says.
Corporations already recognize the need for remote access, which means they
have a budget — currently spent on dial-up and DSL — which Megabeam can tap
into.
They also often have VPN technology in place or can roll it out fairly readily.
This means Megabeam doesn’t have to worry about providing advanced security
at its sites. "VPNs and security in general are really only an issue if
you’re targeting SME or consumer customers," Jarvis notes.
The tight focus on corporate clients is one key plank in the Megabeam master
plan. The other is the company’s wholesale strategy.
The company will offer service direct to corporate and private customers initially.
It’s busy working on partnership deals with other service providers — telcos,
ISPs and, especially, mobile carriers — and expects that by the end of next
year 70 percent of its customer base will come from resellers.
"When wireless LAN becomes a less topical subject, customers will want
to see all their remote solutions integrated into one [service provider and
bill]," Jarvis says.
Intel, Toshiba and Damovo, a "global services company" spun off from
Ericsson and now headquartered in the UK, are among the first reseller partners
to sign up with Megabeam.
Mobile carriers will be key partners because they already fulfill corporate
remote access needs with their 115-Kbps GPRS (General Packet Radio Service)/GSM
(Global System for Mobile Communications) networks. Megabeam had not announced
any deals with mobile carriers at the time of writing, but Jarvis implies one
or more are in the offing.
"I think we’ll see that 2003 will be the year when mobile carriers announce
their WLAN strategies," he says. "And we’ll be well positioned to
serve the needs of their corporate customers."
Megabeam’s fundamental strategies, especially the decision to pursue a wholesale
business model, plus its early success at sewing up premium hotspot venues,
gives the company a better than even chance of surviving, Forrester Research
says in a November Technology Brief on Megabeam. It also helps that the company
recognizes its limitations and is willing to expand its footprint through roaming
agreements, Forrester says.
In its relationships with site owners, Megabeam is showing similar flexibility.
In some of its "travel hub" sites (i.e. airport and rail station)
it has exclusive rights to provide WLAN hotspot services and owns the infrastructure,
sharing revenues with the owners. In others — Munich, for example — the airport
owns and manages the infrastructure, and Megabeam pays for non-exclusive access.
In the case of "travel destination" sites (i.e. hotel and conference
center), Megabeam owns and manages the infrastructure and shares revenues with
the owners.
The company has not published its wholesale rates or its discounted rates for
corporate customers. To North American eyes, the published retail rates for
private customers may seem high, especially those for casual users — $7.50
for two hours, $30 for 24 hours, $65 for seven days and $115 per month.
However, Jarvis points out that these rates are not high by European standards,
in fact they’re lower than some competitors. He also notes that they’re for
premium sites and that the Megabeam rates incorporate roaming charges across
Europe. For corporate customers now using GPRS for remote access, they can represent
a significant cost saving, Jarvis says.
At the time of writing, the company had only been selling subscriptions for
about a month. "All I can say at this point is that we’re beating our revenue
forecasts," Jarvis says. "We’re very pleased with the market take-up
so far, but 2003 is when the market will really take off."
Even if Megabeam is, as Forrester suggests, making all the right moves, its
success is by no means assured. It may be tailoring its offering to the high-end
corporate customer, but that doesn’t mean high-end corporate customers will
buy it. They might just look at a familiar player like BT or Telia, either of
which can offer more hotspot sites, if not as high-quality, and decide they’re
an altogether safer bet. 2003 will tell the story.
