Dealing with the “Wi-Fi as Amenity” Issue

A new trend in thinking about the Wi-Fi service market is emerging, a reaction
against the prevailing business model exemplified by Wayport, T-Mobile
and others.

That model, in which a service provider secures rights of way to business
premises — coffee shops, hotels, etc. — and builds Wi-Fi cells to create
a ubiquitous cellular-like footprint and service, has not been as successful
as many hoped.

At least two vendor companies are now calling into question its value —
especially to hotspot site owners.

Recently we wrote about Single Digits,
a hotspot software and services company pitching business-owner customers
a turnkey solution based on the company’s own back-end hotspot management
software. Key to the Single Digits pitch is that the business owner brands
the service, sets service pricing, if any, and, theoretically, reaps the customer
loyalty and other benefits.

It is perhaps not coincidental that BT Syntegra, the $1-billion-a-year
systems implementation and consulting arm of British Telecom, recently introduced
its own one-stop hotspot package for hotel chains and other hospitality industry
clients. Again, "own-branding" is a key part of the "new"
business model being espoused.

The Syntegra service includes everything from initial business consulting,
to network engineering, to implementation, to network monitoring and technical
support. "The packaging of it is new," says Paul Harrison, the company’s
U.S.-based vice president of travel and leisure. "But we have been out
doing one-off implementations in both hospitality and also in retail for some
time."

Harrison says pricing of initial assessments by Syntegra to get a hotel chain
to the point of deciding to go ahead with a major Wi-Fi initiative would cost
"the reasonably small" amount of $25,000 to $50,000. Costs for implementation
and management services vary all over the map depending on the size of implementation,
types of services and quality of service delivered to guests.

The company claims to have 40,000 access points installed worldwide in 5,000
locations, the majority of them using Wi-Fi. It’s clear, though, that only
a handful are hotel customers. Most are in retail chains, mainly for internal
applications, and most are not in North America.

Syntegra, which has 5,500 employees worldwide, is not huge in the United
States, Harrison says. However, its Minneapolis network operations center
(NOC) does provide application and network management services to "many"
Fortune 500 companies.

"Those services typically include monitoring and making sure applications
are up and running. It’s no different for Wi-Fi. The key is being able to
reach out over the network to make sure the technology is doing what’s intended.
We also have service technicians in the field who can go out and address any
issues that come up."

The company uses "best of breed" technology and services — from,
among others, Cisco, Vivato, Vocera
for voice over IP (VoIP), and Airpath
Wireless
for back-office software. In hotel implementations where the
hotel is not charging for Wi-Fi service, Syntegra uses its own back-office
software tools.

The company got interested in Wi-Fi service models in the hospitality industry
when it was called in to "recertify" existing Wi-Fi services for
a couple of hotel customers. They came in to assess and evaluate the services
and recommend changes or improvements.

When they started looking at the market, Syntegra consultants were shocked
to discover that 50 percent of the time Wi-Fi services at hotels, resorts
and convention centers failed users. The reason is that the service providers
— mostly local and regional players, not the Wayports and T-Mobiles, Harrison
concedes — often don’t do top-grade implementations and rarely provide adequate
monitoring and technical support services afterwards. "They just walk
away."

As Syntegra points out, with the prevailing business model, when the service
works, the service provider — whose brand is front and center — gets the
credit. When it fails, the hotel bears the brunt of customer displeasure.

Syntegra argues that hotels, especially the big chains, must take control
of Wi-Fi services on their premises. First, they’re missing out on the customer
loyalty benefits. Second, and more important, there is a strong trend towards
hotels having to offer Wi-Fi service for free, and that will change the economics
of guest-room Wi-Fi services.

Syntegra learned recently that two major hotel chains — Best Western and Microtel Inns & Suites — will be offering
free Wi-Fi service in all of their properties by the end of this year. "That
puts a lot of pressure on other chains [because] once other chains offer it
free, there will be intense pressure for everyone to follow suit," Harrison
says.

When that happens, the various revenue sharing models in use by third-party
service providers will go out the window. "Now it becomes a cost,"
Harrison points out. "So what do we do with this cost? The question is,
how to create more than brand loyalty from it?"

To help pay for Wi-Fi services for guests, Syntegra is recommending hotels
and chains look at ways to leverage the Wi-Fi infrastructure they build by
using it for internal applications, and to provide customer services that
could generate additional revenues.

"There are a lot of things they can do to take cost out of the system, to
absorb the cost of providing the free service to customers," Harrison
says.

The network could be used for internal communications, including VoIP wireless
phones, reducing reliance on much more expensive cellular services. Hotels
could provide wireless terminals for patrons to order meals, reducing the
need for wait staff in casual dining rooms. They could also use it to track
assets using Wi-Fi RFID technology, helping reduce assets shrinkage, or to
provide wireless check-in services for smart card carrying regular customers.

Hotels can also use the Wi-Fi network to provide content services, Harrison
says — information on local activities, advertising from nearby businesses,
content about other hotels in the chain — or give guests the ability track
travel plans or rent a car through an affiliate.

"Now they’ve got a private network," Harrison points out. "They
can use it not only to increase brand loyalty but also to generate new revenues."

Multi-use wireless networks require much more careful design, implementation
and managing, however — which is why Syntegra thinks its offering will strike
a chord. Security, for example, is a huge issue. Harrison cites recent Gartner
findings suggesting that 70 percent of successful wireless LAN attacks are
a result of network misconfiguration.

"Wi-Fi networks really have to be done right, which means you have to
truly understand the DNA and inner workings of wireless," he says. The
implication is that Syntegra does.

The Syntegra and Single Digits pitches are not entirely original or new.
Wayport is offering similar services and deals in its Wi-Fi World program
with the MacDonald’s restaurant chain. Some smaller local and regional Wi-Fi
service providers focused on the hospitality industry offer hotels the option
of paying a single fee for a turnkey service which the hotel brands and controls
in much the way these two companies are suggesting.

Some hotel chains — Starwood, for
example — have been exploring the notion of using Wi-Fi infrastructure for
internal applications for over two years.

Still, it’s clear that Syntegra and Single Digits are responding to real
trends and pressures in the market. If Syntegra is right that hotels will
soon be offering Wi-Fi or high-speed Internet access of some kind as an
amenity, then commercial hotspot providers like T-Mobile may indeed have to
rethink their business models.

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