Flying Under The Radar

Alex Neihaus has the passion of a Wi-Fi true believer, and a missionary’s zeal.
As president of Air11 Technology, a New England
reseller of Toshiba‘s
Wi-Fi hotspot service, it’s his job to make converts, of course, but Neihaus
shows signs of being better at it than most.

After operating for only 90 days, he already has seven locations up and running
— in some unlikely locations, such as Bed & Breakfast inns and small marinas,
but also at the prestigious Southbridge Hotel and Convention Center, a new conference
hotel mid-way between Boston and Hartford.

Neihaus claims to have a close rate of 100% when pitching location owners who already have broadband Internet access. The cost to them is under $250 (mostly
for the Toshiba access point/gateway). Air11 installs and manages the technology.
Toshiba provides all the back-end billing and authentication services, as well
as 24X7 technical support for end users.

There is little risk for location owners, plus the lure of shared revenues
to defray monthly costs of their broadband Internet connection. (It’s a three-way
split. Neihaus won’t say what part Toshiba gets, but he offers location owners
a 50:50 split of the remainder. Other Toshiba resellers are or offering 20 and
30 percent to location owners, he says.)

Neihaus says he "wouldn’t be surprised" to have 75 to 100 hotspots
up by the end of the year.

Wi-Fi hotspots, he is fully convinced, will become ubiquitous very quickly,
and it will be small players like his own one-man company that will make it
happen, not the big guys. Many of the large ISPs, he notes, are already losing
interest after making their moves too soon.

"I find it amusing that at the exact moment everything is finally working
together towards the original vision, everybody is turning sour on [the Wi-Fi
hotspot business]," Neihaus says. "It’s always the same in the technology
industry — this perpetual impatience."

A tech industry veteran, Neihaus spent 20 years with Lotus and IBM and then
ran his own software company before selling it. He knows of what he speaks.

By "everything" he is referring to three converging technology drivers:

  • Cable and DSL companies are battling for dominance, which means broadband
    is becoming more readily available in more places and prices are coming down.
    Result: more prospective hotspot location owners already have broadband access.
  • Toshiba and other low-end hotspot product/service providers such as Pronto Networks and NetNearU are bringing turnkey solutions
    to market featuring price points that make it very easy for small and mid-size
    location owners to take a chance on Wi-Fi.
  • Wi-Fi client devices continue to proliferate.

Yet analysts like Gartner and IDC are "turning sour" on the Wi-Fi
hotspot concept after initially promoting it, Neihaus contends. The reason is
that big players such as T-Mobile,
with its project to put hotspots in Starbucks
coffee shops and other stores across America, have run into some roadblocks.
T-Mobile lowered the price for its service earlier this year.

T-Mobile’s business model and timing were flawed, though, Neihaus maintains.
It started rolling out its Wi-Fi hotspots when hardware prices were still high,
and in most shops it installed expensive T-1 Internet connections, making it
difficult for individual locations to break even.

It’s also true that usage has not been as high as hoped, but that should have
been foreseen, he says — and it won’t last forever.

"The usage will come. This is not a simple build-it-and-they will-come
thing. It does take time and effort. On the other hand, Intel is not going to
stop building Centrino laptops, and they’ll all want to be used. [This current
attitude] is just impatience."

He cites the case of one of his marina hotspots on a recent rainy weekend.
With sailing curtailed, "live-aboards" and weekend sailors racked
up 35 hours of usage on the service in one 48-hour period. "That’s an amazing
achievement for a hotspot that’s been up for less than 30 days," Neihaus

So while the big guys puzzle out how to make a buck, Neihaus — who admits
he’s "losing money hand over fist" right now — will attempt to fly
under the radar. He’ll do it by keeping costs low, going after supposedly less
desirable hotspot venues — and being patient.

The big players, he points out, are all focused on business travelers, a mistake,
he believes. "There’s a disconnect in the way the industry sees these things,"
Neihaus says. "It’s not just the traveling business person anymore, it’s
almost everybody."

Because Wi-Fi LANs became a consumer technology early, with massive shipments
to residential customers in 2001 and 2002, access points and client devices
are "already dirt cheap," he says — low enough to make the technology

The same kind of unforeseen viral spread has happened with other technologies
in the past — like e-mail, he notes — but the technology industry "suffers
from an almost total lack of historical perspective."

The major hotspot players all continue to go after high-traffic locations such
as airport lounges and big hotels, but Neihaus argues there are others where
the value hotspots provide is much greater. At B&Bs, marinas and ski resorts,
for example, hotspots let weekenders spend time with family and friends but
still keep in touch with work and the rest of the world.

Not everything about the way his business is evolving is perfect, Neihaus concedes.
He chose Toshiba because it had the most attractive price points and a true
turnkey offering, including all-important end-user tech support.

Now he’s finding that some end customers are dissatisfied with the limited
pricing plans. They can pay $5.95 for two hours or $11.95 for 24 — or as little
as $8 if the location owner subsidizes the pricing, as Southbridge does. They
can’t bank time, though.

The low fees and "episodic" pricing model are good in that they turn
Wi-Fi access into an impulse buy, Neihaus says. On the other hand, regular customers
would like to pay on a monthly basis, and he concedes many would probably prefer
to buy a block of time on the network that they could use as needed — like
prepaid cellular.

Toshiba’s pricing strategies are completely outside his control, however, and
the company doesn’t discuss them with him. It will eventually respond as more
customers ask for different pricing structures, he believes, but if it doesn’t,
Air11 isn’t locked in.

"I own the valuable thing, which is the relationship with the location
owner," Neihaus points out. "I have to do the right thing for them
and for my company. If there’s demand for [different pricing plans] and Toshiba
can’t satisfy it in a timely way, well, they have lots of competition."

In the meantime, Neihaus will continue to fly under the radar and make converts
at the grassroots. This, he says, is "the next phase of the Wi-fi-zation
of America."

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