Hotspots in the Great White North, Part III

At a time when operators elsewhere may be fearing they’ve made their move too
soon, the hotspot market in Canada is just starting to percolate — as we saw
in the first two parts of this three — part series.

The last few months have seen a rash of service launches and announcements.
While entrepreneurial start — ups dominate the newly vitalized Canadian market,
some heavy hitters have also waded in — including Bell Canada, the country’s
largest ILEC, Telus, the second largest ILEC, and Toshiba Canada.

Bell Canada, the incumbent telco in Ontario
and Quebec, quietly launched a pilot trial of its AccessZones hotspot initiative
in November. The pilot service, with 3 Mbps to each access point, is free to
all.

The AccessZones — fewer than a dozen so far — are in a broad mix of locations,
including Air Canada frequent flyer lounges in Montreal, Toronto and Calgary
airports, the main railway station in Toronto, a Toronto Holiday Inn, a small
city library, and a park in another Ontario community.

Some, such as the three AccessZones in Union Station in downtown Toronto, piggyback
on Bell’s existing pay phone infrastructure, using the DSL-class lines that
come into the banks of phone booths. The pay phone strategy is a first, Bell
says.

These AccessZones are housed in phone-box-size housings and typically replace
an existing phone booth. They feature distinctive signage and blue lights at
floor level.

"Our goal is instant brand recognition," says Sean Winter, Bell’s
senior associate director for wireless LANs. "We think this is really important."

Response to the trial from end users has been "incredible…More than
I ever expected," Winter says, though he would not provide actual data.
Bell at this point, though, is committing to nothing. The trial is scheduled
to end at the end of March, at which time the company will publish results and
make known its business plan.

While Winter boasts of the project having "a lot of momentum," the
business plan it announces may take Bell in quite a different direction. Other
sources inside Bell say the company views hotspots as a difficult market in
which to make money (which is probably true) and suggest it will more likely
pursue a strategy of being an aggregator.

Winter will say nothing about possible pricing strategies, nor about plans
to expand the footprint. If it does continue installing its own infrastructure,
Bell will likely pick its spots — such as frequent flyer lounges rather than
entire airports. On the other hand, a large portion of Union Station is covered
for the trial.

Bell also won’t say much about the business model it expects to use, although
Winter says there may be revenue sharing with some location owners — but not
necessarily. It’s interesting to note that in the pay phone business, Bell sometimes
pays location owners a fee to put in its phone booths, and in other cases the
location owners pay Bell.

West-coast-based Telus, Bell’s main rival, with a similar mix of ILEC, ISP
and mobile telephony services and similar national aspirations, has not entered
the hotspot market directly, but its venture capital arm did invest about $4
million in Toronto-based startup Spotnik Mobile.

Spotnik recently launched its service with 13 hotspots in Toronto, with another
ten or so to open soon. They include prime sites such as First Canadian Place,
a downtown business complex, the Toronto City Center Airport, a downtown commuter
hub, and The National Trade and Convention Centre at Exhibition Place.

Spotnik is adding new hotspots at a rate of one per day on average and says
it will have hundreds in place by the end of 2003. The company apparently plans
to be national in scope. It describes itself in its literature as "the
leading provider of secure high-speed public wireless Internet service across
Canada."

Spotnik is offering free service as part of its launch, but according to its
Web site, will charge $9 for 60 minutes, which can be used up over a month,
$15 per 24 — hour period, or $32.50 to $50 for unlimited access in a 30 —
day period, depending on the length of the contract. (We’ll take a closer look
at Spotnik later in the year.)

Toshiba Canada is following in
the footsteps of its U.S. sister company. It recently announced a hotspot program
similar to Toshiba U.S.A.’s in which it will function as hardware supplier,
co-marketer and aggregator.

The company expects to work with its existing reseller channel partners —
companies that sell its laptop computers. They will set up and manage hotspots
or sell Toshiba hotspot hardware solution to location owners. Toshiba claims
it will have about 1,000 hotspots up and running in Canada by the end of the
year.

The company will leave most of the business planning to the channel partners
and location owners, although it sees the key price point as "about [$6.50]
for a few hours" of access time, says Toshiba Canada vice president of
marketing Mary Ann Yule. There will be no hard and fast rule, however.

"If you’re a high-end hotel chain, you may offer the service free to your
guests," Yule notes. "But if you are a more cost-conscious hotel chain,
you may choose to offer it for a fee. It depends on your model and how you want
to create competitive advantage."

The hardware — Toshiba’s 1000HS wireless router with custom firmware providing
logon and credit card payment — is a big part of the appeal of Toshiba’s program.
The routers sell for less than $200, and can be installed for about $65, Toshiba
says.

the marketing clout Toshiba has with laptop owners makes it look attractive
to both hotspot venue owners and end users.

Toshiba has not yet announced partnerships with existing resellers. But it
is working with Ottawa-based startup BOLDstreet Wireless Internet
— which brings us full circle. It was with BOLDstreet, now with 18 sites up
and running, but still providing service for free, that we started this series.

Do Canadian entrepreneurs and telecom enterprises know something their U.S.
counterparts don’t about how to make hotspots pay? Very unlikely, but you’d
never know because Canadian hotspot operators are playing their cards very close
to the vest.

One advantage they do have is being able to watch U.S. pioneers take the arrows
and maybe, just maybe, gain some insights into how to avoid arrows themselves.

As one Canadian entrepreneur told us, "timing is everything" in the
hotspot market. It’s possible the hosers have their timing right, while gung-ho
entrepreneurs in the U.S. moved too soon. Only time will tell.

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