MobileStar: WISP’s P.A.L. or Foe?

Put a Wi-Fi access point in a Public Access Location—hotel, train,
station, airport, restaurant or convention center—and wire it back
to your POP with a T-1 or T-3. Mobile subscribers equipped with Wi-Fi
PC cards in their laptops can log on to the Net at broadband speeds whenever
they come in range.

With more and more enterprises installing Wi-Fi-based local area networks,
the population of Wi-Fi PC cards is exploding—and prices for cards
are coming down as a result.

Wi-Fi-based public access would seem a logical value: added service for
existing wireline—and wireless—Internet Service Providers. There’s
just one potential problem.

Specialist service providers like Richardson, Texas-based MobileStar
Network Corp.
have a huge head start in developing the public access
market.

No fancy extras
MobileStar functions in effect as its own ISP, although its ISP operations
are, as chief technology and development officer Ali Tabassi concedes,
“stripped down.” It basically provides access only.

Subscribers must source e-mail, calendaring, hosting, and other traditional
ISP services from other suppliers.

Despite this obvious flaw in its business model—the fact that many
of its customers will have to manage and pay for two ISP services, one
for home and/or office, one for travel—MobileStar has already made
considerable headway.

In particular, it has locked up some prime public access locations or
PALs.

Holding the high ground
Earlier this year, MobileStar announced an agreement with Starbucks Coffee
Co. to put access points in 75 per cent of Starbucks’ coffee shops in
the U.S. and Canada—4,000 of them by 2003.

It has similar agreements with the Hilton Hotel chain and American Airlines
to put access points in hotels and airport lounges. Altogether, MobileStar
is in 630 PALs today. The goal is to be in close to 1,000 by end of year,
8,000 by 2003.

And when MobileStar locks up a venue, it’s for a long time. It has exclusive
agreements with Starbucks, AA and Hilton that last three to five years.
And after that, even if it doesn’t renegotiate exclusivity, MobileStar
is protected by non-interference clauses.

The non-interference clause means that another Wi-Fi service provider
can’t operate in the location if it interferes with MobileStar’s network.

Tabassi says there may well be battles for prime PALs in future as other
companies begin to see the potential of the public access market, but
his company is intent on locking up a very select group of PALs owned
by what he calls “premier service providers,” into which category the
current three big partners clearly fit.

“The question becomes, how many of those premier service providers are
there out there,” Tabassi says. “It’s not a huge number of locations.”

Sharp focus, wide angle
So there’s one chink of sunlight in the giant shadow MobileStar is casting
over this market. Even with its full 2003 roll-out, it will only be in
8,000 locations. That leaves thousands more for other players.

It’s not as if MobileStar saturates a population center with access points
either. Its PAL strategy reflects a marketing focus on mobile professionals
and business people. Which means it targets food outlets, hotels, airports,
train stations.

That leaves lots of other possibilities: universities and colleges, for
example, government offices, and anywhere where people are apt to have
to wait.

It’s true some universities and colleges are setting up their own Wi-Fi
networks to give students broadband access to the Net anywhere on campus,
but those that are slower off the mark should be prime targets for ISPs
looking for PAL partners.

MobileStar itself may be another potential partner. It is perfectly well
aware of the problem of customers having to have two ISP accounts. It
is working on setting up roaming partnerships with both wireline and other
public access Wi-Fi service providers outside North America.

The main focus appears to be overseas public access Wi-Fi operators.
“We see roaming agreements as a means for us to expand our footprint and
for our partners to expand theirs,” Tabassi says. “Without actually going
international, we can support customers who travel internationally.”

MobileStar already has a roaming agreement in effect with the Australian
company, Sydney-based SkyNetGlobal
Ltd.
, which has a similar business model to MobileStar’s. It is also
negotiating with two European service providers and one Asian.

Polyglot partnerships
But the company is talking to wireline ISPs in the U.S. as well—specifically
“two very big” ISPs, as yet unnamed. It definitely sees the value of being
able to offer a bundled, one-bill service—wireline access from the
partner for home and/or office, MobileStar for the road, with the same
access ID for both, and a single bill.

Would MobileStar consider such co-marketing and co-billing partnerships
with smaller regional ISPs?

“I don’t think we’d ever say it’s not worth our time to work with anyone,”
Tabassi says. “We believe any partnership has its place and rewards. So
we’d have to visit each case individually and make a decision at that
time.”

MobileStar doesn’t see wireline ISPs as a big competitive threat. The
assumption is that most don’t have RF expertise. “One of the mistakes
early competitors made was to think that because they have network experience,
they can handle the RF side,” Tabassi says. “That has very clearly been
proven to be not the case.”

Of course, it’s no secret that lots of ISPs have wireless experience
now—and specifically Wi-Fi experience. Could such ISPs establish
their own public access network? Sure, except of course it takes money,
and time away from the core business.

For those that don’t have Wi-Fi expertise, MobileStar will actually build
a network for you and even manage it. It has already built public access
systems for two large enterprises that wanted to be able to provide Internet
access to visitors on its campuses.

When we ask Tabassi if MobileStar would provide the same turnkey systems
integration services to a company that wanted to offer commercial public
access service, the answer, somewhat surprisingly, is yes.

So for ISPs interested in the Wi-Fi public access market, MobileStar
is good news and bad. The bad is that it has a big head start in developing
the market and grabbing prime locations. The good is that partnering with
this company is not out of the question.

Of course, neither option means beating MobileStar at its own game.

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