The lush Hawaiian Island of Maui is one of the great tourist destinations of
the world, attracting more than two million visitors a year. Tourism, needless
to say, is the island’s primary industry, and scores of hotels and resorts line
its sun-drenched beaches.
Some of those resorts will soon be offering guests a unique broadband
wireless Internet service that provides access not only in their rooms, but just
about everywhere else on the property–golf course, beach, lounges–and,
eventually, anywhere on the island.
Two resorts–the Hyatt Regency in Maui and the Ritz-Carlton in Kapalua–have
already signed up for the service. The Hyatt is about to start offering service.
Going against the hospitality industry grain, service provider Maui Sky Fiber
LLC is opting not to use 802.11b networks. Instead it’s deploying
third-generation-like broadband wireless technology from IPWireless
Inc., which runs on 2.5 GHz licensed personal communications service (PCS) spectrum.
“I know a lot of people are going to take up arms against us for saying
this,” says MSF managing director Steve Berkoff. “But we just don’t see 802.11
as a viable wide area network technology. We don’t see it as a competitor to our
network. We can provide connectivity much more cost effectively.”
WLANs on the islands
The key concept here is
“wide area.” Because of the non-line-of-sight (NLOS) characteristics of the
IPWireless technology and its range, MSF doesn’t have to set up access points
inside each resort property. The network it is building will eventually provide
in-building coverage virtually everywhere on the island, making it possible to
serve not only the hotels and resorts but also local businesses and residents,
all using the same infrastructure.
What’s more, local subscribers who need access from home, from the office–and
even when they’re on the move–will now only need one service for everywhere.
When MSF started working on a business plan last year, it first explored
using 802.11b technology in the hotels, its initial target market. After all,
that was what everybody else was using to get broadband into hotels. But it
found that because of the “dense”–concrete, steel and glass–construction of many
of the island’s modern resorts, it was looking at having to deploy, at best, one
Wi-Fi access point for every 10 to 12 rooms.
“It starts to add up,” Berkoff says. “You’re looking at upwards of 50 access
points per hotel. And then you also have to install a Cat-5 backbone to link
them. It’s a pretty substantial cost to paint each building. But we’re able to
do the 2.5 GHz solution from outside, and the cost of providing coverage goes
way, way down.”
With 802.11, one 500-room hotel could cost $150,000 and up, MSF estimates.
$150,000 is also about the cost to establish one cell site using the IPWireless
technology. In Kaanapali on Maui’s west coast, MSF’s first IPWireless cell can
reach more than 4,500 hotel and resort rooms. The company reckons its capital
cost to build the network at about $25 per room served.
The company already had 2.5 GHz licenses which it initially planned to use
for backhaul between 802.11b hotel sites. But it soon realized that, using the
IPWireless technology, it could leverage the licensed spectrum to provide the
last-mile access as well.
The IPWireless technology also enables a business model that makes it much
easier to get hotels to buy in. MSF asks the properties to invest in enough
modem cards–at a little under $500 apiece–to cover 5 percent of their rooms. The
5 percent represents the current anticipated usage rate (3.5 to 4 percent based
on experience of broadband services in hotels in other markets) plus a little
room for growth. For a 500 room hotel, that’s only about $12,000.
The hotel has no infrastructure on site. Its only responsibility is to
up-sell the service and distribute the modem cards to guests. Guests insert the
card and the MSF disc and log on directly to the service. They also pay online
using a credit card–$12.95 per day or less for three-day and week packages. For
that they get 256 Kbps service. MSF handles all customer support via a telephone
help desk.
Some hotel WLAN service providers are now advocating a free-to-guests
business model for broadband Internet access, noting that it will ultimately
become an amenity like cable TV and coffee makers that hotels will have to
provide anyway. In the meantime, offering it for free can give a property a
crucial competitive advantage.
Berkoff doubts this line of reasoning holds true for properties like Maui’s
that cater primarily to tourists rather than business travelers–and he may be
right. In any case, he says, if any hotel wanted to offer the MSF service free,
the company could accommodate with a wholesale deal. “Our model is not cast in
stone,” he notes. But none of the properties he has talked to so far has
expressed an interest in doing this.
Besides the two properties that have already signed up, one other has all but
signed. “And we’re close on a number of deals with other major resorts in Maui
as well,” Berkoff says.
Low-hanging fruit
The company has a build-out
plan that started in the island’s west end, a region densely populated with
hotels, resorts and low-rise condominiums. MSF has already built four cell sites
to cover this area. Next is the island’s south coast, then the central area,
including the capital, Kihei, where MSF is headquartered.
Berkoff is not sure how many sites it will ultimately take to cover Maui. His
engineering team is refining the cell plan as it goes, seeing how much coverage
it can squeeze out of each site given the hilly terrain. It will be somewhere
between 12 to 15 sites, and the build-out will be complete by the end of the
year, Berkoff says. Total cost of the project is in the $3 million range.
The hotels and resorts on the island are just the low-hanging fruit. MSF is
also going after business and residential customers–although given a population
of under 150,000, it’s not a huge market. When we spoke to Berkoff, the company
had just begun marketing the service to locals. “We’re getting pretty good
response,” he says.
MSF is offering a residential package for $39.95 a month for a 384 Kbps
connection. There is a 512 Kbps small business service for $49.95. Other
bandwidths will be available as well.
Maui already has limited digital subscriber line (DSL) service from Verizon and Time
Warner’s Road Runner cable modem service is available in some places. “But
we’re not trying to compete head to head with those services,” Berkoff stresses.
“Our goal is not to commoditize the service and make it just another bandwidth
source.”
MSF will differentiate itself by playing up the portability of its service.
Subscribers such as small business people and entrepreneurs who need service at
home, at the office, and in between will ultimately save because they will now
need only one service–and if they carry a laptop, only one piece of customer
premises equipment.
The IPWireless technology provides true mobile broadband access–customers
sitting in buses or in the backs of cabs or cars could connect over the MSF
service while in motion. The company has yet to conduct rigorous testing of the
technology’s mobile capabilities, but there appears to be little degradation in
throughput, Berkoff says.
Few customers will immediately see the benefit of mobile broadband access, he
admits. Indeed, it will take an education effort just to get across the
advantages of portability, let alone mobility.
But police, fire departments, and other municipal government agencies are
already expressing some interest in the mobile capabilities. The police, for
example, see the possibility of being able to equip squad cars with video
cameras to monitor crucial incidents. “That’s a very big item for the safety of
the officers,” Berkoff notes.
Municipalities are also interested in using the service for remote telemetry
and to set up online video surveillance of their remote facilities.
MSF has been financed so far entirely with private funds. Berkoff figures he
has a business plan that will take the company to the break-even point–“we
hope”–within 16 months. That all hinges on sales, of course, he says. But if MSF
can meet that target, it doesn’t need any additional investment.
A nice little business in paradise.
Reprinted from ISP-Planet.
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