MobileStar Network Corp.’s troubles foreshadow an omnious tone for a
nascent Wi-Fi technology, but analysts warn against writing off the 802.11
wireless standard just yet. Still, they also predict that this week’s
developments with the Richardson, Texas-based wireless Internet service
provider will affect many future business models and may have service
providers and equipment vendors alike re-evaluating their rollout plans.
On Wednesday, word leaked out that the company, which has been attempting
to
build a broadband wireless ISP with nodes across the country, was
closing up shop. A deal to fund more development fell through at the last
moment, a MobileStar director told Reuters on Friday.
While the fate of the Richardson, Texas-based wireless Internet service
provider now dangles in the hands of its investment advisor, Diablo
Management Group, others are quickly re-examining their strategies. The
remaining handful of service providers will likely adopt a specialized
approach, industry observers said. And everyone from service providers to
equipment makers would be wise to concentrate more on the enterprise market
rather than consumers. In fact, while the MobileStar postmortem continues to
be debated, one thing is for certain — the future of the IEEE 802.11
technology depends largely on how wireless local area networks (WLAN) are
accepted within the enterprise, analysts concurred.
“I think there has to be the critical mass in the corporate space first
to proliferate the wireless technologies that people have in their laptops,
because it only makes sense that a current user of wireless technology
will want to extend the use from the office to the public space market,”
said Kurt Scherf, vice president of research at Parks Associates, a
Dallas-based market research and consulting firm.
The Business Approach Matters
To the undiscerning eye, MobileStar appears to have a business
model very similar to that of Wayport,
from Austin, Texas. Both service providers hope to bring high-speed Internet
access to the business traveler by serving hotels, conference and meeting
centers and airports. But look deeper and the differences become apparent —
facets that Wayport is more than eager to point out.
“Our business model and strategy has been very different from theirs,”
said Dan Lowden, vice president of marketing at Wayport. “We fully expect to be a leader
in this space in the long term.”
First, Wayport approaches the business traveler with a variety options
from wireless to wired access. That’s not to say that wireless providers are
facing a no-win situation. Lowden admitted that standalone wireless can be a
successful business model. “You just have to have the right formula to make
it successful,” he added.
But perhaps the biggest discerning factor between the two Texas wireless
ISPs is the age-old B-school adage: Know thy customer. MobileStar offered a
variety of pricing plans from pre-paid service to unlimited local to
unlimited national to per-minute. Its service plans were tailored to meet
the different needs of the business traveler but, at the end of the day, the
customer was still the John Q. Public.
After stumbling around with consumers for a few years, Wayport, however,
quickly realized that they needed to re-examine their business model and
align with partners that were able to absorb some of the hefty start-up
costs. So, rather than incur the upfront capital expenses and recurring
charges, Wayport shifted some of the initial costs to the hotels. In
essense, the hotels became the customers. The two partners have been sharing
revenue ever since.
Given analysts’ predictions, that approach may be the only model that
works.
“I don’t think anyone can be cash flow positive until 2003. That’s simply
because there’s a lot of upfront costs with building out the
infrastructure…setting up the access points,” said Navin Sabharwal, vice president of
Residential & Networking Technologies at Allied Business Intelligence.
There’s WLANs in Them Their Hills
MobileStar’s downfall is also attributed to the tough task of trying to
be all things to all people. “I think it might make more sense to take a
regional approach or take [an industry-]specific approach like with American
Airlines Admiral Clubs. You can give the consumer the impression there are
enough locations for the consumer to connect. You’re making a much more
conservative business model,” Sabharwal said.
To be sure, Wayport’s rollout strategy encompasses a national scope.
“People are still looking for the service. We have hotel properties that
know they have to have this type of service. They are losing business if
they don’t,” Lowden said, explaining that less than 10 percent of hotels
nationwide have high-speed Internet connections — wired or wireless.
Still, there is consensus among the industry. Everyone from analysts to
participants now believe the so-called “Gold-Rush” mentality is dead and
that first-mover advantage doesn’t amount to a hill of beans anymore. It no
longer makes sense to acquire customers “at any cost” and, for this reason,
many see MobileStar’s collapse as a watershed event for a nascent
industry.
“If you look at the cellular companies, there’s a reason there’s roaming.
I don’t see why people doing this aren’t taking the same approach. In the
last six months, there was a ‘land-grab’ mentality. If they took a more
reasonable approach, they probably could have preserved cash,” Sabharwal
said.
“A ‘land-grab’ is the way the industry used to be,” Lowden added. “Those
days are gone…it’s not a short-term or long-term model that works.”
As for the equipment makers, most are staying quiet about MobileStar’s impact until the fallout can be better examined. Executives
from Intersil, Lucent, Texas Instruments and Symbol Technologies all
declined requests for interviews stating it was still very premature.
And analysts like Sabharwal believe equipment makers will be shielded
from any fallout for the time being. “The MobileStar implosion will be
fairly well-contained to the ‘Public Hotspots’ space. The equipment
suppliers will still depend on enterprise acceptance. Public networking
wasn’t going to be a big market for them.”
“It’s the same sort of argument for the home…wireless will come as long
as you have enough users in the corporate environment,” Scherf added.
