Hotspot Spotlight: Carriers Will Drive Growth

While the growth in hotspots during 2002 might not be what the public access
Wi-Fi providers hoped, the growth world wide — from 2,000 locations to over
12,000 — made for what In-Stat/MDR is
called an overall "extraordinary year" for the hotspot market.

The Scottsdale, AZ-based high-tech research firm has a new report out this
week entitled "Hot, or Not: the Market Evolution of Hotspots as a Remote
Connectivity Solution" that takes a look at the state of the technology,
strategy and players in the world of for-fee hotspots (this research does not
take freenets like the Bay Area Wireless User
(BAWUG) or any of the small mom-and-pops shops that have setup free
access for customers.)

While the growth worldwide is significant, even higher than what In-Stat itself
predicted in early 2002, In-Stat analyst Amy Cravens says that the numbers weren’t
what many of the hotspot providers were expecting. Site aggregator Boingo Wireless,
for example, ends the month of November with only 1,000 locations, but expected
as many as 5,000 by the end of the year.

"As in most new markets the companies are over zealous in the expectations
of growth," says Cravens. "Not just Boingo, but others in the cafi
market like Joltage expected rapid growth, and it wasn’t quite there."

In fact, by the end of the year there are only about 3,000 hotspots in the
United States, up from 750 at the end of 2001. Cravens expects the number will
double to 6,000 locations by the end of 2003.

The main growth in hotspots will be driven by the carriers like Verizon, AT&T
Wireless and Cingular embracing the Wi-Fi market, according to the report (of the current hotspots in the U.S., two-thirds are operated by carrier T-Mobile). The
recent launch of Cometa Networks by AT&T, IBM and investors was singled
out as the major factor for North American growth, but Europe and the Asia Pacific
region are expected to continue to show high levels of interest in Wi-Fi. Cravens
notes that Korea probably already has the largest rollout of hotspots. Announcements
last week from Gemtek Systems show that China Mobile Communications Corp. (CMCC),
the largest mobile operator in the world, is beginning a nationwide rollout
of hotspots, starting in the Guangdong Province. Gemtek will provide the carrier-equipment
to the Guangdong subsidiary of CMCC, which has about
15 million wireless subscribers.

Most of hotspots today are reporting a user to venue ratio of 7:1 on average,
which is too low to sustain any growth.

"20 or 25 to 1 is needed depending on the cost of the infrastructure and
how they have the network set up," says Cravens. To get there, the report
says business models must shift so prices can realign to fit the expectations
of end-users. Those expectation, like it or not, are set by the cellular phone
service market. Costs for regional and local hotspot providers could be $20
a month, while national providers like Boingo are around $70 a month. The bull’s
eye would be around $30 to $40 for national coverage — that’s what the business
travelers that will drive the market expect services to cost.

Because business travelers will drive hotspot market stability, expect to see
them mostly in airports, hotels, and convention centers, in that order.

What about roaming from your cellular network on to the Wi-Fi network? That’s
going to take more time. While the carriers are certainly going to push in that
direction, she says "I don’t see that as significant until 2004 or 2005.

Eric Griffith is the managing editor of 802.11 Planet.

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