Hot Spots

Posted: 12/2002

Hot Spots
Wi-Fi Resellers Heat Up Public
Broadband Access

By Khali Henderson

A
FUNNY THING HAPPENED TO ME on the way to writing this article. I traveled to
Orlando for the Association of Communications Enterprises (ASCENT) fall
conference, where PHONE+ publishes a daily newspaper, only to find that my room
was not equipped with an Ethernet connection, which I needed so I could send
large graphic files to our production director back in Phoenix. News editor Josh
Long and I were annoyed with our MIS manager; he had assured us that he’d called
ahead to make sure they had what we needed. We were panicked. We wanted to talk
to him. We couldn’t track him down. So, we called the front desk.

"There must be some
mistake." The clerk says there is a data port in every phone. True,
but they’re RJ-11s, not RJ-45s. Should she send the maintenance manager? Yes,
please. We were not hopeful. What could he really do or say but confirm what we
already knew — the plug was not going to fit in the jack.

Minutes later he arrived. He said
there was no jack suitable for our cable in the room. He said we could not get
high-speed access … unless we were willing to switch rooms. Turns out rooms in
a new building on the property did have Ethernet connections. So at 11 p.m. we
were schlepping our stuff across the grounds to smaller quarters with the
elusive high-speed connection.

While everything worked out fine,
this story could have had a very different plot. One in which I got to stay in
the roomy vacationers’ suite on the older property and transfer text files and
jpeg files to our production director from the spacious porch overlooking the
pool. Heck, since it’s my story … how about Josh and I just work poolside.

This isn’t the fantasy of an
overworked editor, but the reality of Wi-Fi.

Wi-Fi, short for wireless fidelity,
is unwired high-speed Internet access based on free bandwidth set up by the
Federal Communications Commission (FCC). Using the IEEE’s (802.11b) Wi-Fi
standard, anyone within 1,000 feet of a node — also called a hotspot — can
connect enabled computers and peripherals to the Internet. Savvy consumers and
businesses have been tapping into the network for some time, but now it is
making its way to public places — like hotels, airports and cafes through local
ISPs. They typically stick a deal with a landlord to deploy the necessary access
point and pay the landlord a commission.

The
emergence of platform providers that enable the billing, security and roaming
functions on a resale or revenue-sharing basis make it even easier for these
so-called microcarriers or wireless ISPs to deploy service. It’s an attractive
proposition, earning 10 percent to 40 percent margins depending on the location
and the reseller’s sales and marketing efforts. Public access rates vary, but
are beginning to settle to around $10 per day — depending on the property type
and geographic location.

By the end of 2002, Wi-Fi will link
more than 15 million devices, according to research publication InfoTech
Trends. It also forecasts the market to grow from $1.2 billion in 2001 to
$4.1 billion in 2005.

While some would argue that large
carrier participation like that of T-Mobile USA Inc. is what will ultimately
push Wi-Fi into mainstream consciousness, resellers’ local distribution channels
also will play a vital role in moving the technology to Main Street.

Channel Opportunities

Wi-Fi is essentially free to the
consumer or enterprise once it has been purchased and access points have been
installed on the customer’s property, but it has become clear it should not
remain free to users outside those private signals. Securing such public
networks and figuring out how to bill for the service has been the preoccupation
of a number of firms, including Pronto Networks Inc.

Pronto has developed the Hotspot
Networking System, which consists of a hotspot controller, provisioning and OSS.
The system provides everything required to set up and manage a hotspot, except
for the high-speed bandwidth (T1 or DSL) from the Internet to the hotspot
location. The controller, which costs $799, taps into the wireline data source
and then controls the wireless access points dispersed in a building. In
addition, the company offers a managed service option: Pronto provides all the
equipment and back-office operations for the service, including credit card
processing, billing and roaming, while the customer determines pricing, network
policies and branding. Pronto’s managed service model is based on a
revenue-share model where 75 percent of end user revenue goes to the hotspot
network operator to be shared with the property owner as desired. The remaining
25 percent goes to Pronto for operating the data center and performing all the
billing, revenue settlement, network monitoring and customer service.

Pronto offers its system solution
primarily to services providers with extensive customer bases and existing
network operational expertise, such as DSL/cable providers and mobile carriers.
The managed service is designed for small and medium-sized wireless ISPs as well
as mobile virtual network operators (MVNOs).

DeepBlueWireless Inc. is one of
Pronto’s managed service partners. CEO Alan Gale says DeepBlueWireless has been
working with Pronto since August, but had worked with Wi-Fi for more than a year
through another provider that went out of business. The company operates 20
hotspots in the Bay Area and in Southern California and has aggressive plans to
install 300 in the United States and Europe by the end of next year. In three to
six months, DeepBlueWireless will be adding third-party services that ride over
the network, such as voice over IP, video streaming, driverless printing and
electronic fax, Gale says.

Gale justifies these plans by
pointing to his company’s experience with the technology and its ability to
integrate a multivendor solution into a single platform much more quickly than
larger carriers; those big players are just now are looking at Wi-Fi as a
serious endeavor.

Another company that is taking on
resellers is NetNearU Corp. One of its resellers is North Atlantic Inc., a
longtime distributor of payphone hardware to independent payphone service
providers. While North Atlantic buys and marks up the equipment, it receives a
commission from NetNearu, which it splits with its customer. NetNEarU handles
all the back-office functions.

North Atlantic’s COO Kevin Austin
says his company has been investigating Wi-Fi intensely since March and has
decided to offer it as another product for its core customers, whose existing
clients – hotels, airports, convention centers, etc. — fit the profile for
public access Wi-Fi. He says a dozen customers are interested in it already, and
he expects 20 to 30 access points will be deployed in first quarter.

Austin says his pitch is simple:
"If you are already stopping by, why not mine the location."

The location is the channel, says
Josh Friedman, president of eleven wireless, which sources its own equipment and
provides its own back-office functions. Locations have incentive to market Wi-Fi
because it offers incremental revenue and attracts additional customers.

Operator Gale agrees, but adds the
proposition can be more compelling to smaller properties, like boutique hotels
or cafes, where the service commission might not be very large, but Wi-Fi helped
secure a reservation or led to core product sales. One of DeepBlueWireless’
cafi accounts makes a few hundred dollars a month in commission, but easily
exceeds that in food and beverage orders.

The iPASS log-on interface screens.
Source: iPASS Inc.

Ubiquity Challenges

The proliferation of Wi-Fi is not
without its challenges — the chief of which is ubiquity. It’s the classic
chicken-and-egg dilemma: Users require networks but would-be network providers
require users. Since users already have shown a willingness to embrace the
technology on their own, some providers are making a leap of faith in deploying
public access networks.

NetNearU reseller Austin says that
the risk assessment has to include the success of cellular phones, which took a
similar path, he says. "Not too many people had cell phone 12 years ago,
but once the antennas went up, now everyone has them," he reminds us.

The cellular analogy extends even
further when you consider that the only way to achieve ubiquity is through
roaming agreements with other providers. Already, three companies –iPass Inc.,
Boingo Wireless Inc.and GRIC Communications Inc. — have emerged as Wi-Fi
aggregators. They essentially sign up Wi-Fi operators to be part of their
networks, allowing their users to roam onto hundreds of smaller networks using a
single interface and billing mechanism.

Both iPass and GRIC are longtime
dial-up aggregators, and Boingo is backed by investors like Earthlink Inc. and
Sprint PCS. While agreements bring additional traffic to a hotspot operator,
they do not allow the operator to extend its own network. The aggregators
usually make their services available for resale, however. Boingo, as an
example, signed a deal in October to co-brand its service for AIR2LAN Inc. In
another example, systems integrator Aventail Corp. resells iPass service to its
"global 2,000" customer base as part of its secure virtual private
network (VPN) offering.

Meanwhile, hotspot operators are
left to create their own agreements or join up with a grass-roots effort called
Pass-One. Created in April 2002, Pass-One is a nonprofit association of
companies attempting to facilitate multilateral roaming. Its members are ISPs,
cellular carriers and wireline telcos with public wireless LAN (WLAN) offerings.
In general Pass-One’s main task will be specifying the rules for authentication
(SIM and browser-based), authorization and profile transfer, access management
(including service barring), accounting and billing, tariff planning, settlement
and overall service delivery.

While the merits of roaming are
clear, it may not be the critical hump over which Wi-Fi must pass. Gale notes
that most local users require only access to one or two locations, and even
business travelers can access most networks by paying with a credit card for a
specified time period.

One company, Vesta Corp., is hoping
to add prepaid cards to the payment functionality. Vesta, which has experience
in stored value cards, is developing a common back-end authentication and
billing system to knit together disparate coverage areas. To expand its prepaid
services to Wi-Fi, Vesta is addressing two hurdles — authentication of users
and devices and decrementing over the Internet with links to account management
functions that alert users to account levels. A pilot project conducted with
eleven wireless and the Hotel Lucia in Portland, Ore., is testing these
capabilities. Vesta also is considering how to manage the roaming component by
establishing its own agreements with carriers that already are its customers or
by reselling an aggregator’s network.

Hotspot
Networking System
Source: Pronto Networks Inc.