Do retail hotspots live or die?
||Wi-Fi hotspot access is not easy or convenient to use
||The Wi-Fi retail hotspot business model is broken
||The enterprise has grave reservations about public hotspots
||Wi-Fi access is fast - this is a short-term reality but a long-term
||Wi-Fi hotspots are interference prone
||Coverage is spotty and inconsistent
1. By 2005, in North America, 1x technologies will demonstrate a significantly
better cost, coverage, capacity and convenience proposition than Wi-Fi,
thus relegating public hotspots to all but niche status.
2. By 2007, outside the US, the combination of 1x and W-CDMA technologies
will relegate Wi-Fi hotspots to niche status.
3. CIOs should expect wide scale integration of 1x wireless technologies
into PDAs by 2005.
4. CIOs can expect 1x technologies to be integrated in laptops, but not
1. Should CIOs consider exploiting hotspots in the short
term, they are well advised to take immediate action to scale Wi-Fi economics
and employ more simplicity and security by using a provider that can aggregate
the domestic and international
hotspot points of presence. iPass and GRIC are examples. Failing this,
CIOs may well face material Wi-Fi expenses undermining their budgets over
the next 18 to 24 months, much like cellular phone expenses did 10 years
2. To curtail costs in today's budget-constrained environment, CIOs may
consider a policy that discourages the use of hotspots at the department
level by making it a non-reimbursable item unless a specific ROI has been
determined within the LOB.
3. CIOs should consider trial use of 1x modems for highly mobile people
and put pressure on their current mobile operator(s) for deep discounts
from retail pricing for 1x data use based on the dollar volume their enterprise
already does for voice and SMS.
Despite ill-conceived forecasts to the contrary, the lion's share of speculative,
retail Wi-Fi hotspots are likely to become little more than frigid, floating,
uncharted icebergs by year-end '05, especially in North America. CIOs
and IT managers who count on Wireless LANs for anything other than use
on corporate campuses, in hotel meeting rooms and in employee homes are
likely to find themselves no less at risk for their shortcomings than
did the Titanic's onboard designers.
With well over 100,000 hotspots expected to spring up around the world
by 2005-as well as the debut of Intel's Centrino technology that integrates
Wi-Fi capabilities into notebook computers-it may seem that public hotspots
are ready to flame hotter. But we expect them to flame out as their shortcomings
are exposed and as CDMA2000 1x is further deployed.
Don't get me wrong. As one of the original authors of the IEEE 802.11
Wireless LAN standard, I am a big fan of Wireless LANs-when used in the
right place for the right purpose. I have worked with the technology for
the past 10 years, when the solutions were far from the elegant, cost-effective
designs that exist today. I have used it in my home for many years. I
have deployed it within corporate campuses. And yes, I have used Wireless
LAN access in airports and coffee shops many times, especially when it's
free-often because no good alternative was available. However, the more
that I use my 1x cards (1xRTT and 1xEV-DO), the more I realize how deficient
Wi-Fi is when it comes to public access - with very few exceptions. Still,
the hype is undeniably high, and hotspots have attracted their share of
Why They're Hot…
Hotspots have captured the fascination of savvy business travelers, hip
Starbucks customers and the trade press in large part because they represent
hidden doors to the Internet that allow spontaneous networking and, in
some cases, higher speed access than users are getting at home or in the
Numerous elements are converging to create fertile ground for hotspot
growth, at least in theory. Namely, hotspots are finally proliferating
beyond a few thousand locations. Airports, hotels and other establishments
are opening their wireless doors by becoming hotspot locations. And carriers
are ramping up their plans to deploy hotspots, with T-Mobile being the
most aggressive as it outfits popular Starbucks locations with Wi-Fi capabilities.
Intel recently unveiled its Centrino technology, and that has fueled
the belief that user interest in finding public access points will grow
- particularly as a growing number of laptops begin to sport integrated
wireless capabilities. What's more, the price of wireless-enabling LAN
cards, now hovering around $100, is expected to drop nearly 70 percent
in the next four years.
…And Why They're Not
While public hotspots may feed the need of frequent travelers to stay
connected and appeal to the gourmet coffee crowd, a multitude of problems
threaten to make hotspots turn colder than the Antarctic:
*Wi-Fi hotspot access is not easy or convenient to use
*The Wi-Fi retail hotspot business model is broken
*The enterprise has grave reservations about public hotspots
*Wi-Fi access is fast - this is a short-term reality but a long-term fantasy
*Wi-Fi hotspots are interference prone
*Coverage is spotty and inconsistent
Sexy But Not Easy
The first problem is that you often don't even know if you are in a hotspot.
And when you do, in addition to needing a service plan and a device that
is Wi-Fi 802.11b-capable, you almost need a masters degree in computer
setup to know how to (re)configure your laptop or (worse) your PDA to
the settings required by the hotspot provider - assuming you even know
who that hotspot provider is.
In Search of a Business Model
I understand why Wi-Fi is good for Starbucks - Starbucks stores get cheap
(free) access to a T1 for their enterprise use, and, if someone hangs
around and buys one of those fancy name coffees that I like, so much the
better! I also understand why there is so much hotspot interest from companies
like T-Mobile and AT&T Wireless-it's based on survival, not investment
return and ARPU growth.
But no true value proposition has emerged to guide carriers (or, for
that matter, enterprises) on how to make money from hotspots. While nearly
4 million people around the globe access hotspots, the current core group
of users is limited at best, encompassing the tech-savvy and access-hungry
business traveler and upscale clientele that have the time to mill around
gourmet coffee shops.
The Hesitant Enterprise
Purveyors of hotspots seem to think that they will attract a wider business
audience once they bring enterprises more firmly into the fold, a scenario
that seems unlikely for a couple of reasons. First, enterprise IT staff
and management are leery of hotspots because they rightfully doubt the
effectiveness of WEP security and are uncertain whether WPA will resolve
these concerns. The bottom line is that they are afraid that hotspots
could compromise their own corporate networks. The knee-jerk reaction
has been to limit or eliminate access through unauthorized access points.
Warchalkers already have shown how easy it is to spot and exploit access
points on the fly.
What's more, the enterprise has not been presented with a clear strategy
for achieving ROI by encouraging their employees to use public hotspots-nor
have they attempted to comprehensively track the savings that hotspot
access might bring about. For most enterprises, the ROI factor is a deal-breaker.
In what has been a downturn economy for quite some time, the only initiatives
that generally get the green light from management and IT are the ones
with proven ROI-or those that streamline business processes.
Speed Kills, But Not for Long
Today, where there is a T1 and nobody is sharing it, Wi-Fi is faster than
wide area solutions such as 1x. While the industry hypes the speed of
Wi-Fi to be 11Mb/s per user, its real speed is more like a half duplex
6 Mb/s. Depending on where you are in the signal area or how much interference
you are subjected to, it could be as low as a half duplex 1Mb/s shared
channel. There are technology roadmaps to give Wi-Fi more speed, but not
more capacity. On the wide area side, a hotspot supplier can invest in
more T1s, but if the business model did not work with one T1, it will
be worse with n+ T1s. Thus, success itself dooms the fast speed notion
for Wi-Fi hotspots, either due to technology limitations or the investment
Can You Hear Me Now?
Wi-Fi hotspots operate in the free-for-all 2.4 MHz radio band. This same
radio spectrum is home to cordless phones, remote controls, garage door
openers and a host of other radio solutions. And, unfortunately, the interference
source may not be limited to things that are located directly within the
Public telecom solutions need protected spectrum - without it, the only
thing you can count on the service for, is not counting on it.
1x Will Put Hotspots on Ice
Wi-Fi providers are truly in a Catch 22. While revenue is growing, it
is not at the level needed to support large-footprint-expansion projects.
However, in order to attract more users and subscribers, it will be necessary
to expand the Wi-Fi footprint.
By contrast, 1xRTT is now served nationwide by two providers, Sprint
PCS and Verizon Wireless. Already there are more than 100 million CDMA
users in the U.S., and carriers are quickly making the transition to 1x.
Microsoft has even thrown its considerable weight and influence behind
CDMA and the eventual transition to 1x by taking the wraps off software
that supports CDMA for both Pocket PCs and Smartphones. I predict that
by 2005, 1xEV-DO will also be available nationwide, while Wi-Fi hotspots
will still be struggling to cover an aggregate area that is less than
the size of Rhode Island. Face it, without coverage, nothing else matters.
Of course, all is not a yellow brick road for 1x operators. While I believe
1xRTT is more convenient to use out of the gate, and the coverage proposition
is good, overall it's too expensive and back office support is marginal
at best. And while I am thrilled to finally see solid ISDN level speeds
out of a wireless network, I continue to have an insatiable need for speed-and
coffee-so I find myself standing around waiting for a place to sit and
get sole access to a public T1 in a Starbucks. Thus, the deployment of
1xEV-DO is a market mandate for the traditional wireless carriers.
However, despite Wi-Fi's obvious surface appeal, overall, 1x sidesteps
many of the problems associated with hotspots, and service prices will
eventually drop significantly to attract a wider audience. CIOs would
be well advised to put 1x on the radar screen for the long-term.
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