Nigel Ballard on free vs. paid Wi-Fi access

A little background is required before I launch into a full blown assault on the subject of whether or not there is a business model surrounding Wi-Fi hot spots.

By day I manage commercial Wi-Fi installations for Matrix Networks. We install enterprise-grade equipment typically on T-1 lines at major brand hotels, motels, golf courses, RV parks, marinas, enterprise locations and secure research establishments. I also perform paid wireless consultancy through Matrix for some multinational clients.

By night I am a director of the Oregon non-profit community Wi-Fi group called Personal Telco Project or PTP. We install free hot spots in cafés, bars, malls, meeting spaces and open public areas in the Portland metro area. We have helped Portland win the "Best Places" to get free Wi-Fi two years running thanks to our reach into the community.

I tell you this because I feel the combination of the day and night jobs gives me a very good grasp of the whole Wi-Fi arena.

We should now all be well beyond the point of accepting that Wi-Fi is a success, well all except 802.11a which has failed to gain any traction. The 2.4GHz ISM band is home to microwave ovens, medical telemetry, alarm activators, rubber vulcanizing welders, Wi-Fi and much more besides.

And with all this RF crammed into a small slither of unlicensed spectrum, Wi-Fi continues to work, and work rather well in the areas for which it was designed, namely an access point in the ceiling serving a number of localized clients.

Those who attempt to squeeze more out of the standard than it was ever intended to be are learning of its limitations, especially in built up areas where the RF noise floor is becoming scarily high.

And now with so many consumer Wi-Fi access points having the ability to turn off their broadcast SSID in a wholly pointless attempt to make the node secure, it is apparent there is a lot more RF bouncing about out there than can be detected with a standard Windows laptop running Netstumbler. Run up Kismet under Linux or splash out for Airmagnet under Windows and you’ll discover there is a LOT of Wi-Fi out there.

I am not sure if there is an official correlation, but I feel pretty confident that Wi-Fi has been the best thing that ever happened to laptop sales. It is a natural partnership. Laptops are all about mobility. And being mobile AND connected to the Internet is a marriage made in heaven.

So, most people have an office Wi-Fi network, probably secured with some standard WEP key that everyone from the mail clerk to the CEO are sharing. Then they have a home network, the unit is probably a Linksys box and it is a fairly safe bet that the home unit is running with the factory defaults. The SSID is linksys, the channel is six and the administrator password is, er, password. Nobody reads the manuals anymore or heeds the warnings it seems. I would like to say these people are generously sharing their Wi-Fi network and all their Windows share directories with anyone who cares to hook up, but in reality it is a combination of laziness and lack of knowledge as to the security implications.

Armed with our Wi-Fi enabled laptops, we now find ourselves wanting to use them at locations other than the home or office.

Enter the hot spot! They are popping up all over the place in hotels, airports, coffee shops, shopping malls and more besides.

Some companies are intent on making lots of money by providing commercial hot spots, basically saying, if you play, you have to pay. And in truly captive business-oriented markets like airports and convention centers you can indeed charge $10 a day with ease. Even marinas don’t have problems charging. But what of the others?

Let’s look at the coffee shop hot spot. At Personal Telco we get the owner to install a business DSL circuit (typically $45 a month), they purchase a recommended Wi-Fi b/g router for about $59 and we donate a re-worked PC now running Linux which serves as a gateway complete with splash page. We put a sticker on the door, add them to our online database and voila! A hot spot on the cheap.

There are no passwords, tracking, pop-ups or membership required. You can run your VPN (Virtual Private Network) tunnels over our nodes with ease. Reliability is probably 95%.

There is no encryption over the air interface, so users are warned not to pass sensitive financial information. We monitor all the nodes remotely and can administer them over SSH. But this is a volunteer network and there is no help desk or support engineer looking at a giant NORAD-like network topology display 24/7. But it's free and you can surf the web and check your email with ease.

T-Mobile which is owned by the giant German Deutsche Telekom installs commercial hot spots in the likes of Starbucks coffee shops across America. They want hard currency for access, and for that you get access to a nice fat T-1 circuit with 999.99% uptime, a totally reliable Cisco access point, live 24/7 customer support and secure logins. Added to which you can go to hundreds of Starbucks cafes across America and stand a good chance of being able to locate one with a hot spot. So like their coffee, you are being offered consistency. If you're a business person who travels a fair bit and has an expense account, it makes perfect sense.

If however you aren't Captain Mission Critical, you just want a good cup of joe, a comfy chair and free access to a Wi-Fi node, then the community model may well serve you and your wallet better.

I'll throw in an anecdotal story to mix things up a bit. A local coffee shop in Portland called World Cup Coffee initially rejected the approach from PTP to install a free node, instead opting for a Toshiba commercial hot spot. Three months later they had made a paltry $7 in commissions, but were aware they'd lost a ton of business to potential clients who would walk the extra block to a competitor with a free PTP node.

World Cup cancelled the Toshiba node two weeks before Toshiba actually pulled the plug on the whole venture. They realized the hard way that it is impossible to charge people $10 a day to check their email in a coffee shop when all around folk are offering it as a free amenity. World Cup is now a free PTP node; we even now have a World Cup free node in the famous Powell’s bookstore in town.

It is worth mentioning the hospitality hot spot model. You might think that, like the airports, hotels and motels have a captive audience, so charging for Internet access would seem perfectly possible. One year ago that was the case, but now all the major US flag properties such as the Hilton, Marriott, Holiday Inn, Best Western, etc. have mandated all their US properties provide complimentary high-speed Internet throughout the property or risk losing their valuable flag.

Every one of these national brand hotels Matrix has Wi-Fi'd over the last year has opted for a wholly complimentary Wi-Fi solution. Can you see a trend here?

And if that isn’t enough to convince you of the writing on the wall, take a look at the recent SBC announcement. They are offering DSL customers free access to their FreedomLink Wi-Fi service. After April 15, 2005 it will cost a minuscule $1.99 a month. I am sure it will cost them more than that in billing and collection services alone.

SBC has effectively set the commercial bar at a low $1.99. Where does that leave the likes of Wayport, T-Mobile and Boingo?

The question I often get asked is, "Can I make a profitable business model (three-year return on investment) creating pay-as-you-surf hot spots?"

If you have the über deep pockets of Deutsche Telekom, then you can finance it. If you are a slick sales person and can locate a Sand Hill Road VC who has been living on Mars in the past year, then maybe you can get some seed money to start it. But to anyone who has his feet on terra firma, the answer is a resounding no. One year ago it might have been "maybe"; two years ago it was a resounding yes. But that was then, and this is now.

And what of all those start-ups touting billing, aggregation and roaming services? With the model going "complimentary" across most of the board, there is not much need for billing or roaming aggregation. Nice try but no cigar.

The bottom line is that Wi-Fi is hugely popular. Setting up a single-node hot spot is really very easy and inexpensive to maintain even with the monthly DSL charges. Folk are doing it for themselves and using it to attract customers.

I am seeing a widespread move away from the fee model to the free model and I believe this particular model is heading in the right direction.

*****

Nigel Ballard is the Wireless Director of Matrix Networks in Oregon. He manages the company’s wireless division which include installations at colleges, marinas, hotels, convention centers and large enterprises. Secure Research Establishments. In his free time, Nigel works to deliver high-speed wireless access to underserved communities. He is a board advisor to Oregon nonprofit Personal Telco Project, a volunteer group dedicated to providing free high-speed wireless access in public areas. You can visit his homepage at http://www.joejava.com.

Posted by Muniwireless November 02, 2004