A reality check for Wi-Fi

LONDON: Whether it be broadband Internet access, 3G mobile phones or flat screen monitors, the high-tech industry has turned hyping new technologies into high art. Cashing in is another matter entirely.






Wi-fi, a technology that allows users of laptops and handheld mobile gadgets to surf the Net in public places at high speeds -- is the latest favored acronym. But this time there's a difference: Wi-fi is already being installed, with 15,000 locations going live across Europe by year-end, being championed by an unlikely combination of coffee shop owners, mobile phone operators and chip manufacturers.

As with all new technologies, questions abound about how to attract customers and make money from them. Since Wi-fi equipment is so cheap to install, operators are launching and learning. A "land grab" reminiscent of the dot-com days is underway, with operators big and small anxious to plant their Wi-fi transmitters wherever laptop-toting travelers dwell.

In Europe the race to Wi-fi is led by operators like BT and Swisscom, which do not have the billions of euros tied up in third generation (3G) high-speed mobile phone networks. With much smaller Wi-fi investments they hope to grab a slice of the mobile data access market.

Equipment costs run as low as several hundred dollars for a small cafe. For operations to break even, a Wi-fi operator only needs to cover the cost of the high-speed telecoms line connecting its "hot spot" to the Net. Even so, they face challenges.

HOT SPOTS: SURFERS NEEDED

Research shows that a small cafe requires dozens of regular users every month to recoup a hot spot's running costs. This means Wi-Fi as a business proposition works better in places where there are more people, such as an airport, according to Paul Lee of Deloitte Research.

But even at Amsterdam's Schiphol Airport, the number four in Europe with 41 million passengers a year, only around a dozen people log onto the Wi-fi network on any given day, compared with some 600 getting onto the fixed line Internet, said Edward van de Zande, who manages the public Web access services at the airport.

"I believe it will be very tough to build a profitable business on Wi-Fi hot spots alone," he said. Operators agree that revenues will be modest for some time. BT Group, which has a goal of wiring 400 hot spots by August, aims to earn 30 million pounds ($48 million) in annual Wi-Fi revenue by 2005. In its sights are main airports, considered prime Wi-fi real estate across Europe.

Price is still a big drawback for would-be Wi-Fi users. Surfers, on average, pay seven euros ($8.10) per hour, according to Pyramid Research. Monthly contracts run as high as 120 euros.

Prices Falling

Prices are falling quickly to below $10 a day, and while this could spur demand it becomes even harder to make a profit. Another bottleneck is lack of roaming agreements between Wi-Fi operators. Traveling business professionals may have to sign up to more than one service to stay connected on the road.

There are signs of progress here though. BT has struck a deal with Sweden's TeliaSonera and SwissCom notched a similar deal with SFR, a joint venture between Vivendi and Vodafone, to operate beyond their home borders. While that serves international travelers, users moving around a country may be out of luck, said Dave Hughes, director of mobility for BT Retail. "The question is, will there be national roaming coverage?," Hughes said, likening the current scenario to the days when a consumer couldn't use the cash machine at a rival bank.

© Reuters