Magazine Issue Name:
Magazine Issue Date:
In the face of skepticism, scorn and exorbitant backhaul costs, not to mention the ongoing upgrades of 3G networks to multi-megabit speeds, the Wi-Fi hotspot has proven a strikingly resilient business concept - at least if you go by venue numbers. In 2001, there were less than 100 venues offering Wi-Fi connectivity.
By the end of last year, there were close to 180,000 places on Earth you could find a Wi-Fi connection, according to MultiMedia Intelligence (MMI), from airports, hotels and convention centers to cafÅ½s, fast food restaurants and even trains.
That said, the road to ubiquitous Wi-Fi is also littered with players that either ended up relying on wholesalers to serve their customers or quitting the business altogether as growth and usage never met expectations that were arguably overpriced in the first place.
As such, the hotspot market is undergoing something of a double-pronged paradigm shift, says MMI president Mark Kirstein: 'a trend toward provider consolidation and an increasing focus on network quality.'
Indeed, the hotspot service provider market has been in consolidation mode since 2006.
Meanwhile, some hotspot providers are already enhancing their backhaul networks to better handle higher traffic loads, two-way communications and traffic prioritization for apps like VoIP.
Such trends are still emerging, says Kirstein, but they also represent an opportunity for hotspot providers to kick their business up a gear - especially as the user base becomes increasingly driven by consumers as well as business users, and as new potential apps emerge like VoIP, gaming, entertainment services, and even back-office services like customer ordering, cashless payment and environmental monitoring, that can potentially add new revenue streams on top of basic access.
Not that it's as easy as that. Wi-Fi hotspot operators still face a range of market challenges. Apart from obvious competitive issues with 3G and, in the next couple of years, Wimax - as well as the rise of public Wi-Fi in markets like Hong Kong and Singapore - the biggest challenges for hotspot services have been network consistency, user-friendliness (both due to Wi-Fi's fragmented development over the years) and a marketing strategy that will hit home with consumers.
The rise of roaming providers has helped address the fragmentation issues, but they're by no means fully resolved. Meanwhile, consumer marketing is becoming increasingly crucial - MMI expects consumers to have the greatest impact on subscriber growth over the next two years, especially as portable consumer devices like gaming consoles and particularly mobile phones become Wi-Fi enabled.
'Handhelds will account for 50% of hotspot sessions within the next two years,' Kirstein says. 'This will have dramatic implications on who uses hotspots, for what purposes they are being used, and the duration of session.'
With consumer awareness being key to all this, MMI lists branding as a key factor to hotspot success in the near future. 'Branded deployments, such as Starbucks, McDonalds and Borders, provide location consistency across an operator's network,' Kirstein says.
Other recommended factors hotspot operators should keep in mind include multiple pricing plans and bundling Wi-Fi with mobile broadband services, as operators in Korea and Hong Kong have done.
Kirstein adds that while a wide footprint matters, the quality of that footprint matters even more.
edited by John C. Tanner