Wireless Hotspots Heat Up

So which way will it go? We're bullish and believe the market will succeed. For cautious enterprise IT professionals, even a safe "somewhere in the middle" projection means that Wi-Fi hotspots will play a role in business-technology plans, in two ways: First, if your organization has a significant number of mobile workers, particularly those who make intensive use of notebook PCs to do their jobs on the road, Wi-Fi hotspots can yield major productivity benefits. Second, and perhaps more interesting, your organization could end up becoming a hotspot venue, and not just if you work in IT for Starbucks Corp. Think about how pay phones used to be deployed in your organization's facilities, mainly as a courtesy service for visitors. It's not much of a stretch to imagine Wi-Fi hotspots moving in the same direction. In fact, Bell Canada is converting pay phones into Wi-Fi hotspots as we speak.

The Basic Technology

About 20,000 hotspots are online today, and Gartner estimates that the market will grow sixfold to about 120,000 worldwide by 2007. Cometa Networks, a start-up hotspot wholesaler with heavy support from AT&T, IBM and Intel, plans to build 20,000 hotspots by the end of 2004. Toshiba, known to most as a provider of mobile devices, pledges 10,000 hotspots by the end of this year using its inexpensive and easy-to-deploy systems. Although these numbers may sound big--and they are--remember that with today's technology, a single hotspot's coverage area is not much bigger than the inside of your house.

Unlike traditional GSM and GPRS or CDMA voice/data infrastructures used by cellular carriers, where coverage is measured in blocks and miles, hotspot coverage is best measured in rooms and feet. But look at the economics of buildout and you'll see that smaller range also carries a smaller price tag: Deploying a CDMA cell will set you back about a million dollars, while a Wi-Fi hotspot might cost only a few hundred dollars. Of course, deployment better be cheap, because before service achieves anywhere near ubiquitous status, we'll need far more than the 120,000 locations Gartner projects--we're talking millions of hotspots. Is there a business model to support that kind of buildout?

Some experts are doubtful. Andrew Seybold, a respected wireless industry analyst and founder of the Outlook 4Mobility group, says he is surprised that so many otherwise sane people have jumped on the Wi-Fi hotspot bandwagon. Seybold acknowledges that there are valid cases where hotspot deployments make sense--a prime example: if it helps you sell more coffee--but says he sees no economic model for an independent hotspot business, including those being promoted by wireless service providers and wholesale hotspot companies.Wi-Fi hotspot advocates, on the other hand, would argue that the major costs of providing a hotspot service--the wireless infrastructure and broadband access--are dropping. DSL-based Internet services capable of supporting 10 or more typical concurrent Wi-Fi users are now widely available for less than $100 per month, and the cost of Wi-Fi gear, even specialty stuff needed for hotspots, is falling fast. Thanks to vendors like Airpath Wireless, Gemtek Technology and Toshiba that have released highly integrated boxes that simplify deployment, it's conceivable to deploy a hotspot for up-front costs of $500 or less and recurring costs of less than $100 per month. It wouldn't take much of a customer yield to cover those costs in many venues, even in smaller environments with a single access point.

For more ambitious projects, enterprise-oriented WLAN infrastructure vendors such as Proxim have tweaked their products to support the needs of hotspot operators. And newer vendors like Vivato are using phased array technology that may be able to light up an entire building with hotspot service using a single box. If a venue is appealing enough, hotspot operators will fund all the capital and operational costs in exchange for a portion of the proceeds, a model that has worked for many hotels and airports.

The hotspot market is crowded with new entries, all in search of their piece of what they believe will be a huge market pie. Running a reliable, secure, scalable and manageable hotspot service is a far cry from installing a Wi-Fi gateway in your family room. But despite the challenges, many creative minds are at work trying to make a go of it. The Wi-Fi hotspot market comprises many different players:

• Hotspot wholesalers, like Cometa, plan to build out service in various venues and make those services available to retailers, which will handle marketing and fulfillment.

• Established cellular carriers, like AT&T Wireless,

T-Mobile and Verizon, understand the potential benefits in high-density environments and feel they can offer hotspots as a complement to 2.5G and 3G service, with seamless roaming between the networks.• Service aggregators, like Boingo Wireless, Gric Communications and iPass, don't own hotspots but rather provide access to a range of partner networks, thus assembling a much larger footprint.

• National and regional WISPs (wireless Internet service providers), such as Hotspotzz, Surf and Sip and Wayport, are convinced there is a viable way to make money building a network one venue at a time.

• Free-access WISPs, many undoubtedly distant relatives of the FreeNet dial-up movement, aim to provide free Wi-Fi services to the masses.

For service aggregators and regional WISPs, there is significant pressure to partner through roaming agreements, a strategy that increases coverage footprints in what is often a mutually beneficial manner. However, as we learned in our RFI (see "Common Goals, Unique Strengths," page 43), it's not uncommon for the partnership to be one-way in nature. The fee an aggregator pays to allow its customers access to a carrier's network does not necessarily grant that carrier's customers access to the aggregator's other partner networks. That's one reason why aggregators offer the largest coverage footprint, an appealing model for organizations whose staff travel extensively. But you can expect to pay a premium for those services.

The Hotspot Value ChainTo deliver the optimal user experience, the plethora of specialty players in today's hotspot market must find a level of cooperation that includes adherence to a common set of technical and implementation standards and, in some cases, significant trade-offs between ideals and pragmatic solutions. The most publicized effort was advanced in February by the Wi-Fi Alliance's WISPr working group, written by representatives of Gemtek (a wireless infrastructure provider), iPass (an aggregator) and Nomadix (a hotspot-gateway provider). Rather than designing a sophisticated set of roaming standards, WISPr is working within the context of existing standards to define best practices for hotspot networks. Most of the vendors that participated in our RFI have pledged support for WISPr.

From a technical standpoint, WISPr calls for using a combination of HTTP, SSL and RADIUS to provide secure authentication, authorization and accounting services. Although participants must follow some implementation standards, others are just recommended or optional. For example, while providers are required to offer Web authentication services, they have the option to use so-called smart clients that add functionality like enhanced security, service browsing and hotspot directories and can make access more transparent to users.

Although the transmission of authentication credentials is protected by SSL encryption, WISPr-compliant systems do not provide privacy services. Instead, WISPr encourages the use of VPN clients for secure connections. That's a prudent compromise in the absence of workable alternatives, but the WISPr group clearly envisions a day when support for the IEEE's 802.1x standard will overcome those limitations, serving as both an authentication protocol and as a vehicle for managing dynamic session keys. WISPr provides a clear explanation about how 802.1x will be integrated into the system, including explicit support for TLS and TTLS authentication types (see "The New Face of Authentication", and "802.1x Explored").

There are serious questions about whether either of those authentication types will win out in the market, but one can hardly expect WISPr to solve that problem. In any case, the system is flexible enough to support whatever standard eventually emerges.

Dave Molta is a senior technology editor at Network Computing. He is also an assistant professor in the School of Information Studies at Syracuse University and director of the Center for Emerging Network Technologies. Molta's experience includes 15 years in IT and network management. Write to him at [email protected].

Post a comment or question on this story.Sure, providing users with untethered Internet and e-mail access while they sip caramel macchiatos (no foam) will enhance your popularity, but that's just a happy by-product of hotspot technology: Visitors to your physical locations will appreciate how easy it is to check in with their offices, and mobile employees will likely see productivity increases.In other words, hotspots aren't just for coffeehouses anymore. Hotels, convention centers, fast food restaurants and cafes, airports, bookstores and even campgrounds are getting lit up. Although there are questions regarding the best provider-side business model, aggregators are wrapping extensive coverage into attractively priced and configured packages, and enterprise IT managers can buy the hardware needed to build a wireless hotspot for a couple hundred bucks. Where's the downside?

To root out the best coverage and access, we sent out an RFI asking Boingo Wireless, Deep Blue Wireless, Gric Communications, Hotspotzz, iPass, Surf and Sip, T-Mobile, Toshiba and Wayport to supply our fictitious McDonald and Seifert Engineering firm with the means to give mobile employees easy access to company resources.

Even though, as an aggregator, its pricing was on the high side, Boingo got the Editor's Choice nod thanks to its wide connectivity. We also liked its flexible rate plans and top-notch client software. Overall, we're optimistic on the future of the hotspot market and see few drawbacks to jumping in--the cost of entry is low, and payoffs can be as rich as a tall toffee-nut latte with extra whipped cream.Although Wi-Fi hotspots and 3G wireless are sometimes viewed as competitors, most service providers recognize that coexistence is the more likely scenario for the future. Some holdouts still exist, of course: Irwin Jacobs, CEO of cellular industry giant Qualcomm, predicts the demise of hotspots once 3G, with its promise of multimegabit data rates and coverage equivalent to cellular voice, becomes widely deployed. His logic is simple: Why have two wide-area wireless data services when you can have one that does it all?

Jacobs' prediction is unlikely to come true, though, because Wi-Fi systems are becoming so inexpensive and are garnering a groundswell of industry support, extending even to major cellular phone manufacturers, such as Nokia. These vendors view integration of the two technologies on a single device as a logical extension of the multimode phones we use now. Today, 2.5G (GPRS and CDMA 1x) and Wi-Fi integration means two chipsets. Tomorrow, it's reasonable to expect that chipsets will support multiple standards, including 11a, 11b, 11g, GSM/GPRS and CDMA, in various combinations.

The multimode radios of the future will facilitate new opportunities and present new challenges, including the development of interservice roaming standards so users can wander between networks transparently. The end result may be what some academics refer to as a "wireless grid," suitable for yet-to-be-developed forms of distributed communication and commerce.Today we're dabbling in the grid's early stages, with hotspots as a key element. Despite many potential obstacles, we expect their role to become increasingly important to organizations during the next several years, with benefits reaped by individuals and organizations that learn how to tap the hotspots' inherent potential. Readers polled for this article were nearly evenly split between those who had never used a hotspot service and those who had. More than three-quarters of respondents carry a notebook computer while traveling, and about 60 percent work in environments where central IT has implemented pilot or production internal WLAN services. This admittedly techie-weighted sample provided some interesting insights about hotspots:

• The venues considered most important for coverage are hotels, convention centers, airports and libraries. Convenience stores, gas/service stations and urban parks are viewed as least important. We found it interesting that even our relatively experienced respondents tend to identify conventional venues as most important, indicating service providers have been doing a good job of grabbing the low-hanging fruit.

• About three-quarters of readers polled say a viable hotspot provider must offer coverage in at least 50 percent of the 100 largest U.S. cities, and about a third peg the threshold at above 75 percent.

• Interestingly, though major cellular providers like T-Mobile hope availability of hotspots will drive increased demand for conventional voice services, almost 75 percent of respondents do not feel it is important to receive hotspot services from a cellular company with which they have an existing business relationship.

• Gric Communications and iPass, which bundle wireless and dial-up services, will be pleased to hear that about 60 percent of our respondents say bundling is important.• In terms of price expectations, the results are about evenly split between two monthly price points: less than $25, and $25 to $50. Only 3 percent are willing to pay more than that. Although the largest percentage (42 percent) prefer an unlimited monthly charge model, it appears potential customers may be flexible in that regard.A recent Wall Street Journal article called hotspots a godsend for business travelers. Just how do you put a dollar value on that? It's the dilemma you face when evaluating consumer-side, hotspot ROI. As with many emerging mobile technologies, the stimulus for enterprise evaluation of hotspot services frequently comes from the field, often from highly paid staff. So forking out $5 to $10 per day for a service, even if it is restricted to a single venue, is easy to justify.

Two models may help you evaluate hotspot ROI. A conventional, efficiency-oriented mobile technology ROI model estimates the number of additional hours per day a mobile employee has access to broadband network services, then multiplies that figure by the monetary value of the projected improvement in productivity.

An effectiveness-oriented ROI model, which is more difficult to quantify, estimates the value of information available to the employee through broadband network access, and translates that into the monetary value of better decision making, improved scheduling, closed sales, enhanced customer service and many other qualitative benefits.

When these models are applied to other technologies, including cellular phones, the consensus is that the projected return is so compelling, it isn't even worth the bother of developing an ROI model. But the ROI hotspot equation is not so neat: Access is limited; you can't just assume the service will be available everywhere, at least not today.

The good news is cost: The capital costs associated with hotspot services are minimal, especially since many employees have wireless capabilities on their devices. Recurring costs are low as well, often adding up to no more than the price of a few toll-free dial-up sessions from a hotel room. So though hotspots are not yet pervasive, it's safe to say that providing mobile employees with hotspot access will be worth the cost. And service providers are making it easy for you to do so by providing flexible per-day access plans and even plans that can be shared among employees.The other ROI element relates to the benefits your organization might realize by becoming a hotspot venue. When Starbucks entered the hotspot market through its partnership with Mobilestar (now part of T-Mobile), many analysts began to look at the market differently. Instead of calculating the monetary value of Starbucks' cut of the connect fees, they started thinking about how deploying hotspot service could help sell more coffee. And how it provides a virtually free broadband network connection for store employees, which can enhance business operations.

Even if your organization is not in the service sector of the economy, you may find that providing hotspot services as a courtesy for your business visitors makes a lot of sense. In fact, nearly half of readers responding to our e-poll for this article had visitor requests for wireless service in the past six months. Today, many wireless infrastructure vendors deliver open, front-of-firewall access to visitors while securing wireless access to back-end services. Longer term, it's conceivable that service providers could step in and partner with organizations to deliver hotspot services on their sites. About half of the respondents to our e-poll said they would be willing to consider such a strategy if they were given a commission.