Telecommunications equipment supplier Ericsson and Telstra launched the landmark wireless hotspot site this week. The sites, designed and constructed by Ericsson, integrate networking hardware from Cisco. The vendor partnership is the result of an agreement announced in April last year to offer joint solutions for the wireline communications market.
International Data Corp senior analyst Warren Chaisatien said Telstra was starting to dominate the wireless hotspot market, especially with the smaller players scaling down their investment for the sector.
"I don't believe any hotspot providers have made money from this business yet," Chaisatien said. "There is no profitability in the hotspot marketplace. Evidence of this is the drop-out of smaller players. They used to be very aggressive but they haven't been expanding for the past 12 to 18 months. Last year, most of the smaller players have announced a scale-back to revisit their hotspots plans. They are not killing it, but they realised there is no money in it".
He added that even Optus only has 96 hotspot locations nationwide and the number has "not grown significantly in the past 12 months".
"Optus almost agreed last year that the [wireless hotspot] business is not going anywhere. They had to scale back and re evaluate their plans as well. I don't think they are going to kill it anytime soon because it provides a strategic solution for them. But I doubt they would put much more in there."
"Telstra, on the other hand, surprisingly, became the only hotspot provider who kept expanding despite market conditions. I believe that's because their pocket is so deep, I don't think they really care if the hotspots are making money," Chaisatien said.
In addition to the ongoing roll out of hotspot sites, Telstra and Ericsson are also exploring technology solutions to "improve customer experience in using WLAN (wireless Internet) at hotspots". This includes evaluation of secure client access, and integration with other wireless data services, such as EV-DO and GPRS.
Telstra's director of wireless and mobility products, Holly Kramer, said Telstra aimed to have more than 1,000 public hotspots around the country to make wireless broadband Internet more accessible to users.
Chaisatien said that Telstra and Optus are currently trialling wireless broadband solutions, which would then compete with other wireless broadband solution providers like Unwired.
"I would not be surprised to see these big carriers introduce some sort of wireless broadband solution like Unwired and when that happens, these carriers can say they have an end to end solution for customers. That is how the carriers look at this market place," Chaisatien said.
Chaisatien said Telstra was anxious to dominate the market.
"The goal is to blanket the entire market with wireless broadband connectivity, especially niche locations such as hotels, conference rooms, and airport lounges," Chaisatien said.
He said the expensive price for wireless access via a hotspot, "patchy" coverage and the growth of wireless broadband were among the reasons that wireless hotspot growth in Australia had been stunted.
Chaisatien fears that as Telstra becomes more dominant in the wireless hotspot market, it will not necessarily be responsive to issues raised by customers.
"The prices are still so ridiculous. The price points are very high and they have remained very high for a few years now. In Australia, the hotspot market is not user friendly and very expensive, the coverage continues to be patchy and the market has not developed quickly. The market is dominated by one player; Telstra again. And I don't think they see any incentive to cut the price. Telstra is becoming more dominant and so there is less incentive to resolve the issues," Chaisatien said.