Wi-Fi has entered the mainstream as top-tier service providers are adding public-access service. Enterprises will increasingly be able to leverage hot spots to complement existing remote-access strategies but must understand the different business models to get the best fit.
META Trend: User access diversity will increase as mobile users migrate from dial-up to broadband, wireless LAN hot spots, and ad hoc wired connections (e.g., hotel Ethernet) during 2003/04, as well as 2.5G/3G cellular data services (Europe and Asia 2004, US 2005/06). User authentication and SSL VPN adoption will accelerate, becoming the dominant application-based remote access mechanism by 2005, with IPSec devices securing network interconnections. Best-practice organizations will focus efforts on standardized remote access usage policies, user profiles, and formalized identity management processes.
The market for public Wi-Fi-based Internet services continues to capture much attention from service providers, enterprises, facilities owners, and the media. Many have predicted a wild explosion in the number of Wi-Fi hot-spot locations across the globe, but few have succeeded in articulating the way in which these services will make money. The deployment of Wi-Fi as a public-access technology is in its infancy, and enterprises must understand the various business models prior to blindly entering service agreements. In hopes of increasing demand for end-user computing platforms enabled with Wi-Fi, many manufacturers (e.g., Cisco, Intel) have taken aggressive steps to encourage the build-out of Wi-Fi hot spots for public Internet access. The majority of these services are targeted at paying customers; however, numerous free services continue to emerge - many free only for a trial period, while others are attempting to defy the economics of paid services with the goal of increasing customer loyalty. A small group of “freenets” also purports to offer services with no business model whatsoever.
Wi-Fi hot-spot services are all about location. Wi-Fi hot spots powered by a single access point generally have a range of 300 feet - providing much smaller coverage than traditional cellular technologies. Given this confined coverage, the location of the access point is critical in determining how attractive the service will be to customers. As a result, META Group classifies locations into three groups, which should be used as a guideline for evaluating a service provider’s market presence. Many service providers boast of the number of hot spots they support; however, this quantitative approach can be highly misleading because the quantity of locations has no bearing on the true coverage picture.
Service Provider Taxonomy
During the next 12 months, the Wi-Fi hot-spot services market will remain highly fragmented. As providers gradually build a broader footprint, intercarrier roaming will be the linchpin to attracting a critical mass of subscribers. We divide the Wi-Fi services market into five major categories:
- Aggregators: Also known as “virtual network operators” in some markets, especially Europe, aggregators are third-party brokers that establish agreements with multiple hot-spot providers to provide cross-network roaming and greater coverage. The aggregator may have a direct relationship with the customer or rebrand its user-facing software for a larger service provider that will then own the customer relationship. Enterprise-focused aggregators are currently the most aggressive at offering bundled services, with most offering a combined remote-access dial, wired and wireless broadband service, and additional value-added services (e.g., security). As the market evolves, we expect some aggregators to add cellular data to the service portfolio. Major aggregators are Boingo (mostly consumer), GRIC, and iPass.
- WISP: A wireless Internet service provider (WISP) is a regional provider that builds and maintains the hot-spot infrastructure. The WISP generally does not own the location, but rather partners with specific facilities or location owners to provide a service to patrons. The WISP may “own” the customer under its own brand or may allow the facilities provider to rebrand the service. WISPs generally have a limited portfolio of services (predominantly Internet access). WISPs such as STSN, Wayport, and NetNearU are the leaders within the US; E@syConnect and DNA Networks are the leaders in Europe.
- Carrier: Numerous carriers have entered the market hoping to supplement their existing services (e.g., broadband, cellular). Although many carriers have projected substantial build-outs of hot spots during the next 12-24 months, we anticipate most will fall short of their plans in the current economic environment. Longer term, we anticipate that major carriers will be the most successful in attracting customers given their ability to bundle Wi-Fi services with incumbent offerings. The most aggressive carrier to date has been T-Mobile, though AT&T Wireless, SBC, Sprint, and Verizon have also announced services in the US. SingTel, Telstra, NTT, and iPrimus have been aggressive in Asia Pacific, and TeliaSonera Homerun and BT OpenZone have been aggressive in Europe.
- Wholesale: The principal wholesale provider to enter the US Wi-Fi hot-spot market has been Cometa, a joint venture among Intel, IBM, and AT&T. Cometa will not sell to end consumers; rather, it will enter only into wholesale agreements with other carriers interested in offering services to their customers. Despite a promising model, Cometa has yet to fulfill on any promises of a network build-out and is plagued with internal political problems. Within Australia, Azure has been particularly active in hot-spot build-outs.
- Laissez-faire: Numerous free Wi-Fi services have emerged across various municipalities and retail chains. We do not consider these freenet services to be viable for business-class usage given limited scale, reliability, and lack of service-level agreements. Examples of major freenets are NYCwireless and Bay Area Wireless Users Group.
In 2004, we expect roaming agreements between aggregators and service providers and interservice providers to become more formalized. By 2005, we expect the market to start to consolidate as service providers gain experience in determining profitable and sustainable locations. By 2006, Wi-Fi coverage will be purchased commonly as part of a remote-access contract. In the long term (2008), we expect Wi-Fi hot spots to be widely available in any location that has a captive business professional.
Classifying Hot-Spot Locations
Not all hot-spot locations are equal, and an important part of evaluating a service provider is understanding the quality of its hot-spot locations. We have established a ranking methodology that puts hot spots into three classes: Class A, Class B, and Class C (see Figure 1). The determining characteristics are the type of customer most likely to visit the location and the nature of his or her time spent in that location. We rank a location that is more likely to attract a business professional higher than one that would attract a consumer. Similarly, we rank a location in which a person is captive or in transit higher than a location at which the user has the choice in terms of time spent. As an example, a user in an airport is a captive audience, whereas a user in a café can choose to leave at will. Given the general lack of penetration of Wi-Fi-enabled devices in the consumer market, we determine that any location more likely to be frequented by a consumer is ranked lower than one that attracts business professionals, regardless of whether that consumer is captive or has choice. Figure 1 gives a graphical depiction of this ranking along with practical examples of location classification.
Business Impact: A multifaceted remote-access strategy will best increase the productivity of a mobile workforce by providing near-seamless access to corporate services.
Bottom Line: IT organizations must evaluate Wi-Fi hot-spot service providers based on the quality of the locations along with the service provider's longer-term ability to establish roaming agreements and bundled services at competitive prices.
META Group originally published this article on 15 October 2003.