Wi-Fi hotspots burn Toshiba's fingers

By Matthew Broersma, Techworld.com |  Mobile & Wireless

Wi-Fi operators are still in the midst of quickly rolling out as many hotspots as possible. T-Mobile said on Wednesday it had activated hotspots in more than 100 Texaco service stations along main U.K. roads; the operator last month more than doubled its network of Starbucks Corp. sites to 154. The Cloud has a large network of hotspots in U.K. pubs, which it provides wholesale to service providers such as BT, Vodafone Group PLC and Orange SA.

Gartner Inc. expects 43,000 hotspots will be in use in Europe alone by 2008. Worldwide there were 40,000 hotspots last year, according to a study from market research firm In-Stat/MDR. So far, hotspot supply has vastly exceeded demand: In-Stat/MDR's 2003 survey of business users found that more than half had used a public wired or wireless network, but most had done so less than six times a year.

That situation is likely to change this year, with Gartner predicting 30 million will use hotspots in 2004, up from 9.3 million last year, according to a February report.

Heavier usage won't necessarily translate into profits. While hotspots in hotels and airports may be able to rake in fees from business users, other sites will find it difficult to charge, industry observers predict. "Some of these (hotspots) will decline, while others will be used heavily. There is going to be a dynamic situation over the next couple of years or so," said Duke-Woolley. "Those that don't pay for themselves could be offered free, as a promotion for the site where they're based. Others could be taken out. It's a part of the evolutionary process."

He said locations in pubs, McDonalds and shopping malls would probably not be able to charge fees.

Besides roaming and consolidation, service providers are also trying to smooth out the user experience by offering WAN and WLAN bundles and aggregate payment services. T-Mobile, for example, recently launched a 3G, GPRS and Wi-Fi bundle for a flat monthly rate. Aggregation companies such as Boingo Wireless Inc. and iPass Inc. offer a single payment system for many different hotspot networks.

For hotspot providers that get the business model right, the rewards could be big. "There is still plenty of money to be made from commercial Wi-Fi revenues," said Pyramid Research LLC in a report earlier this month. In the U.S. alone, Pyramid said direct Wi-Fi access revenues could exceed US$1.5 billion by 2008.

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