July 06, 2004, 9:19 AM — Despite an initial wave of hype, Wi-Fi hotspots, which let users access the Internet using 802.11 wireless LAN technology, haven't turned into the lucrative revenue source that Chinese fixed-line telecommunications operators expected.
"On the whole, Wi-Fi is not going to be the immediate cash cow everyone thought it would be," said Glyn Truscott, a consultant at BDA China Ltd., a Beijing consultancy that tracks China's telecommunications industry.
China isn't the only country where Wi-Fi hotspots have fallen short of bullish expectations. In many Asian markets, including China, hotspots just haven't drawn large numbers of consumer users, said Tim Crowley, research manager for broadband research at IDC in Hong Kong.
"It's region-wide, for the consumer market the movement (towards using hotspots) is not as strong as people thought it would be," Crowley said, noting that South Korean operators have bucked this trend, drawing large numbers of consumer users to their hotspots.
In Beijing, China Network Communications Group Corp. (China Netcom) offers Wi-Fi access at Starbucks coffee shops dotted throughout the city. But the service is hampered by a lack of familiarity with the service among Starbucks staff and a poorly-designed payment system that first requires users to buy an access card, Truscott said.
"In many cases, Starbucks staff don't know if they have Wi-Fi and even if they do you can't buy the cards there," he said.
Instead, users must first visit a China Netcom customer service center to buy an access card, at a cost of 30 renminbi (US$3.62) per hour, before they can access the Internet from a hotspot. Since there aren't many of these customer service centers around, users are more likely to stumble across one of the hundreds of Internet cafes in Beijing before they find a shop that sells hotspot access cards.
"You'd have to be a very good customer to use their Wi-Fi services," Truscott said.
Things didn't have to be this way. China Netcom should have struck a deal with Starbucks to offer wireless Internet access for a limited period of time, perhaps 30 minutes, with the purchase of each cup of coffee. "If they had done that instead of making people pay 30 renminbi for a cup of coffee and another 30 renminbi for Wi-Fi access, I'd buy two or three cups of coffee instead of just one," Truscott said.
Wi-Fi hotspots were supposed to be a valuable revenue source for Chinese fixed-line operators faced with declining appeal for traditional wireline services. China Netcom had rolled out 120 hotspots by September of last year but has added just 29 more hotspots during the last nine months, Truscott said.