John Marston, a business development executive at Toshiba, cautioned operators to pay attention to the market and not be overly optimistic about subscriber numbers. "Don't spend too much money," said Marston. "You have to think about every dollar you spend and how you expect to acquire locations." The number of hot spots available in the US is expected to explode from 745 locations in 2002 to more than 7,000 locations in 2007, according to In-Stat/MDR. With the recent rash of companies entering the market and committing to thousands of locations this year, those numbers could even prove conservative. In-Stat/MDR's Craven is in the process of updating those projections, which will be available in the next month. Toshiba and Accenture have said they plan to have 10,000 hot spots across the US by the end of 2003. Craven said that with more and more players looking to provide roaming capabilities, it's more likely that companies will try to focus on certain parts of the hot-spot food chain. Roaming is expected to play a significant role in the development of nationwide hot-spot networks, because it will allow wireless users to avoid having to sign up for multiple accounts to use multiple hot spots. Roaming also means more opportunities for recurring revenue for operators and for the aggregators who are expected to bring in subscribers. Aggregators are companies, such as Boingo Wireless, whose software and services allow subscribers to sign into hot-spot networks and receive a single bill and service experience at any location on the network. The hot-spot market is still small, but it's evolving quickly. For operators it's increasingly becoming a land grab for the best locations and right partnerships that they think will give them access to the largest group of customers they want to target. Operators such as Wayport, Surf and Sip, T-Mobile USA and Cometa are the companies that negotiate with location owners, such as coffee shoes and bookstores, to set up hot spots. Craven added that operators will have to be very selective when determining the best locations to attract key customers. Blanketing the country doesn't make sense, but competition for key areas is building -- and in some cases, the competition may already be over. "A lot of the strategically significant claims have already been staked by either grassroots-type service providers or some of the big players," said William Bao Bean, an equity research analyst with Deutsche Bank Securities. For example, the largest hot-spot provider in Portland, Oregon, is a non-profit organisation called Personal Telco, which offers free service. The organisation maintains 41 of the about 100 hot spots in the Portland area, which was recently rated the most unwired US city in a survey sponsored by chipmaker Intel. Cash for connections
Although there are still free hot spots, paid services are likely to take over, according to Sean Maloney, general manager of the Intel's Communication Group. After all, service to the hot-spot operators isn't free: They have to pay monthly fees for a wired Internet connection for their Wi-Fi base stations. "It looks like a preponderance of the hot spots will be paid," Maloney said. "There are a lot of people that are going to offer paid service." Toshiba and Accenture are teaming to offer what amounts to a hot-spot kit for operators. The kits will include hardware provided by Toshiba and maintenance from Accenture, which operators can sell to and set up for location owners, and all parties would split the revenue -- Toshiba and Accenture would receive 50 percent, the location owners 20 percent and the operator 30 percent. The kits are expected to be available in the second quarter of this year. The competition for locations is already fierce, with T-Mobile, among other big names, already pounding its chest to intimidate rivals. "We quickly ran past the point where start-ups could jump into this scene," said Bob Stapleton, vice chairman of T-Mobile USA. "The challenge is to get to critical mass...we're in 60 percent of the installed venues of hot spots." T-Mobile USA has T1 lines set up in 1,200 Starbucks coffee shops, which many in the industry say is overkill for the number of subscribers in the market. The company recently lowered its monthly Wi-Fi fees for subscribers from $40 to $30. In announcing the cuts, Starbucks' new ventures director, Lovina McMurchy, disclosed that the service has so far attracted on average 20 customers per day, per location, in large cities. Competitors aren't flinching, though. "There are so many different ways to go with these models, and the important thing is realising who your customer is and executing toward them," said Christian Gunning, Boingo's director of product management. Telecommunications services company Matrix Networks is concentrating on business travellers and where they stay. Matrix is partnering with hotels to provide hot-spot services to guests. "That's where all our customers are, and the return is growing... if I get 10 percent of a 120-room hotel, it adds up," said Nigel Ballard, director of wireless at Matrix. The numbers of business travellers and consumers with Wi-Fi capability is expected to grow directly or indirectly because of Intel's upcoming marketing blitz for its Centrino family of processors. The chipmaker is spending $300m to market its latest product, which should help to familiarise people with Wi-Fi and what they can do with it. Efforts by the Wi-Fi Alliance should also help improve the awareness of Wi-Fi and the availability of hot spots. The industry group has developed a "Wi-Fi Zone" logo, which identifies hot spots.
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