What are the big challenges for service providers like Boingo?
One is the lack of ubiquity. (Wi-Fi) not yet in all the places you want to use it. Ubiquity isn't the right word because it's not a wide area network. It's for places where people are concentrated and want access. It's got to be in airports, hotels, cafes, convention centres, campuses. But it doesn't need to be out on the highway, and it doesn't need to be on the golf course.
So the idea of a nationwide US network doesn't really make sense?
It's never been about that. It's about pinpoints of access. By the end of this year or early next year, we're going to go from about 5,000 total commercial hot spots in the US to about 10,000. We're going to be close to having it in all the right places, which means all the airports, all the business-class hotels, all the convention centres and ubiquitous brand cafes and places like that will follow. Those aren't as critical. That's when you start to feel like it's in all the places that you need to depend upon it.
Is that the big barrier you need to hurdle?
That's the first barrier. The second is fragmentation. When you walk down the street in a city with a Wi-Fi device you're likely to run across several hot spots and in order to access each of them you're going to need several different accounts. That's not convenient and is not going to work. There needs to be seamless roaming across the industry and it's even more important to Wi-Fi than it was to cellular because Wi-Fi has a smaller range and roaming is part of the very fabric of the business.
Until we have universal roaming, which is what Boingo is trying to achieve, we'll be holding the entire industry back. The third barrier is ease of use. We're making great strides with that.
How do you see pricing models change as more people access Wi-Fi over a variety of devices?
Ultimately, you'll get to the point where a $50 a month plan will give you all you can eat over Wi-Fi and 3G networks on multiple devices. But we haven't found the magic price point like we did in the ISP business at $19.95 per month. The average revenue per user is going to be higher with wireless than it has traditionally been across the board because it's broadband. It's neither narrowband nor wired, which are two things you have in dial-up.
We've already seen one carrier, Verizon Communications, bundle Wi-Fi with another service. Is more of that in the future?
Absolutely, and both will be successful. We like to talk in simplicities, black and white, but it's rarely the case.
A lot of this business seems to be based on partnerships, but that puts companies in the awkward position of being both a competitor and a partner. Is that just the way it's going to be?
It's healthy for an industry in the early days to have channel conflicts because that implies that you have channels and demand. Wayport was really smart; they recognised that early on and they adopted a strategy of not only selling directly to enterprises and end users but also selling to Boingo, Verizon and anybody that wants to come and buy access from them on a wholesale basis. And all it does is help fill up their pipe. The hot spot layer is an inherently fixed cost business, so the more traffic you drive against it, the higher the profitability.
This is not always the case in places where the capacity is scarce, like the Bell world, where the underlying physical asset is a monopoly. But that's not a concern with hot spots. Like the Internet, companies thrive through partnerships and being really focused on what they do and partnering.
And the same applies with Wi-Fi.
Everyone is dependent on someone upstream in the value chain. The raw materials of Wi-Fi are the venues; the operators depend upon the venues; the roaming aggregators depend upon the hot spot providers; and the brands depend upon the roaming aggregators.
That makes specialisation very important then.
Exactly. With specialisation you get the edge. The little details are what will determine success and you can only understand those by living and breathing the experience. You can't get that by generalising and spreading yourself too thin.
