Free hot spots pay dividends

Computerworld - At first glance, it might not make sense for profit-making businesses to give away, rather than charge for, wireless Internet access. But a growing number of hotels and restaurants have found that it pays to offer free Wi-Fi Internet access. This perk attracts customers and provides a real bottom-line payback for a relatively small capital investment, according to free-Wi-Fi pioneers.

Cities and community development organizations across the country have embraced free Wi-Fi to boost economic development and attract visitors to downtown areas. A handful of small airports in the shadow of large hubs offer free Wi-Fi to attract travelers. And Verizon Communications Inc. in New York offers Wi-Fi free of charge to its Internet service subscribers to distinguish itself from its cable-modem rivals.

Operators of free Wi-Fi hot spots are capitalizing on the boom market in Wi-Fi-enabled notebook and handheld computers. Gemma Paulo, an analyst at In-Stat/MDR in Scottsdale, Ariz., estimates that shipments of notebooks equipped with industry-standard 802.11b chips or cards—which offer a raw data rate of 11Mbit/sec. at a range of 100 feet indoors and 300 feet outdoors—will hit 16 million this year.

Free Wi-Fi is an alternative to paid services offered by companies such as Starbucks Corp., which, in partnership with T-Mobile USA, currently offers Wi-Fi service at rates ranging from $9.99 per day to $29.99 per month in 2,300 of its coffee shops.

Lovina McMurchy, director of Starbucks Interactive, says the paid Wi-Fi service helps attract customers after peak morning hours. And those who use it tend to be "high-income customers" who "come more often and stay longer," she says. She declined to reveal the service's impact on the company's bottom line.

John Wooley, chairman, CEO and president of restaurant chain Schlotzsky's Inc. in Austin, isn't so shy in sharing details of what he calls the "strong ROI" from the company's free Wi-Fi service. Schlotzsky's currently offers free Wi-Fi in 30 of its 600 company-owned or franchised Schlotzsky's Delis. Wooley says he figures that the free Wi-Fi results in an additional 15,000 visits per restaurant per year by customers who spend an average of $7 per visit.

That means Wi-Fi service brings in more than $100,000 per year per outlet in return for an investment of about $8,000 per restaurant for wireless infrastructure, Wooley says. The largest continuing cost is backhaul to the Internet over 1.54Mbit/sec. T1 circuits, Wooley says. Since the cost of a T1 circuit varies from $300 to $700, depending on what part of the country you're in, he says Schlotzsky's would average those costs to induce existing franchisees to offer the service. (New franchisees will be required to offer free Wi-Fi, Wooley notes.)