Opinion

Public WLANs -- A Business-Model Challenge for Wi-Fi

By Rajit Gadh, UCLA-WINMEC; V. Sridhar, Satyam Computer Services Ltd.; and Kalyan Rao, Satyam Computer

September 12, 2003 12:00 PM ET

Computerworld - Wi-Fi, or wireless fidelity, is a technology that has gained acceptance through the rapid deployment of public and private wireless networks via "hot spots." The success of this technology can be attributed to a combination of the Federal Communications Commission's deregulation of the 2.4-GHz and the 5-GHz spectrum and the IEEE's rapid consensus on 802.11x standards.

Wi-Fi is indeed a killer app of this decade, but the ability to monetize investment in Wi-Fi by an organization isn't straightforward and neither are the business models on which its deployment is often justified.

Based on today's business-model patterns, we put hot spots into three categories -- implicit, explicit and "emplicit" -- and discuss the current challenges faced by their revenue models.

Explicit -- An explicit hot spot is offered by a location owner in partnership with a wireless Internet service provider (WISP) to generate revenue through paid subscribers. Examples are Internet cafes that offer Wi-Fi. Typically, the user is authenticated by the WISP, which in turn offers security to the paying customer. The WISP may provide the subscriber with roaming capabilities to its partner WISP's hot spots (called roaming hot spots) for a fee. Today, roaming is enabled via third-party brokers that charge a fraction of the amount transacted, splitting the revenues with the location provider, the home WISP (a subscriber's primary provider) and roaming WISP. While brokers are now able to keep part of the transaction fee, in the future, roaming may become a standard feature of explicit hot spots just like it is for cellular services.

Implicit -- An implicit hot spot is offered free of charge to the customer with the cost being borne by the location provider. In the context of public hot spots, these are typically offered by a retail location to attract customers. An example is the Wi-Fi offered by the city of Long Beach, Calif., to attract tourism. Such hot spots typically aren't secured and don't require authentication and therefore could become a source of intrusion or Internet attacks possibly resulting in liability for the location provider
When offered within an enterprise, implicit hot-spot investments are justified by potential increased employee productivity, reduced costs, increased revenues and provision of additional services to customers. In general, these tend to require user authentication and typically offer security as well. While Wi-Fi networks of today are mostly for data use, within a few years, such networks could fill a variety of enterprise needs. For example, a hotel may be able to integrate the following range of functions within a single wireless LAN infrastructure, thereby achieving significant savings in the following ways:
- Get WLAN-based Internet access from the hotel room
- Send faxes or print wirelessly from the hotel room
- Make wireless voice over WLAN phone calls from room to room in a peer-to-peer mode
- Use the WLAN infrastructure to make calls both inside and outside the hotel while roaming through the hotel
- Allow the ability to view movies played on a remote DVD connected via a hotel WLAN network
- Watch television over the WLAN infrastructure (which would require higher bandwidth than is currently available)
- Access games available for playing wirelessly within the rooms
- Eventually wireless-enabling all devices using digital content (including vending machines, safes, etc.).
Needless to say, there are several technical and business challenges to be addressed prior to having a successful implementation, but Wi-Fi-based hotels could offer significant cost savings by having an integrated infrastructure coupled with technological appeal to the more sophisticated customers.

Emplicit -- Perhaps a majority of hot spots lie between the explicit and implicit categories, in which the business needs of the location owner are linked to those of the WISP, and these are being called emplicit hot spots. An example is a hot spot within a cafe that's serviced by a WISP, where purchase-based concessions by the cafe could apply to hot spot usage by the customer or online coupons offered by the WISP would apply to discount purchase of goods within the cafe. Authentication allows the vendors to link usage by the customer to their sales activity. For example, McDonald's announced recently that it will offer Wi-Fi for a fee or will offer Wi-Fi for a customer purchasing specific food items from its restaurants.

Additional Resources

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