Elgan: Wi-Fi wants to be free

Wi-Fi used to be a resource for rent, now it's the new toaster

Public Wi-Fi hot spots have been popular for about eight years. During that time, companies providing the service have been groping about, trying to figure out how to monetize it. The dominant model to date has been to simply charge for it. Pay us $20 a month, and you can log in at any of our many locations.

But this week, a kind of "tipping point" has been reached, and now -- instead of being rented for a fee -- Wi-Fi will increasingly be given away to motivate customers to buy other goods and services.

Wi-Fi is now just like the free toaster that banks used to hand out for opening a new account.

The toaster model

In October, I predicted that Starbucks would start rolling out free Wi-Fi access within one year. I didn't know how it'd do it, but reasoned that it would have to because Starbucks is in a desperate competition for the morning breakfast crowd against the likes of McDonald's, which is also being more aggressive with Wi-Fi access.

As Computerworld columnist David Haskin pointed out this week, Starbucks is leading a transition from Wi-Fi-for-money to Wi-Fi as a lure to get people to spend money on other things.

The Starbucks offer is a stroke of genius. Starbucks and AT&T will give you two hours of free Wi-Fi per day, but only if you use a Starbucks card. If you want more than two hours, you can pay $19.99 per month, which also entitles you to unlimited Wi-Fi offered by AT&T at some 70,000 hot spots in 89 countries. It not only trumps other sellers of sugar and caffeine by offering free Wi-Fi, but it also pushes its lucrative Starbucks card and provides an upgrade path for people eager to hand over money in exchange for unlimited access.

Starbucks cards benefit Starbucks in three ways. First, people with Starbucks cards in their pockets are probably more likely to choose Starbucks when there are other nearby alternatives. Second, by getting millions of customers to pay in advance, Starbucks gets more cash upfront (rather than waiting until people actually get their coffee). Last and best is that cards get lost, stolen or forgotten. When that happens, Starbucks gets to keep the money without supplying anything.

The TV model

Like television, Wi-Fi is increasingly given away in exchange for ads. It's an unproven model -- to the best of my knowledge nobody is making huge profits on this approach yet.

JiWire's "Ads for Access" program gives some users free Wi-Fi access at hot spots normally paid for by others, but in exchange for viewing ads over those connections. The company has recently (and wisely) started targeting iPhone users.

Wi-Fi is free at some airports. One of the largest is Denver International. In addition to advertising, the FreeFi Networks Wi-Fi access is subsidized by Disney-ABC television show rentals, which users can download over the connection.

A company called HypeWifi funds its free Wi-Fi access through advertising, but also by doing "market research" for advertisers for a fee. Users logging onto a HypeWifi access point may earn their access by answering a question or two, which is aggregated and presented to the sponsor, along with demographic information about the users.

The wonderful world of Wi-Fi

The provisioning of public Wi-Fi is an interesting "market," if you can call it that, because there's so much variety and experimentation. And there's no industry where all players universally provide free Wi-Fi as a matter of course. For example, some hotels offer free Wi-Fi, some don't. Some airports have it, some don't.

It's also interesting to note that Wi-Fi works as an incentive even when it's not free.

After a few fits and starts, Wi-Fi in the transportation industry is suddenly taking off. A solid majority of major airlines in both the U.S. and Europe either has or is planning to offer in-flight Wi-Fi. Most will charge for the service. The laggard airlines will take a hit in ticket sales as business fliers jockey for seats on the Wi-Fi-friendly airlines until they get their acts together and provide it themselves. Within two years, all major carriers will offer in-flight Wi-Fi.

Airline Wi-Fi has triggered a rush to install Wi-Fi service in trains across Europe. These rail service companies see the airlines as a competitor for the lucrative business traveler market.

And commuter trains and even taxis are getting Wi-Fi. In fact, wherever you find a concentration of business people with expense accounts and time to kill, expect to find Wi-Fi there. Everyone wants these customers because they spend money on other things.

Free Wi-Fi can pop up in the most unusual places. For example, did you know the Panera Bread chain offers it?

Boingo announced this week special pricing for people who want to use its Wi-Fi hot spots at airports and other locations with iPhones, Windows Mobile devices and Sony Ericsson phones. The new rate is just $8 per month. The new pricing will be rolled out on each platform at different times this year.

I can find hundreds of free Wi-Fi hot spots on various online directories. I've also paid $35 a day for Wi-Fi at a hotel in Paris. Pricing runs the gamut from no-strings-attached free access, to conspicuously overpriced, to creative or selective pricing a la Starbucks or Boingo. But the trend is clear: Wi-Fi is transitioning gradually to always free everywhere.

There's simply no downside to these trends. Everybody loves Wi-Fi -- the freer the better.

Mike Elgan writes about technology and global tech culture. He blogs about the technology needs, desires and successes of mobile warriors in his Computerworld blog, The World Is My Office. Contact Mike at mike.elgan@elgan.com or his blog, The Raw Feed.

Copyright © 2008 IDG Communications, Inc.

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