Wi-Fi hotspots mean some burnt fingers

That funny smell is business plans going up in smoke...

Wi-Fi hotspots are hot indeed, but they could end up being too hot to hold, for the network operators at least. Although companies are piling on board, the latest two to announce packaged wireless hotspots for sale being Toshiba and Evesham Micro, the business and revenue models still haven't come together.

Now a report from US market research outfit Forward Concepts suggests that many hotspots will prove unprofitable. The report's author, Dr Daniel Sweeney, says there are "troubling deficits" in the hotspot market, and predicts that growth will stall next year as the industry reevaluates its plans.

Part of the problem is that the business models currently on offer from the network operators, such as relatively expensive annual subscriptions with limited roaming capability, are not popular enough, claims Paul Munnery, a director of networking reseller Wireless CNP.

"The hotspot business has moved away from contracted users in the last six months and is definitely moving towards the ad-hoc user," he says. "For example, I'm in a hotel and I want access now - where do I get it?

"We're seeing a huge increase in the number of hotspots going into hotels, conference centres, restaurants and so on. I think the drive is moving away from network operators and towards site owners."

This is the area Toshiba is targeting. Its £400 public wireless LAN hotspot needs an broadband connection - which is where Tosh's reseller channel comes in, says business development manager Gary Evans - and then connects into a BT Openzone-powered wireless ISP which takes care of authentication and support.

All the site owner has to do is sell £5 scratchcards valid for 24 hours access at any Tosh hotspot. Having bought the scratchcards from Toshiba at a third off, the site could discount them or even give them away as an incentive to get you to use their coffee shop instead of someone else's, say.

"People have been struggling to find a financially viable model - unless you have a high footfall site it's very difficult," says Evans. "Something that's managed and low cost makes it easier to have a go."

It might also encourage site owners to fix some of the awareness issues. As many Wi-Fi users will know, the big problem is not finding a hotspot, but finding someone there who has the faintest idea what you're talking about when you ask how to buy a wireless Internet connection.

Windows XP has relieved some of the connection difficulties, and multi-speed 802.11g/11b access points will make it less of an issue which network card you have - Paul Munnery says he expects 11g hotspots to replace 11b within six to nine months for exactly this reason. In any case, profitability depends on low infrastructure and billing costs, and that's where the site owners can score against the network operators.

If anyone comes out of this smelling of roses, it might be the founders of hotspot network Megabeam who sold out to Swisscom Eurospot a couple of months ago. Just in time, it would seem. ®

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