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Wayport wins McDonald's hotspot gig

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McDonald's has finally selected its partner for the nationwide roll-out of hotspots in the USA, picking on Wayport. The choice is logical since, of the three contenders involved in trials, it is the most experienced and well established, but it has sparked off a major realignment among the major players in the US public WLAN market, with one of the failed contenders, Toshiba, exiting the business and transferring its hotspots to the other disappointed party, Cometa.

The decision illustrates the consolidation that is sure to affect the US hotspot industry, in which hundreds of players raced to get a toehold, only to face low initial usage rates, poor cashflow and uncertain business models.

The only clear successes so far have been the enterprise-focused aggregators such as iPass and GRIC, which do not have the expense of building a network and have a clear target market; and T-Mobile, which has the largest network, a clear strategy to bolster cellular business with an early start in Wi-Fi, and some highly branded location partners. On the strength of a good track record in key locations such as airports, and the new McDonald's deal, Wayport now qualifies to join that list.

Tough going

For others, the going will be tough. Toshiba entered the market rather late and without a coherent strategy or any major location partners, though its hotspot in a box offering for smaller partners was innovative and much emulated. But the main interest in Wi-Fi for a major player in notebook PCs must be encouraging usage of WLANs, and therefore purchases of high margin wireless laptops, rather than seeking to make a business out of the hotspots themselves. To that end, Toshiba is signing a joint marketing agreement with Cometa to cross-promote its note-books and its partner's hotspots.

Its substantial though scattered US network will be merged into Cometa's system - a welcome addition of up to 350 locations to that company's offering, which is so far failing to meet its ambitious roll-out target of 15,000 locations by the start of 2005. (After the loss of its McDonald's hotspots, it will have only about 100 outlets, though it will add 500 through its recent deal with bookstore chain Barnes & Noble and aims for a total of 800 by September, excluding the Toshiba locations). Cometa will decide which of the Toshiba SurfHere spots to adopt over the coming weeks.

Wayport's victory

As for the victor, Wayport partnered the fast food giant in its hotspot trials in the San Franciso Bay area, Portland, Oregon, Boise, Idaho and Raleigh, North Carolina. It will install Wi-Fi in 6,000 McDonald's outlets over the next year and, eventually, in 13,000 restaurants. Pricing will be set at $2.95 for two hours of access - significantly lower than the $6 per hour in T-Mobile/ Starbucks outlets - and of course the locations will be available to subscribers to Wayport's own service, which now numbers about 800 locations. Wayport will replace the hotspots of its rivals in the near future - Cometa ran the New York area trial, and Toshiba those in Chicago and the Midwest.

Wayport will use its own brand alongside that of McDonald's, as T-Mobile does in Starbucks. In some deals, such as those with SBC and with the UPS Store, Wayport offers a managed service under the customer's brand only and resells this to aggregators. McDonald's is also rolling out Wi-Fi in 25 other countries with a variety of partners, including BT Openzone in the UK. As well as generating revenue and encouraging customers to stay longer and buy more food, the Wi-Fi systems will be used to process credit and debit card transactions and to distribute material such as staff training videos to in-store computers.

As T-Mobile has done in Starbucks, Wayport plans to start offering music and video downloads in the hamburger shops. Wayport CEO Dave Vucina also said that the McDonald's deal will pave the way for a new business model for roaming partners that will encourage more companies to roam with Wayport. He was only dropping hints, with few details, but said: "One of the things you see when we release our model, is that you'll see some new direction and some new ways to package the service."

Vucina said that by the end of the year, Wayport will install up to 9,000 new locations, the bulk of them in McDonald's and UPS stores.

© Copyright 2004 Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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