Wi-Fi hotspots simply too expensive

No return on investment, German study shows

Wi-Fi hotspots will only meet the needs of small customer groups and for the majority of hotspots there will be little or no return of investment. So says the Scientific Institute for Communication Services or WIK, Germany’s leading research and advisory institute for communication services.

The institute expects a consolidation process within the next few years. More importantly, it warns that users find the tariffs of public Wi-Fi services - 5 to 10 euros per hour - simply too high.

Start ups, mobile network providers, ISPs and owners of busy public locations have started to offer Wi-Fi hotspot services in order to provide high-speed Internet access to the public. Since the related standard 802.11 has been implemented, the market penetration of hotspots is growing dynamically. At the beginning of the year more than 13,000 hotspots existed in the US, nearly 3,500 in the UK, 1,200 in Japan and 2,300 in Germany.

But companies offering Wi-Fi access in Germany are hardly breaking even, WIK says.

The institute believes that hotel chains and cafés will eventually offer hotspot services for free or at very low prices, while most start-up enterprises will abandon the market because of problems with billing, roaming, security and high transaction costs. WIK also believes there will be little or no competition from UMTS. UMTS provides ubiquity and mobility, which Wi-Fi hotspots cannot offer.

The WIK report is another indication that the deployment of hotspots is severely overhyped. Just last month Cometa Networks ceased to trade. That company was to build a wholesale network of 20,000 hotspots in the US, with financial backing from IBM, AT&T and Intel. ®

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