Real Estate Sharks Circle For Public Access WLAN
PWLAN providers may find themselves paying high fees, or bargaining away future revenues to premises owners, says Ovum's Richard Dineen.
5 Aug 2002
<looks like my Machiavellian plan (remember) to take over hot spots and control high speed data over wireless using WLAN's is the way to go!!>
Many of the companies eyeing the public access WLAN (PWLAN) opportunity are wireless carriers - note, for instance, the triumvirate at the heart of the Project Rainbow initiative (Verizon, Cingular and AT&T Wireless). Cellular operators feel, perhaps rightly, that they have many of the necessary ingredients to make the PWLAN business model succeed. After all, the little guys - MobileStar and Co. - have already done most of the dirty work (finding out what doesn't work, and paying the price) and now it's time to let the big boys play, right?
Cellular carriers are well known wireless brands and can bring great technical and financial resources to help kick-start the nascent PWLAN market. Furthermore, those tricky 'missing pieces' of the PWLAN jigsaw - billing and roaming - are both familiar territory to cellcos. Surely, public access WLAN is there for their taking?
Well, not necessarily. PWLAN service providers - cellcos and others - may find themselves paying high fees, or bargaining away a sizeable chunk of future revenues to premises owners.
Real estate is the real battle ground
The addressable market for WLAN services is comparatively small - limited by user segment (mainly business executives), application (mainly corporate data) and access device (mainly laptops). The users comprising this select segment are plentiful enough and extremely valuable, but they are not all pervasive. Beyond the office, they tend to stick to particular locations: conference centres, premier hotels and along the main transport routes. Combined with the highly restricted coverage area afforded by short-range radio systems like WLAN, this makes location absolutely critical to a successful PWLAN hotspot deployment strategy.
Some spots are hotter than others
In the early stages of market development, with PWLAN services limited to a cadre of highly mobile executives with laptops, the strength of the business case for each hotspot deployment will be proportional to the density of these users in that location. Airports are 'top of the hotspots,' followed by conference centres/premier hotels, then railway and motorway service stations, then coffee shops - you get the idea.
Once you move beyond the cosy environment of the airport, however, populated with laptop-laden, cash-rich, time-poor business users just screaming out for wireless access to that PowerPoint file they forgot to load onto the C Drive, the PWLAN business model begins to look increasingly shaky. Be honest: how many railway stations would you feel comfortable using a $3000 laptop in? With no offence to the denizens of any of these places, but the station platforms of London Kings Cross, Zurich or Nice are not exactly the most salubrious places in which to break out that nice shiny new Titanium PowerBook G4. Also, how long do people actually wait in railway stations? There's no check-in procedure and, besides, where is the seating?
With this in mind, as a PWLAN service provider, is it really worth deploying a hotspot in a railway station? Ditto a coffee shop, motorway services, shopping mall and so forth - remember you're paying for that T1/E1 line to the Internet whether people use it or not.
Where the business case is strong, landlords may be very demanding
Users go to specific places for specific things. I go to the airport for the primary purpose of flying, I go to a hotel to sleep when I'm away from home, and so forth. WLAN access in these places is very much secondary to the main business at hand. This gives huge bargaining power to the premises owner who will feel that they are contributing a great deal to the PWLAN service provider's ability to earn money from that location.
Cellular operators will already be familiar with the difficulty and expense of siting masts to serve areas which experience high levels of human traffic. Those shopping mall owners aren't fools: they know they're serving up thousands of mobile phone users on a plate, and they'll make the operators pay for it. Similarly, hotels have a reputation for imposing punitive site-rents to accommodate cellular base stations - in part, to compensate them for lost revenues from their once-lucrative in-room fixed telephony services.
The general awareness of PWLAN - especially its revenue potential - is much lower than cellular, for the moment, and premises owners currently have few grounds on which to make exorbitant demands for siting PWLAN access points. This is set to change, however, as WLAN connectivity is extended to a wider range of devices and PWLAN's market attractiveness increases.
As this happens, the payment demands of premises owners are also likely to increase commensurately. By over-playing their hand, however, premises owners threaten the very establishment of the market they are hoping to benefit from.
Multiple WLAN service providers in the same building?
It is envisaged that major hotspot locations will typically support multiple PWLAN service providers. The option to do this, however, is limited by 802.11x technology's susceptibility to co-channel interference from neighbouring 802.11x WLANs which seriously degrades service quality. PWLAN service providers may be able to use adaptive antennas to limit the overlap between cohabiting WLAN systems, or sometimes it may even be possible to co-ordinate channel usage between adjacent WLANs, but this is likely to be the exception rather than the rule. In general PWLAN deployments will have to be kept apart.
The premises owner who will have the final say on 'who gets to put what, where' will typically control the numbers and exact siting of hotspots. And, premises owners being what they are, they are likely to have a good idea of the value of each bit of their property. PWLAN service providers should be prepared for a swim with the real estate sharks.
Richard Dineen is research director for Wireless and analyst and consulting firm Ovum.
For further information see Ovum's advisory services: Mobile@Ovum and Access@Ovum or email: info@ovum.com and visit www.ovum.com. |
