Wi-Fi Basics: Summary
In a very short time, Wi-Fi has emerged as a significant force in communications. Millions of private Wi-Fi networks have already been set up. Thousands of public Wi-Fi hot spots have sprung up almost overnight. Soon, Wi-Fi hot spots will exist wherever you go in well-populated areas. Devices with Wi-Fi radios are proliferating. Plummeting component costs promise to push Wi-Fi beyond laptops and PDAs into broad consumer electronics devices in the coming years.
The future for the embryonic Wi-Fi hot spot industry looks justifiably bright. However, there are several road blocks on the path to mass market adoption.
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Lack of ubiquity
As a result of the explosive popularity of Wi-Fi networks, there will be about 45,000 public hot spots worldwide by the end of 2003, according to Pyramid Research. Most of these are concentrated in hotels, airports and a few national retail and café chains. In contrast, according to Boingo™’s own market research, there are nearly two million potential hot spot locations in the US alone, broken down as follows:
212 conference centers
3,032 train stations
5,352 airports
53,500 hotels
72,720 business centers
202,600 gas stations
480,298 restaurants, bars and cafes
1,111,300 retail stores
Clearly, hot spot deployment is in its infancy. This translates into a significant opportunity for enterprising hot spot operators. It’s a land grab. However, so long as uncertainties about the economics and characteristics of the hot spot industry linger, significant investment capital will remain on the sidelines.
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Fragmentation
One poorly understood characteristic of the hot spot industry is fragmentation. As noted earlier, Wi-Fi has a range of 100-500 feet. This means that in the future, as you walk down the street past a café, a bookstore and then a hotel, you might encounter three different hot spots.
Like the early days of cellular and ATMs, there is a lack of unified roaming in Wi-Fi that holds back the industry. Far fewer people used ATM cards when they were only accepted at the issuing bank’s locations. Similarly, cellular adoption only took off when people could roam from area to area and were not required to change phones and providers.
Wi-Fi users today (lacking a solution like Boingo™) are forced to either maintain accounts with each of the hot spot operators they encounter in their travels or type in their credit card number each time they want to connect. As hot spots proliferate, so will fragmentation, compounding this problem. Until there is unified roaming across all hot spots, industry growth will be hampered.
Universal roaming is one of Boingo’s missions.
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Difficult user experience
Wi-Fi is invisible. Without signage or “sniffer” software like Boingo™’s (which requires turning on your computer) there’s no way to know a hot spot is present. To date the industry has placed insufficient attention on advertising hot spot availability. This is beginning to change, but much more needs to be done.
Even if a user is aware that a signal is present, without software like Boingo’s, actually getting connected is a complex ritual. Users are expected to know things like “SSIDs” (“Service Set Identifiers” – the technical identifying names given to individual Wi-Fi networks), how to turn on and off security settings and how to program often clunky configuration software on their laptops.
Fragmentation and the need for multiple accounts means users must remember multiple SSIDs for various HSOs, and must navigate different login screens at each HSO they encounter. (As the first company to make accessing hot spots easy, Boingo's system completely resolves this problem.)
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Lack of focus
Wi-Fi hot spots are going to be a big business, and one company can’t possibly provide all of the components necessary for success by itself. For starters, the short range of Wi-Fi networks means that, even with billions of dollars to spend, one company can’t build all of the hot spots necessary to meet the ubiquity demanded by customers.
Also, as was discovered in the wireline ISP space, it’s difficult to be successful both at building and operating networks and servicing and supporting end users. They are very different skills.
Wi-Fi is often compared to the cellular phone industry, however, it is more accurately compared to the ISP industry, which, like Wi-Fi, is build upon an unlicensed foundation, allowing literally thousands of competitors to enter the market. This creates very different conditions than those found in cellular, where licensed spectrum limits competition. This limited competition allows the cellular industry to be vertically integrated – the same company that owns the spectrum can afford to build and operate far-flung physical networks, and market to, support and bill end user customers. Through their purchase of spectrum licenses, cellular companies bought the ability to vertically integrate.
In Wi-Fi, no such spectrum protection exists, and as in the ISP space, anyone with a bit of capital and entrepreneurial ingenuity can compete in the service provider value chain. With this reality as a backdrop, vertical integration in Wi-Fi will be very difficult, if not impossible, to pull off. Thus, it is critical to understand how the distinct layers of the industry fit together so that Wi-Fi-related companies can focus their capital effectively. The segmentation pattern of the Wi-Fi industry is discussed in the following section.
Lack of control for carriers and ISPs
As users move from hot spot to hot spot, they will encounter many different providers and will be exposed to competing brands. Without the right solution, carriers and ISPs who hope to offer a Wi-Fi service to their customers have no way to uniformly brand and control their users’ experience.
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Summary
The hot spot industry faces five key challenges:
1. Lack of ubiquity
2. Fragmentation
3. A difficult user experience
4. Lack of focus
5. Lack of control for carriers
As can be seen from the following section, each of these challenges is being overcome.
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