Wireless "hot" spots to become "mature market" - research

by Guy Kewney | posted on 12 December 2002

The idea that the wireless Internet provider business might be a slowing one is proposed, in all seriousness, by a research firm in America which has been watching this area for some time. Strangely, they don't seem to mean "the revenue base is collapsing," but that there aren't enough users.

Guy Kewney

Growth in 2002 was "stellar", according to American research firm In-Stat/MDR "with the world-wide footprint growing from under 2,000 locations to over 12,000 locations. The high-tech market research firm projects that, in most regions, hotspot deployment growth will continue to be steady in the coming year, however, in later years growth rates will decline, as the market becomes more mature."

The report summary, oddly, doesn't appear to cover the growth of "free" hotspots, of the sort mentioned here on this site a week ago.

It predicts that much of the growth in 2003 "will result from carriers and other large players entering the hotspot market." Analyst Amy Cravens expects several European providers to become more active in the hotspot market in 2003, and the providers in the Asia Pacific region will continue to demonstrate a high level of interest. "The North American market will be largely impacted by the realization of the Project Rainbow rumors, with the recent announcement of AT&T, IBM and Intel backed Cometa Networks," she predicts.

The American hotspot market is probably the most-mature wireless Internet network anywhere outside Scandinavia, where Telia is a major provider. Cravens found year 20002 growth to be disappointing, even though it was pretty rapid. "In 2002, the hotspot market experienced an evolution to more sophisticated solutions and services and is rapidly evolving on a variety of fronts, from enabling technologies to hotspot providers, to venue owners, and finally to end-users," she said.

But while deployment levels in 2002 "were higher than In-Stat/MDR anticipated at the onset of the year, they are significantly lower than what providers were predicting as of mid-year 2002," Cravens noted.

"Several prominent vendors introduced 'premise access equipment' specifically designed for the hotspot market, and the price points on these solutions are becoming more affordable for small venue deployments."

The problem, however, is that there are almost more hotspots than users. "Hotspot usage is currently very low, with some providers supporting a user-to-location ratio as low as 7 to 1. To develop this base to a sustainable level, business models must shift, price points must realign with user value perception, consistency of user experience must be promoted, and new marketing and promotional partnerships must be formed."

Again, though, the report is focused on hotspot provision where the funding of the Internet access is derived from fee-paying users. Billing, and back-end solutions and network monitoring platforms take up quite a lot of the $3,495 report's paper - but as Wialess has shown, there are commercial advantages to be gained from providing wireless Internet access free of charge, if it brings new customers in the door.

Cravens believes that in the future, in contrast to 2002 deployments, hotspot deployments "will be more focused on specific venues, notably airports, hotels, and convention centres." However, NewsWireless Net analysis points to a conflict here. Convention centre WiFi deployment is being increasingly seen as a necessary facility for high-tech exhibitions and conferences, rather than as a chargeable extra. If the centre can make extra money out of the conference organiser, they will; but it's not clear that delegates will want to pay for the service, unless it can be made much simpler.

The disappointments were by pay-per-spot entrepreneurs. "In the US, network aggregator Boingo initially expected between 2,000 and 5,000 locations by end of year, but as of November 2002 they had less than 1,000 locations in their portfolio. Even in Korea, which comprised the vast majority of the 2002 growth, target deployment levels were not met," reports Cravens.

To purchase this report, or for more information, please contact Courtney McEuen who can be reached by phone at +1 480.609.4533

Report Title: Hot, or Not: the Market Evolution of Hotspots as a Remote Connectivity Solution Service: MTU & Emerging Broadband Verticals

Report Number: IN020169MU

Publication Date: December 2002

Number of Pages: 105

Other details on the press release at In-Stat/MDR's web site.