The Wall Street Journal's Lee Gomes misses the new paradigm by one day: I am a huge fan of Gomes, a regular columnist and reporter at the Journal, and his column today deals with how 3G cellular data and WiMax might replace the spotty nature of Wi-Fi hotspots. I don't disagree with his overall analysis that ubiquity might trump speed. He's also handicapping the players in this market, including Intel and Qualcomm.
Gomes concludes with this statement: As for people paying $50 or so a month to be able to access the Web wherever they are -- that's a different story. With a few exceptions like T-Mobile, the business of providing wireless connectivity has been a wasteland, akin to the online pet-food companies that sprang up during the Internet bubble. He notes that there may not be a demand for ubiquitous high-speed mobile connectivity.
This misses a key part of the hotspot value proposition, which SBC torpedoed today--that's why I say his column is a day off, and $48.01 short: the cost and complexity of figuring out how, when, and where to use Wi-Fi hotspots has clearly prevented widespread subscriber adoption by the target audience. SBC's new cost structure and pretty clear locations--UPS Stores and McDonald's--should demonstrate much more clearly whether there's a market for it when you eliminate price sensitivity. The lack of roaming at unmetered rates onto T-Mobile's network is surely another restrictive market characteristic that SBC could wind up breaking up.
Also, Gomes overstates the wasteland argument. While a few hundred million--not several billion--has been raised to fund hotspot firms, only MobileStar went bankrupt and only Cometa Networks shut down. MobileStar managed to sell its assets out of bankruptcy to T-Mobile. Cometa wound down its obligations. The rest of the industry is still standing and expanding, including STSN, Wayport, Surf and Sip (internationally), FatPort, TeliaSonera and the entire European market, T-Mobile, and so on.
It's hardly a wasteland when the number of hotspots is increasing by the thousands each month.
Revenue is still the question: it's extremely hard to get an answer to the question, "Is anyone making money?" Again, SBC should answer it. With its very low fixed costs to offer Wi-Fi as an add-on, their ability to gain and retain DSL customers, and then sell Cingular cell service as an add-on plus high-speed cell data (Cingular EDGE and AT&T Wireless EDGE and UMTS)--well, that should give us a definitive set of results. [link via Om Malik on Broadband]