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« News for 9/9/02 | Main | They Thought Cell Phones Were Silly, Too? »

September 10, 2002

Boingo Bounces, but Wired Breaks

Today's 802.11b Networking News is sponsored by FatPort's access point for the rest of us -- FatPoint


The above is a paid, sponsored link. Contact us for more information.

Wired-less magazine on Wi-Fi: The whole article is up, so I can comment in depth. Conceptually, the piece is flawed: as is the case with much technology/social journalism, the author and editors picked a poster child, Sky Dayton, and his company to a lesser extent, and made them the avatar for an industry. Dayton and Boingo are important components in the evolution of commercial hot spot service, but are one set of nexi. It's an important distinction: they're not the center, but they're at one center of many. Did this article want to be a profile of Sky Dayton and morph into a Wi-Fi piece?

Because they seize on Dayton as the avatar, the author feels compelled to run through a bunch of tired personal observations. Sky's an interesting fellow, I agree, but I don't really think knowing how he's dressed or his educational background helps me better understand the scope of the industry which is what most of the article is devoted to. Also, they put him in a suit (or he insisted?) for the cover and interior shot, so how does that relate to the extensive clothing comments? Mayan sandals? Whatever.

Let's go though the errors. Boingo sells Internet access via Wi-Fi: Not really. It sells access to Internet access, which is not the same thing in an article that's harping on the financial details. Dayton is betting...that they'll shell out $75 a month: Sloppy. Up to $75 per month. Because Boingo offers a predictable day rate, and an intermediate $30-odd per month plan, the $75 figure is a red herring.

MobileStar went bankrupt while putting access points--which can cost $4,000 each--in 550 Starbucks. Actually, MobileStar went bankrupt while building out Starbucks data network while telling investors that they'd have massive revenue from subscribers by the fall 2001. Starbucks's requirements forced the $4,000 cost (which I heard from MobileStar's CEO in Sept. 2001 was $2,500 per site), which was for the hot spot, not the less accurately referred to access points.

Bongo? What is this Bongo? Now we're in a Pink Panther movie. This whole I wandered around to two hotels and gave up going to a third and asked the front-desk staff about the service and they didn't know what it was thing. It's tired. There's a bigger story here that involves Wi-Fi and broadband in general that's not at a tangent to this overall picture if the author had gone beyond anecdote into research. The hotel industry has invested massively and been massively talked into building wireless broadband. But the problem that the writer saw in small could have been a good point in the piece: the front-desk staff, the chain customer service/reservations desk, and other people associated with hotels rarely have much information about the third-party services they offer. So far, according to analysts I've spoken with, hotels aren't making back the money on broadband. But they all feel it's inevitable because business travelers demand it and are making room-night decisions. You only need a handful of people every night switching to your hotel coupled with the access fees to make it a viable service.

Did the writer turn his laptop on in these hotels to see if Wi-Fi existed? No. Did he call the partners who run the Wi-Fi in these hotels to find out what the story is? No. He basically relies on the lack of information provided, even to the extent that he's told he can't log on and doesn't try. (Most of us are willing to slip into a hotel lobby or bar and check for Wi-Fi, aren't we?)

The list of Boingo's current sites lacks several obvious m-worker beacheads...no sign of Boingo at JFK, SFO, or O'Hare: I'm beginning to think the writer forgets Boingo's model here at this point, so intent on making them the flash poiint of the industry. Historical reasons dating back to 1999 and 2000 are why these airports aren't wireless, and add to that the airline slump and 9/11. (He redeems himself a bit later.)

The map in the print edition of Minneapolis-St. Paul fails to credit Concourse Communications. I figure the only reason they used this illustration is that they'd done an Infoporn showing hot spots throughout the US a few months ago, and Concourse was the only wISP willing to give that much detailed information. The caption fails to mention Concourse, but Dick Snyder is quoted in the article with an attribution that mentions the airport. (They have JFK, Newark, and LaGuardia's concession, not just JFK.)

...a recent InStat/MDR study estimates there won't be 40,000 public hot spots, total, worldwide, until 2006: Predictions of future hot spot locations are pure speculation. The industry is either going to bloom with massive cell telco investment, who will co-opt, expand, and seamlessly integrate with 2.5/3G, or hot spots will become a onesy-twosy situation without any national integration or presence. We won't have 40K hot spots in 2006, but a smaller number or a much, much higher number, like 500K or 1M. Anyone with knowledge of the industry and of telecom in general knows that it's not going to rise gradually, but bloom or explode. Many analysts will go on the record about that very fact.

The whole interlude about eCompanies seems misplaced to me, and again a function of turning Dayton and Boingo into the symbol of the industry instead of looking at a much wider variety of players and segments that are well-deployed and represent hundreds of millions in revenue, like IBM Global Services.

Later, we get into the whole San Francisco airport situation. This is where there's some good meat. I interviewed John Payne last year, and this part of the article finally gets into the issues of why we don't see more wireless access in airports: it's expensive and ITT directors (information technology and telecommunications) have been burned. Payne was burned twice, but others have been burned once or more, and now face a variety of burdens having to do with post-9/11 information needs and reduced budgets.

Some errors in this part: Aerzone bid an eye-popping $2 million for the rights to build a handful of Laptop Lane Wi-Fi kiosks: it wasn't eye-popping at the time. But the firm went bust before it ever installed a node: No, it ceased operations. It was a division of SoftNet, which had purchased Laptop Lanes from a Seattle-based company, and SoftNet pulled the plug frightened about the capital investment requirements when the markets were already drying up. I interviewed the CMO of Aerzone on a Friday in December; on Tuesday, the PR firm called to tell me the company was shut down. Not bankrupt.

...its assets were purchased by...Wayport: Not exactly. Wayport bought several Laptop Lanes locations, but had to renegoatiate a bit with airport authorities, as not all the agreements were assignable.

Criticism a bit later by Airpath and Wayport executives is wonderful, in that the writer got them on the record talking about the problems with the model to date, but we all know we're in the baby steps of this industry. 600 or 4,000 hot spots are really nothing, and Boingo can't succeed unless the infrastructure starts to ramp up dramatically and soon. Airpath and Wayport could fall by the wayside and it wouldn't make much difference if there were 40,000 other hot spots. Wayport has spent a lot of money over a lot of years without reaching profitability, and a recent press release indicated that they had had 1 million sessions over the company's lifetime: maybe several million in revenue from that entire span.

Then we get into Pass-One. Pass-One is an interesting idea, binding together a number of international players and one of the cell telephone world's fee settlements firms that handles payments across networks from users who roam. Wayport's CEO puts his neck out there, given that he only has a few hundred hot spots and all the partners together really have a fairly small footprint. He also makes what I think is a howler possible only from someone who hasn't engaged in software development: I can be in that [aggregator] business in 90 days; it's just a matter of writing the client software. I'm sure Microsoft would like the secret of that kind of software deployment that would allow reliable client connections on dozens of Wi-Fi chipsets and hardware configurations. Hey, wait, Microsoft did that themselves--it just took years and hundreds of people.

In mid-July rumors began to swirl about a wireless venture...codenamed Project Rainbow: Rumors? Mostly a single New York Times article that every company involved has seemed to deny or repudiate. It may be that such an effort is underway, but it's been way too quiet. Too much real-estate is involved, and too many wardrivers to let a network of the scale of that under discussion be deployed without anyone noticing.

Deutsch Telecomm recently purchased MobileStar...: It bought its assets out of bankruptcy after providing a bridge loan as one of the conditions. It walked away from the debt and shareholders. This happened in January, which might be recent but seems a long time ago.

I suppose I appear pretty vehement, but that's because there's a good article here that would explain and challenge the industry's assumptions and success, and the hot spot world's future. But this wasn't it.

Other News for 9/10/02

Linksys partners with Verizon: Linksys sent me a press release about an interesting DSL partnership with Verizon. Business customers of Verizon can get a rebate of up to $180 when they order DSL and purchase a Linksys EtherFast router (the BEFW11S4 which is a four port 10/100 Mbps switch with a separate WAN port and a bridge/router/wireless access point).

News.com on roaming from home: Standards discussions in the works, which most would welcome, but nothing substantive yet resulting.

Analyst report estimates death to single-venue hot spots; 128K hot spots by 2007: The analysis firm BWCS has issued a report that projects a count of 128,000 worldwide hot spots by 2007. Bzzt! I'm sorry, try again. If any of the current projects come to fruition, the worldwide number will exceed 100,000 within 6 to 8 months. If there are only 128K hot spots by 2007, the industry will have failed and it will be a mere curiosity instead of a major component and partner to cell telephone carriers' high-speed data services. The press release quotes the report's author as saying, "We have effectively seen the end of the standalone hotspot owner-operator business model, with a string of well-known W-ISPs selling out or switching the focus of their operations." Also a provably false statement: the cost of operating a small number of hot spots has dropped dramatically because of reduced equipment costs and the variety of in-a-box hot spot offerings from FatPort, Surf and Sip, Boingo Wireless, and others. Smaller regional outfits have a higher chance of understanding the local market and getting a variety of good venues hooked up while charging reasonable amounts of money to counter their less-capital-intensive deployments. You don't find regional or local wISPs spending $4,000 per outlet.

Belkin adds new wireless router: Veteran cabling/adapter company Belkin, now fully emerged into the wireless space with Bluetooth and Wi-Fi gear, offers up their new 11Mbps Wireless Cable/DSL Gateway Router (F5D6231-4). It has a 4-port 10/100 Mbps Ethernet switch, and supports a variety of gateway features, including DMZ (machine exposing), NAT, IPSec pass-through, and stateful packet inspection plus 128-bit WEP keys. Due out Nov. 1 with Windows drivers, and Mac support to follow, the list price is $150. The interesting part about this unit is a prefab setup wizard customized for ISP integration: when run, it should automatically configure your gateway for your ISP's particular setup.