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« Pulver's Wireless Summit | Main | Boingo's Funding »

October 3, 2003

High Fees Ground Partnership

TechDirt analyzes email from Wayport stating that its partnership with Concourse for access in La Guardia and Minneapolis-St. Paul collapsed: This is the kind of growing pains one might expect, but it's still surprising. The relationship among the various parts in an airport Wi-Fi service operation is pretty complicated. Concourse Communications contracts with the airport for a long period, several years or even decades, as the company told me a few weeks ago. Concourse has the rights to run the infrastructure, but has to meet various obligations.

Concourse, in turn, needs to derive enough income from reselling access to the network. It charges Wayport (and a few other partners). Wayport itself resells access to aggregators. Lots of pieces, lots of middlemen, but only marginal returns.

Somewhere in this value chain, the amount of money Concourse needed and Wayport offered didn't mesh. It must have been a pretty tense situation given that Wayport outed the situation.

How does this affect Wayport? It reduces their value advantage from several airports to a handful. When I was researching the New York Times piece I wrote about Wayport a few weeks ago, I found out that Wayport's own contracts with its own airports (Seattle, San Jose, Oakland) are of relatively short duration or near expiration--though they can be renewed or extended.

Likewise, Concourse already dumped iPass from Minneapolis and now Wayport. Concourse has to have a reasonable partner through which to resell service. The Techdirt folks speculate that this might be a move that separate venues into premium locations where users get gouged and other venues that offer subscriptions.

Here's the flaw in that issue. Yes, Wi-Fi promotes the notion that broadband is better. But if captive venues gouge, then perhaps the rising 2.5G flavors topping 100 Kbps will become a reasonable alternative.

I keep saying that there's a set of dials for ubiquity, speed, and cost. You can twiddle them for various offerings. Cell data right now is ubiquitous, slow, and slightly expensive, but for some people, the ubiquity makes it worthwhile. Wi-Fi is hard to find, fast, and relatively cheap or even free. If you turn Wi-Fi into expensive and fast and cell data is moderately priced (relatively) and moderately speedy, well, people don't need broadband constantly.

The captive venue has an advantage over places where people have choice, but I suspect that the actual end user price of service hasn't even started to hit bottom in the hot spot market. Direct hot spot revenue is in a race for a marginal return, and will continue in that decline to compete against rising cell data offerings. Gougers will be routed around.


The WiFi needs to get its act together or it faces the real possibility that Verizon could skim a lot of the early adopters and even not-so-early-adopters if it rolls out 1xEV-DO. I've been using 1xEV-DO in the Washington, D.C. area and another wireless data consultant, Andy Seybold, has been using it in San Diego.

Our experiences are similar: 1xEV-DO is offering download speeds of 200K bps and above (granted, on a very lightly loaded network).

With a single "do it" command by the head of Verizon, the cellular operator could roll out 1xEV-DO in major markets around the country. You'll get one bill for wireless data and voice services.

Within a year, cellular operators will have EDGE that provides a slower experience than 1xEV-DO but could offer 70K bps, perhaps faster -- again, in cities across the U.S. No need to think about whether the Marriott or Hilton has WiFi. Cellular data will be everywhere (holes in coverage notwithstanding!).

The slow upload speeds of cellular data could be a problem, but lots of people probably will accept that in exchange for not having to walk or drive to a hotspot.

T-Mobile continues to believe it's the king of the hill and doesn't want to allow roaming unless it's absolutely forced to. But, even if T-Mobile signs roaming deals, there still aren't anywhere near enough hotspots to compete against cellular from a coverage standpoint.

Coverage isn't going to be as big a problem with cellular, but pricing will be. Pricing for unlimited data over 1xEV-DO will be high for a while. It remains to be seen how expensive EDGE will be. Also, will 1xEV-DO or EDGE be able to penetrate inside hotel meeting rooms and convention centers?

WiFi still will have an advantage deep inside buildings. But cellular operators already provide coverage and supplementary transmitters to cover convention centers. Airports generally aren't much of a problem -- lots of windows to allow cellular signals (unless the airport windows are able to block RF transmissions).

There is no one winner here, yet. But Verizon could be a tough competitor if it launches nationwide 1xEV-DO.

Somewhat defending Derek's post over at Techdirt... I think the two of you came to the same conclusion. Derek pointed out that if they try to gouge, then it will open up an opportunity for 3G providers - which is the same thing that you said.

So, basically we're all in agreement.

It just seems, from your post, that you're implying that Derek said the gouging would *work* - which we don't think it will.