Tacoma, Washington, has a tremendously ahead-of-its-time fiber optic link run as a utility by the city, but a hotspot experiment has ended due to concerns over security: The network tested out a hotspot at one location, but decided that for security reasons--and also, but less importantly, lack of projectable revenue--that they'd pull the plug.
As 802.1X and VPNs rise in availability and importance, it may be that security decisions can be wiped away. If you had a preponderance of Windows XP and Mac OS X 10.3 users, who have built-in VPN clients for both IPsec and PPTP as well as secured 802.1X/EAP, then perhaps you could build a business on the notion that you were offering 100-percent locally encrypted connections.
I've wondered why hotspots don't partner with a VPN ASP and simply provide a free account to monthly users or a $1 add-on to pay-as-you-go users to give them permanent (monthly) or disposable (pay-as-you-go) VPN accounts? (Boingo is the only service to offer VPN as just a part of their client.)