Is Seattle the center of the hotspot revolution or what? Pittsburgh firm Telerama launches national network's first outpost in Seattle: Nancy Gohring, the senior editor of Wi-Fi Networking News, examines why and how Telerama has launched its first non-Pittsburgh network in Seattle with 13 hotspots initially, planned to grow to 70 by year's end.

Seattle and its nearby cities house T-Mobile HotSpot and Starbucks, which collaborate in one of the world's largest single chain deployed networks. Cometa Networks chose Seattle as its first, and so far only, multi-venue deployment with 250 hotspots in several chains and upscale malls. AT&T Wireless is also headquartered here (for the moment). Seattle Wireless is one of the most active of the community wireless networking groups, as well.

I met with Doug Luce last week in one of the seven Caffe Ladro coffeeshops that are part of the initial network. Caffe Ladro is a well-regarded local business, one of the largest of the Seattle-only chains.

I had spoken to Luce extensively last November when Telerama first launched the hotspot division. Luce has moved his family to Seattle to spearhead the new venture's start here.

Part of Telerama's appeal to venues is that they're paying all of the costs and handling the support chain. Telerama can offer this, Luce said, because they've kept costs down all across the operation. In last November's interview, Luce said it cost $500 to unwire a hotspot. Now, it's down to $300.

Telerama also controls maintenance costs through what seems to be a unique method (or at least uniquely disclosed method) of testing a network's performance. In each store, they deploy a Linksys WAP11, an 802.11b access point which has almost no features but does offer some SNMP statistics for network monitoring. They also install a Unix-variant (BSD) computer running a Pentium II that has a USB Wi-Fi adapter attached. A Linksys signal booster designed for the WAP11 ensures quality reception around the venue.

That USB adapter can help them avoid service calls: they can test the local loop from WAP11 to client association to network connection using it. If the network tests out normally, they don't have to send someone out, but can reboot or rejigger the unit entirely remotely. If the local loop fails, then they have 100-percent certainty that the hardware has a problem. Luce says that the antennas are unscrewed from the access points more often than seems possible--a sort of low-tech/high-tech vandalism, even with the APs located typically far out of reach.

Telerama's low-cost approach to hotspot build-out is echoed in their virtual dial-up and DSL infrastructure. The company works with Covad for DSL installation for their customers, and they pay the wholesale rates for DSL when installed at their hotspot locations. (These rates are still quite high, Luce said. FCC and court decisions have allowed telcos to sell their own service top consumers below their wholesale rate to ISPs.) Dial-up is resold from Dial-Up USA.

The company tries to further keep costs down by using Internet Relay Chat (IRC) as a kind of live company intercom and support system. Customers are encouraged to use live chat to solve problems or ask questions, and company employees are constantly logged in--including Luce--to ask and answer questions of one another, provide status reports, and have ad hoc or formal meetings. This has allowed Luce to continue to be involved in the day-to-day operations of the Pittsburgh-based firm.

With costs this low, Telerama doesn't need to recover much from each hotspot to break even, as Nancy notes in her Seattle Times report. With 90 subscriptions already acquired with no marketing costs or even any announcement, and with each subscription contributing from $10 to $20 per month, Telerama is already seeing between $125 and $200 per month per hotspot. Of course, they have overhead to pay, capital expense to pay down, and their four current staffers (expanding to six) salaries to consider.

In Seattle, a town with a high rate of broadband use in the home already, the company has to overcome the no-cost model of the many, many free Wi-Fi coffeehouses already deployed, and the quality of several DSL providers in town, notably Speakeasy. Luce noted several times in our talk his admiration for Speakeasy's quality of service and interesting offerings, such as the ability of its customers to resell access to their broadband to neighbors and have Speakeasy collect and split the fee.

Luce feels that Telerama has proven in Pittsburgh that with enough hotspot locations in the right places, and a quality dial-up and DSL service, they can bring over users who want the whole package with a single company that they can turn to.

It's the opinion of this writer that the price for unlimited monthly Wi-Fi access will drop to something around $20 per month--just below the price charged by Telerama ($29.95 including dial-up) and Boingo Wireless ($21.95 in their initial 12 month subscription plan); T-Mobile charges $19.95 per month as an a one-year commitment add-on for T-Mobile cell users. (Telerama resells its service to Boingo and iPass).

At that price, the utility has to be relatively high but not superb for a customer to choose a paid plan over scattered free locations that they find convenient to them. By including dial-up or allowing a somewhat competitive DSL add-on to unlimited Wi-Fi, Telerama might be hitting that sweet spot.

It's easy to forget, too, that less than 25 percent of households nationally with Internet access have broadband; the rest have dial-up. Many students have dial-up subscriptions from Earthlink (over $20 per month) or local providers (about the same) because they have broadband at school or use free hotspots. Telerama's $9.95 per month rate for Wi-Fi and dial-up for students and non-profits is trying to court this market very strongly.

Judging by the crowd at the Caffe Ladro that Luce and I met in, and by the proliferation of laptops at all coffeeshops these days, there's no shortage of people interested in Wi-Fi access.

But the proliferation of free locations isn't a slowing trend. Luce told me as we sat down to talk that the Caffe Ladro baristsa told him that a nearby coffeeshop, just across the street, was complaining that Telerama's service was "interferring" with them. Luce fired up his laptop and found that the channel that Fremont Coffee Company was using was in fact the same as Telerama's. He switched the channel and rebooted the gateway.

It's this kind of easy cooperation that shows that Telerama has the Seattle attitude. But it's also the penetrating power of Wi-Fi that might dim the lights on their business model. Time will tell.