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« WLAN Switch with a Twist: All APs on Same Channel | Main | Fairer Debate over Minneapolis Muni Plans »

April 25, 2005

Needleman Argues for Free, But Commercially Sensible, Wi-Fi

Long-time tech report Rafe Needleman editorializes in favor of sensibly free Wi-Fi: He's not asking for a gift, but rather describes a set of strategies in which more free Wi-Fi could be made available to travelers and the public, and how to convince hospitality operators like hotels to include Wi-Fi in their amenities budget so that it's just plain free.

I'm not so convinced that Wi-Fi needs to be free everywhere: rather, I would argue that roaming needs to be universal with a single login and that pricing needs to drop to the natural bottom, which is about $20 per month. When you can get consistent, reliable, supported service everywhere you go as a business traveler for $20 per month it's worth the price. When you have to traverse several networks and a melange of free and fee networks all of which offer a differ set of costs and promises for availability, it's not worth the price. Free can cost you money if you can't use it and there's no promise you can.

In fact, I still believe that some locations may offer both free and fee usage: for free, you get bandwidth limits, limits by service, time limits, and no support. For fee, you get full bandwidth, no service limits, and full tech support, plus secure login over 802.1X. Having two separate network names would aid this, of course: "Use Us Free" and "Use Us Fee."

Rafe notes that municipalities may provide Wi-Fi soon, but I'd caution him to believe that it'll be free. Most of the plans--and all of the sensible ones--that would roll out metropolitan Wi-Fi involve charging end users in homes and businesses but offering some or extensive free hotspot service in parks, city buildings, libraries, downtown areas, and other public places.


While I agree that there may be some space for free and fee over the short term, I'm very curious how you come up with the $20/month figure as the "natural bottom." My sense is that it's a much, much lower number -- more along the lines of SBC's $2/month. $20/month only attracts a very small number of users who (a) travel a ton and (b) need constant internet access. However, without it being ubiquitous or mobile, it's hard to justify the $20/month (almost the price of a home DSL connection these days). However, as a $2 add on, it's a much easier justification.

The increasingly widespread nature of free WiFi will continue to push the "natural bottom" price of fee-based WiFi down. It's basic economics -- but if you want to charge against free, then you have to have something that people value. The suggestion is that the value is in ubiquitous coverage, good security and things like that... but it's not at all clear that enough people are actually willing to shell out $20/month for that. In fact, the evidence seems to suggest otherwise. That price is barely sustainable.

$20 per month seems to be the bottom of the market now. $2 per month represents SBC's interest in reducing churn on DSL and having captive customers that they already bill. I wouldn't be surprised if $2 a month by reducing churn by even 20 or 30 percent for those customers produces enough revenue to cover the cost of their Wi-Fi network!

My take on $20 per month is that you have to have universal roaming for that to be a sustainable rate on top of a cell or DSL/cable modem bill. If you could roam across 20,000 of the 25,000 or so U.S. hotspots now for $20 per month, you might pay it. But you can't. You'd need to pay about $70 to $100 per month to have unlimited access across all the networks that operate.

I agree. It would make a lot of sense for broadband ISPs (or cell carriers) to offer Wi-Fi roaming as an additional service. But the coverage area has to be pretty large. I don't like it when I'm paying $20 a month for access and then find myself in a location served by another provider, who wants some outrageous day fee for a few hours of access.

For corporate users, this is what iPass offers -- I use it to bypass TMobile logins in certain locations. But it's not a consumer solution.

The "natural bottom" Glenn talks about is the ballpark price for nationwide dialup access, which is in essence what public access wi-fi is destined to replace for laptop users, nothing more than a broadband pay phone for IP devices. I kind of disagree with Glenn about the tiers of service, it runs counter to Isenberg's Stupid Network concept, and counter to what is evolving on the web these days. You pay for IP transport to be either on or off and then subscribe to the application/web services you want from content or service providers separately. Speeds and feeds, baby. If you can bundle those (fixed, nomdadic, and mobile) together, you can make a go of it. If you want better service, you switch to a better provider.

I would also like to see the "evidence" (numbers, both locations and user metrics, please) that free is winning out. Basic economics works on the supply side too. For those of you that think wi-fi networks need no ongoing maintenance or user support, get a clue. There's a reason that AOL had so many subscribers at one time, and it was because they made the web easy to use for the mass market, and 95% of their user support calls were for the user's system problems that needed to be solved in order for the customer to use the network. Their numbers have declined because of broadband adoption and the web has become easier to use. I doubt that many of the folks that constitute that mass market read this or any other blog yet, but they are the folks that public wi-fi needs to cater to, and make easy and secure to use. That's also where sustainable revenue comes from too. The people that are in the blogosphere I think tend to forget that and make predictions assuming that the rest of the world is as computer -savvy as we are.

This is an embarassment to admit, but I pay T-mobile $20/month to have broadband access at Starbucks, Borders, and Kinkos, and I run my own paid Wi-Fi network(s). Its really the only reason I have T-mobile cell service too, because of the bundling, and the ubiquitous-enough-ness of the SBK trinity. To do the support and integration work that really pays the bills, I need to have reliable, fast access. If I have to drive a little down the road, it's not critical, but to work efficiently, I need more bandwidth than the nascent WWANs can give me right now. And I need the recognizeable logos to tell me where I can stop and get that reliable connection.

In New York City, many independent venues don't want Wi-Fi, period, whether fee or free, because it reduces table turn, and therefore revenue per square foot. I recently had one cafe owner ask to have a purely per minute wi-fi spot, prohibiting unlimited subscriptions. Plus, they want to make things complimentary with a purchase, insuring that revenue is brought in, rather than have a table lurker hanging around.

If there's no revenue for the builders in public wi-fi, either directly from the subscriber, or from the venue to the builder ( for maintenance and user support ), then the networks won't get built. Right now, the successful ones are those that are combining public wi-fi with part of the business infrastructure, like Wayport/McDonalds and T-Mobile/Starbucks. Hopefully, we will do the same with Wi-RAN on the Hampton Jitney.

It still comes down to supply and demand. In urban areas, where there's lots of choices, it will drive the price of access down. In rural areas, when you're the only game in town, or it's too inconvenient to drive to another spot that offers free wi-fi, you'll pay. If it follows the trajectory of the cellular voice networks, then the buildout will happen, especially if voice is successfully integrated to hotspots where the combo cell/wifi phone "just works". Voice is where the volume is. Not enough customers need mobile data yet.

What I want to know is how he plans so A. Secure this wireless connection, can't use WEP or DES, AES or whatnot unless you are going to publicly distribute the key, which would be pointless. I would also like to know more about this single "login" Is this like an RSA key signature login or is it username and password which would be rather ridiculous.

Economics has pretty much accepted the supply-demand pricing theory. The seller will price his goods at what the market will bear. Its also accepted that the lower the price, more and more consumers will buy. Consequently WISPs will price their services where they will make peak revenues.

Currently, and for the last year, the going rate with leading Wi-Fi providers seems to be $10.00 per day for a single connection and $30.00 per month with a contract and no other add-ons (T-Mobile, Wayport, Airpath...). Admittedly, there are combination packages such as the $20 per month T-Mobile and the $2 per month SBC loyalty plans. However, if the "Free" model were to truly be winning out, then the prices of these service offerings would be coming down due to the glut of free hotspots. Both Free and For Fee hotspots continue to be deployed and the prices have not changed.

Perhaps what is being overlooked by Glenn is that there are two market segments: For a fee and "free". Larger airports tend to sell Wi-Fi for a fee, smaller ones tend to follow the "free" model. Upscale coffee shops tend to sell Wi-Fi for a fee, less known coffee shops are more likely to give away Wi-Fi to attract customers. The same patterns seems to be repeated in Hotels, Airline Clubs, and other locations. Libraries are often free beacause their service of disseminating information is subsidized by the government. However, you can't get a cup of coffee or receive calls in a libary.

Free services don't have to offer Quality of Service (QoS), billing, roaming, customer care, maintenance, security... On the other hand, For Fee services have to. Business travellers are willing to pay for the extra services because their business depends on it.

Bargain hunters will put up with the lack of QoS, security ... because they mostly use their connection for casual Web browsing and personal use.

I see this same kind of market segmentation in Hotels with "free" continental breakfast, "free" local calls, or "free" HBO.

I forsee both market segments growing since there is a need for both services. But, I have a difficulty in believing that both business models can be operated in the same venue. This is because the two business models are inherently conflicting. For example, how do you effectively hold a free continental breakfast buffet and at the same time manage to sell a full price breakfast?

For about the last year I have been regularly adding at least 50 new locations a week, sometimes many more, to my Wi-Fi-FreeSpot Directory. I currently have over 5000 individual location listings.

Public libraries are adding free Wi-Fi access at a rapid rate and most do not require a library card for access.

Panera Bread leads the way in multiple ownership/franchised locations with free Wi-Fi but others are jumping in.

Many major Hotel/Motel chains have a free Wi-Fi roll-out in progress or completed. Not all have it available in guest rooms yet, but generally, all offer it in the lobby and other public areas. ( I do have reports that many signals are available from the parking lot. )

I rarely get a report of a location dropping free Wi-Fi or switching to fee based access. I do get reports of locations going out of business but it is not likely due to offering free Wi-Fi.

Yes, I know, it's not really free. There are costs associated with Free Wi-Fi but the providers of Free Wi-Fi are willing to absorb the costs ( they really aren't that high ) and thus make it free for the end user. It's a business decision they seem comfortable with, and it may not always be a bottom line driven decision. Others, like Hotels are likely to build it in to the price of a room but I can't imagine it would be noticable enough for someone to choose not to stay there. If it were noticable I imagine that travelers who don't need Free Wi-Fi would be complaining about a higher price based on something they weren't going to use. Not everybody watches the Free HBO.

Fee based locations do outnumber Free locations. So, free is not "winning out" but I don't think it needs too.

Unfortunately, there is little data available on number of users of free locations and not much available for fee based ones either.

Many of the people who have paid subscriptions are likely to be able to pass the cost on to their employer or write it off themselves, so a "natural bottom" (no implants allowed) may not be a relevant issue.

What it comes down to is that there are people who are most likely to look for Free Wi-Fi and there are others that are most likely to look for a fee based location. So what? To each their own.(Just as there are business owners who are more likely to offer it for free while others charge. So what?) Based on whatever their concerns or lack thereof may be, level of service, support, security, etc., they have a choice to pay or not to pay, and luckily there are plenty of both kinds of locations to choose from.

Yes Virginia ( and Arkansas and Wyoming ) there is free Wi-Fi.