Vienna: Hotspot City
February 25, 2003
North America may have pioneered the public access Wi-Fi hotspot, but the Europeans companies like metronet wireless are coming on hard to make it their own.
Pop quiz: Which city has the most Wi-Fi hotspots? Nope, it's not New York, and it's not San Francisco either, though they rank number two and three respectively. Give up? It's Vienna, Austria, with 136 hotspots -- the "world champion of wireless Internet."
This is according to metronet wireless, the company that supposedly put Vienna out in front in this unheralded hotspot derby. Metronet visited the Web sites of major hotspot network operators and hotspot location finders to compile its top 20 listing. (It's not clear whether it considered the Asia-Pacific region, a hotspot hotbed.)
Metronet's "championship" may not be terribly meaningful, especially given that the company won't say how many customers it has, how close it is to breaking even or how much it has invested to date. Still, its 136 hotspots in Vienna -- 250 total across Austria -- is a startling achievement for a small company launched little more than a year ago and funded at first entirely by its young partners.
More to the point, the company's business model and some of its marketing strategies deserve close examination by North American hotspot network operators looking for ways to turn a buck in this embryonic market. Metronet has some original ideas that seem to be working -- though, again, it's hard to tell how well.
Co-founder Mike Mcginn says the idea for the company came up over drinks with neighbor Stefan Poltnigg, an IT expert, in September 2001. Their own frustration at not being able to connect at high-speed to the Internet when on the road was part of the motivation for starting the business.
The two took their brain child to friends and associates and eventually put together a team with expertise in most of the areas they needed. Mcginn's background is building mobile networks. His wife is a PR professional. The team also includes a lawyer and other IT consultants. The partners were able to pony up all the start-up funding needed.
Metronet in quick order developed a business plan, wrote its own back-end and front-end software, built a network operations center using mainly Cisco equipment and launched operations on January 11, 2002 with 20 hotspots in traditional Viennese coffee shops -- where, as Mcginn says, "life and business happens."
The number of hotspots is up over 250 now and the company is still installing them at the rate of about 20 a month. It eventually expects to have 350 to 400 in Austria. They're in the usual mix of locations: cafes, hotels, conference centers and airports.
Metronet started off deploying Wi-Fi access points from Neue ELSA GmbH of Aachen, Germany. Now it uses OEM products manufactured for it in Taiwan. The capital investment in hardware for each hotspot is about $1,000, Mcginn says. The Internet connections range from 512 Kbps to 4 Mbps depending on the type of site and the amount of traffic.
"We change connection speed if the traffic and number of simultaneous users is growing at a hotspot," Mcginn notes.
The company departs from the North American norm in its relationships with hotspot site owners. Owners don't pay for hardware -- except in the cases of some hotels that want to extend coverage to additional areas of their properties. They also don't get any share of metronet's revenues, unless they sell prepaid cards, in which case they receive a retailer's margin.
What's in it for hotspot owners?
"We bring them the newest technology in their coffee shops or hotels, and they can concentrate on their businesses without having to worry about operating a system or having a big investment in it," Mcginn says.
The presence of the Wi-Fi hotspot enhances the property, he argues, because it attracts business people who typically consume more. "I don't ask them for a share of [the revenue from] the food and drinks the people using the WLAN consume," Mcginn points out.
This is not the typical relationship between hotspot owner and network operator in North America, but in metronet's network, both sides are satisfied with the arrangement, he says.Another metronet innovation is the pay-as-you-go prepaid service which is much like North American cellular prepaid services. Customers pay about $20 for two hours, but it's not continuous elapsed time as with most hotspot services here. Customers can use up the two hours in increments as small as a few seconds over a six-month period.
They either purchase a virtual prepaid card by doing a credit card or Web payment transaction using their cellular phone -- everybody has cell phones in Austria, Mcginn notes -- or they can buy a physical card at some sites from the service personnel there. T-Mobile mobile phone customers can send an SMS message to metronet to order the prepaid service. They receive the metronet PIN and password by return SMS and the fees are charged to their T-Mobile bill.
Metronet also offers monthly subscriptions of course -- about $13.50 a month plus 62 cents per megabyte or $18.50 plus 32 cents per megabyte.
Because of strong demand, metronet also introduced a discounted service for students. They pay about $6.50 per month plus 32 cents per MB.
"We have as many students as business customers," Mcginn says. "At first we thought business users would be our most important target group, but last summer we had a lot of requests for special student accounts."
Metronet is positioning the hotspot services against cellular SMS. It points out that Wi-Fi is of course faster than even GPRS, but it also makes the case that sending and receiving e-mail at a metronet hotspot is cheaper for text communications than using SMS over a GSM network.
The company is also offering an interesting wired-wireless service for the home-SOHO market. Customers order 64-Kbps ISDN or 512-Kbps ADSL service through metronet and pay about $250 for a Wi-Fi router which they use to extend high-speed wireless access throughout their premises. They can also use a Wi-Fi-equipped computer at any of metronet's public access sites.
The $42-per-month basic fee covers 1GB of download at home. Customers pay about 7 cents per MB over the 1GB at home and the standard 32 cents per megabyte when they're roaming at one of metronet's hotspots.
Metronet designed and wrote all the back-end software to enable this unique set of marketing/billing options. As with more and more hotspot operations, metronet users don't need special client software -- just a Wi-Fi card, ID and password. (Metronet also sells Wi-Fi cards from its Web site.)
Initially the company was attracting mostly prepaid customers, Mcginn says. "People were testing us. Now we have quite a good mix of prepaid and contract customers."
Metronet has been pretty much a bootstrap operation. The partners provided all the start-up funding. Last May, an Austrian venture capital firm, smartventures, approached the company and asked if it wanted additional funding.
"We said, 'Yes, of course.' They got 5.3 percent of the metronet shares," Mcginn says. "All the other owners are still our team members."
Metronet wouldn't say no to more outside funding -- it would help ratchet up its marketing. Most of the marketing so far has been through media relations. Over 600 articles about or mentioning the company appeared in Austrian newspapers and magazines in 2002, Mcginn says.
Metronet has also used direct marketing tools and done promotions in co-operation with hotspot partners and professional associations -- lawyers, IT consultants, PR people.
The guerilla marketing has paid off too. According to a survey by independent Austrian research firm marketagent.com Marktforschung GmbH, brand awareness for metronet sits at a respectable 6.4 percent. "Without big advertising campaigns," Mcginn notes.
Altogether, metronet's is an impressive achievement. Of course, anybody can spend a lot of money and make a lot of noise. We still don't know if or how quickly metronet is winning customers, or how quickly its business model can turn a profit. Stay tuned.