Hotspots in the Great White North

By Gerry Blackwell

March 06, 2003

In the first in a series of articles, we look at BOLDstreet, whose partnership with Toshiba is one of the many helping the Canadian hotspot industry take off. And it's about time.

Canadians have a reputation as conservative business people. Rarely first into a fray, they supposedly like to watch and wait and pick just the right moment to make their move.

Many Canadian businesses see it as a great advantage that they live next door to a nation of gung-ho, risk-loving entrepreneurs. They get to learn -- or so the optimistic theory goes -- from American mistakes.

All of which adds interest to the fact that the Wi-Fi hotspot business in Canada is suddenly starting to percolate.

A few entrepreneurs, such as Ignition Point Technologies with its FatPort subsidiary, made moves last year, and Canadian Starbucks locations have been among those turned on by T-Mobile. However, a rash of announcements in the last few months has signaled that the race is now on in earnest in Canada. In the first of this series of articles we take a look at one of the most recent entrants -- BOLDstreet Wireless Internet of Ottawa -- and its sometimes contrarian business strategies.

But BOLDstreet is just the latest. In December, Bell Canada, the ILEC in the country's two largest provinces, Ontario and Quebec, announced it was beginning a three-month free trial of its Bell AccessZone offering.

Bell has less than 20 hotspots and hotzones, mainly in transportation hubs -- including Union Station in Toronto and Air Canada frequent flyer lounges in Montreal, Toronto and Calgary airports. Many piggyback on Bell's existing pay phone infrastructure -- a first according to Bell.

Telus, the ILEC in the next two most populous provinces, Alberta and British Columbia in the west, announced late last year that it was investing just under $4 million in a Toronto hotspot company called Spotnik Mobile. Spotnik announced its launch this week.

Toshiba ISG, the Canadian subsidiary that sells Toshiba notebook computers, is following the lead of Toshiba America, launching a Toshiba Hotspot Solution program built around the company's wireless router units -- a standard access point and access gateway firmware designed to be connected to a cable or DSL line.

Toshiba Canada announced recently that it would sell the wireless routers to location owners for less than $200 and that its computer reseller/network operator partners would install them for less than $70. The company hopes to have 1,000 sites in Canada up and running by the end of 2003, says vice president of marketing Mary Ann Yule. One of Toshiba's first partners is BOLDstreet.

Co-founded by "Silicon Valley North" marketing veteran Tom Camps, the company's president and CEO, BOLDstreet only recently came out of stealth mode itself.

Camps and partner Chris Burchett, BOLDstreet's technical guru, formed the company last April, landed a substantial whack of venture capital money in June -- they won't say how much -- and had its first hotspot up and running by July.

Then it quietly built up a network of 11 sites before the end of 2002, mostly in pubs, restaurants and coffee shops -- though it also, interestingly, has one car wash and one video store.

Camps wanted video stores because he likes the idea of being able to browse for movie reviews on a Net-linked PDA while shopping for videos to rent. He also thinks car washes, lube shops and other odd-ball locations where people have to sit and wait may make sense as hotspot locations.

BOLDstreet is still offering service for free -- as most Canadian hotspot pioneers are -- partly to raise awareness and learn more about market dynamics, and partly because few users would pay anyway.

"Right now, at least in Canada, we don't' see the volume of users just yet that would make it very compelling to charge," Camps says. "But we'll be switching to pay mode very shortly."

In February of this year, the company took the wraps off, announcing its partnership with Lone Star Cafe, a small national chain of Texas-style steak houses. BOLDstreet has now added seven Lone Star sites to its network of hotspots -- in Ottawa, the Toronto area and Kingston, a mid-size city halfway in between.

That brings the grand total of BOLDstreet sites to 18. Only the most recent use the Toshiba wireless routers -- no doubt to take advantage of the low prices Toshiba is charging, and the marketing clout Toshiba can bring to bear through its network of corporate computer resellers.

Camps is cautious -- read, typically Canadian -- about giving away much of his future plans. He won't say how many sites he expects to have up and running by the end of the year.

"Everybody quotes a number on this," he acknowledges, "but I'm not going to do it. For one thing, it gives a lot away, but also I think a lot of those numbers are not founded in reality."

Expansion plans are not contingent on finding more funding, though, he insists. The money the company raised in June is plenty to build a viable network.

He will say that BOLDstreet is "absolutely a national play." Lone Star will give it a few more sites across the country, but it hopes to add other independent locations as well as other nationwide retail chains.

Camps also won't say what he expects to charge end users when he does go commercial. The market is too uncertain yet to make that kind of determination, he implies. He cites T-Mobile's recent announcement about reducing its rates as evidence of that.

He does say, however, that he thinks the typical approach by U.S.-based hotspot players -- charging ad hoc users for a fixed period at a single site -- is wrong headed.

"It doesn't speak to a reasonable value proposition for the customer -- who's typically not bolted to one location," Camps says. "And it goes against what the location owners want. The last thing they want is somebody sitting there all day over a cup of coffee because, 'By god, I paid for a day and I'm going to get a day!'"

He thinks the approach taken by metronet wireless, the Austrian company -- letting customers pay for a certain amount of time that they can use up at any site in as small increments of time as they want -- is probably the right way to go.

Although he won't go into much detail, Camps does provide some inkling of the company's business model. A key part is that it will charge sites like the Lone Star Cafes to install the Wi-Fi hotspots.

"The importance of having the location pay is that the only way they'll give adequate consideration to something is if they've paid for it," Camps says.

"I need to have buy-in from the location owners. I need their servers to be educated about the service so they can explain it to customers. If there are point of sale materials, they have to be kept restocked. And none of this will happen if they haven't bought into the business model."

Somewhat surprisingly, BOLDstreet won't necessarily offer location owners a split of revenues -- though it might to some. The pitch to location owners now is that the presence of the hotspot will bring new customers in and encourage them to return.

So what happens when every second restaurant on the street has a hotspot? Camps turns the question around: "Then every other restaurant will have to get [a hotspot] as well," he says.

Part of the aversion to building the business model around offering a revenue sharing to location owners is pure pragmatism.

"Look at what's happening in the U.S. where the model is to sell it on the notion that there's revenue for everybody," Camps says. "The reality is the revenue isn't there."

"If you're selling that as the value proposition, you're going to look like an idiot. Everybody's got big dollar signs in their eyes and then they get a cheque for $1.75. We have to be smarter about how we sell this."

BOLDstreet is typical of the Canadian approach. Call it tentative. But maybe entrepreneurs like Camps are right -- maybe that's the way to go until the hotspot waters clear a little.

In Part II: Comparing a couple of Vancouver hotspot providers.

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