Verizon Hotspots: The End of Costly Public Wi-Fi

By Ed Sutherland

June 03, 2003

A number of analysts say the move by the phone company to turn its payphones into free-to-the-public access points could be the death-knell for fee-based hotspots.

Wireless providers looking to profit from public Wi-Fi hotspots may have ordered an extra double mocha latte upon hearing of Verizon's plans to enter the free wireless broadband arena. Some analysts say the phone company's recent announcement that it will offer free public 802.11 access via New York City pay phones is the death of fee-based public hotspots while potentially placing the telecom giant in head-to-head competition with other Wi-Fi services.

Although Verizon has launched in Manhattan just 150 of an eventual 1,000 public payphones converted to Wi-Fi hotspots, analysts say the move will redefine hotspot customers and venues.

Verizon's announcement "kills the consumer Wi-Fi goose," according to Charles Golvin, a Forrester Research analyst. By offering Wi-Fi as part of their broadband service, Verizon is driving the price for consumers down to zero, forcing phone and cable companies to "forgo Wi-Fi access revenues to retain their competitive edge," says Golvin.

Golvin believes the current rag-tag group of companies attempting to eek out profits while serving up Wi-Fi connections to consumers over a cup of designer coffee or a slice of pizza will be replaced by AT&T and Sprint using a wholesaler like Cometa Networks to bundle Wi-Fi access with dial-up services for mobile employees.

If Verizon's HotSpots, costing $5,000 per modified payphone, extend beyond the street corner and into a Hyatt hotel or airport lounge there could be some costly conflicts as hotspot operators vie for the same Wi-Fi customers, according to Julie Ask, a Jupiter Research analyst (Jupiter Research is owned by Jupitermedia, the parent company of this site.)

Verizon, with little or no connection to the buildings hosting their phones, would have a distinct advantage over other operators who must split hotspot revenues with venues. For example, a large portion of T-Mobile's Wi-Fi revenue reportedly goes to Starbucks.

By using its own DSL infrastructure, Verizon would save even more. T-Mobile must pay for the T1 lines going into each of its hotspots.

How will hotspot operators react to such competition? While T-Mobile refused to comment, Wayport is already working with Verizon Wireless on reselling access to hotel and airport-based Wi-Fi networks.

Ask believes Verizon's Wi-Fi experiment won't cut into other operator's profits until the carrier takes the New York City trial nationwide. Then there are quality of service questions as such a service gains momentum and usage.

Amy Cravens, a senior analyst and hotspot guru for In-Stat/MDR sees predictions of Verizon's entry into the field as the death-knell for fee-based public Wi-Fi being only a statement of the inevitable. Cravens says cafes serving up wireless broadband are not profitable and are better suited as a free amenity -- like good lighting or air-conditioning.

Cravens says there are two types of hotspot users. The true business user is found in airports. Cafes tend to serve more on-the-road sales people, says Cravens. If Verizon's Wi-Fi venture expands, it would meet the needs of the core enterprise user, says Cravens.

In order for Verizon to expand the reach of its new free Wi-Fi service beyond Wall Street and the pin-stripe areas of Manhattan, it must first solve the problem of many phones not having the electrical connections to power a Wi-Fi transmitter. At the moment, Verizon is still in the early stages. The 150 company's payphones now Wi-Fi enabled cover just seven acres, or .005 percent of Manhattan's 14,210 acres.

"The Wi-Fi industry is so early in its deployment cycle that I am not sure where it's going to wind up," says Verizon president Larry Babbio.

802.11 Planet Conference Do you have questions for Verizon about their hotspots? Ask them yourself! They'll be one of the over 80 vendors on the exhibit floor when you join us at the 802.11 Planet Conference & Expo, June 25 - 27, 2003 at the World Trade Center Boston in Boston, MA.



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