Rejecting the "Cellular" Hotspot Model
July 07, 2004
Single Digits thinks success in the hotspot market means making venue owners a part of the equation rather than just passive location providers.
Everybody in the Wi-Fi hotspot industry thinks they have unique knowledge of how to make a buck at this game. Trouble is, few if any have proven it yet.
Single Digits, an 18-month-old hotspot software and services company that announced its "debut" recently, is no different. It does however have some intriguing ideas and, surprising for a debutante, a track record, which includes over 100 customer locations and a global presence.
Single Digits is looking to take on the Wayports and T-Mobiles of the hotspot world in the battle for the hearts and minds of business owners who possess prime locations. That includes the usual -- hotels and coffee shops -- but also marinas, RV parks and other verticals. In fact, the company has begun a "spotlight series" on what it calls unique summer venues, the first of which is DiMillo's Marina at Long Wharf in Portland, Maine.
The company rejects what CEO Frank Hayes calls the "cellular" model of Wi-Fi hotspot service, where a third-party provider uses business owners' premises as cell sites to offer a supposedly ubiquitous Wi-Fi service to end users for a monthly subscription fee. He figures 80 to 85 percent of hotspots have been built by companies using this model.
Instead, Single Digits is saying to business owners, do it yourself and we'll help you. Offer a Wi-Fi service that carries your brand, so you get the customer loyalty benefits. You decide on the look and feel of the service, and you can change it whenever you like. You get the revenues -- if any -- and you decide what to charge.
One Single Digits customer in Nantucket, a hotel with something of a captive market, is earning thousands a month in revenue from its Wi-Fi service, Hayes notes. For other hotels in more competitive situations, it may make more sense to provide the service as an amenity. The key is flexibility.
"We think we'll get some traction with this approach," Hayes says. "Our angle is that we're focused on the business owner. We're saying the business owner can create his own branded Wi-Fi commerce zone, and Single Digits provides a cost-effective solution for doing it."
The solution includes three key components:
- Single Digits' Triple-A (authentication, authorization, accounting), reconciliation and network monitoring software running on servers at its regional network operations centers (NOCs)
- 24/7 network monitoring
- Technical support for the business owner and Wi-Fi users.
The business owner pays a more or less fixed monthly fee for these services based on anticipated usage and can make changes to network configuration and service presentation "on a moment's notice."
This is not a complete solution, obviously. Single Digits markets exclusively through resellers that look after all the site surveying, engineering, hardware acquisition, Internet connectivity and implementation.
The company is hardware agnostic. All it needs is a gateway at the business owner's site to route traffic to one of its NOCs -- it has them in Arlington, Va.; Raleigh, N.C.; Dubai in the Middle East; Turkey; and soon in Auckland, New Zealand. The resellers decide which access points and gateway to use. Single Digits has worked with gear from Cisco, Enterasys, Colubris and others.The resellers also collect the monthly or annual fees from business owner customers. They keep in the neighborhood of 25% as a commission, passing the balance along to Single Digits. They also get all the revenue from systems implementation -- and most important, they control the customer relationship.
Single Digits has about 30 to 35 resellers already signed up and is actively recruiting more. It would like companies with Wi-Fi and networking experience, but more important is to find resellers with an existing customer base in key verticals.
Typical of the current resellers is Integrated Dealer Systems (IDS), a company that sells business applications into marinas and RV parks. IDS didn't have any specific Wi-Fi experience, but did have networking and data applications expertise, says Single Digits' director of marketing, Mike Emerton.
IDS was interested in Wi-Fi networking as an adjunct to its main business because it expects that many boats will soon be fitted with Wi-Fi-enabled computers. A marina with Wi-Fi infrastructure integrated with its IDS systems could use it to automatically register customers entering the marina over the air, Emerton says.
The notion of using Wi-Fi infrastructure to support both end-user access services and internal business applications is another key to Single Digits' approach. Hayes notes that marina, resort and conference center owners could also use the network to keep in touch with mobile employees on the property.
Several of the company's resellers are overseas. Hayes claims there was always a systematic plan to conquer the world, but Single Digits' selection of somewhat off-the-beaten-track international locations -- Dubai, Turkey, New Zealand -- suggests happenstance had more to do with it. One of the investors the company met when it went out last year looking for seed capital -- Single Digits eventually took about $400,000 -- had connections in Dubai in the Middle East. Dubai, it turns out, is a commercial hub in the region. The company now has a NOC there and dealers, including a major property owner that is getting set to announce a major deal involving "hundreds of properties."
Some of its partners are content to let Single Digits provide the software on an ASP (application service provider) basis. However, some, especially among the overseas partners, want to buy the software outright and offer a service similar to Single Digits', or even support the cellular model that the company is trying to get away from. A Turkish CLEC (Competitive Local Exchange Carrier) is one current example of the former.
Dubai is Single Digits' regional hub for the Middle East and Africa. The New Zealand operation will be the launching pad for Asia-Pacific, and the company will attack Europe from Turkey -- an odd route, perhaps, although Single Digits is also in the process of launching a UK presence.
Hayes admits that Europe has an even greater attachment to the cellular model of Wi-Fi service provision, but insists that even there, end users and business owners are dissatisfied with the approach.
The company is expecting to grow rapidly. "We anticipate that we'll be in more than 1,000 customer locations by the end of the year -- or into multiple thousands, depending on how well we do the job."
Single Digits expects to go out for another round of financing within the next two quarters, looking for between $3 and $5 million. For now, though, it's in no big rush.
"There is no immediate need," Hayes says. "We're doing a little better than predicted with revenues, so that gives us a bit of leeway."