Dealing with the "Wi-Fi as Amenity" Issue

By Gerry Blackwell

July 14, 2004

Companies like BT Syntegra are responding to the trends and pressures in the hotspot market -- such as free access in hotels and beyond -- by making 'own-branding' a bigger part of the business model.

A new trend in thinking about the Wi-Fi service market is emerging, a reaction against the prevailing business model exemplified by Wayport, T-Mobile and others.

That model, in which a service provider secures rights of way to business premises -- coffee shops, hotels, etc. -- and builds Wi-Fi cells to create a ubiquitous cellular-like footprint and service, has not been as successful as many hoped.

At least two vendor companies are now calling into question its value -- especially to hotspot site owners.

Recently we wrote about Single Digits, a hotspot software and services company pitching business-owner customers a turnkey solution based on the company's own back-end hotspot management software. Key to the Single Digits pitch is that the business owner brands the service, sets service pricing, if any, and, theoretically, reaps the customer loyalty and other benefits.

It is perhaps not coincidental that BT Syntegra, the $1-billion-a-year systems implementation and consulting arm of British Telecom, recently introduced its own one-stop hotspot package for hotel chains and other hospitality industry clients. Again, "own-branding" is a key part of the "new" business model being espoused.

The Syntegra service includes everything from initial business consulting, to network engineering, to implementation, to network monitoring and technical support. "The packaging of it is new," says Paul Harrison, the company's U.S.-based vice president of travel and leisure. "But we have been out doing one-off implementations in both hospitality and also in retail for some time."

Harrison says pricing of initial assessments by Syntegra to get a hotel chain to the point of deciding to go ahead with a major Wi-Fi initiative would cost "the reasonably small" amount of $25,000 to $50,000. Costs for implementation and management services vary all over the map depending on the size of implementation, types of services and quality of service delivered to guests.

The company claims to have 40,000 access points installed worldwide in 5,000 locations, the majority of them using Wi-Fi. It's clear, though, that only a handful are hotel customers. Most are in retail chains, mainly for internal applications, and most are not in North America.

Syntegra, which has 5,500 employees worldwide, is not huge in the United States, Harrison says. However, its Minneapolis network operations center (NOC) does provide application and network management services to "many" Fortune 500 companies.

"Those services typically include monitoring and making sure applications are up and running. It's no different for Wi-Fi. The key is being able to reach out over the network to make sure the technology is doing what's intended. We also have service technicians in the field who can go out and address any issues that come up."

The company uses "best of breed" technology and services -- from, among others, Cisco, Vivato, Vocera for voice over IP (VoIP), and Airpath Wireless for back-office software. In hotel implementations where the hotel is not charging for Wi-Fi service, Syntegra uses its own back-office software tools.

The company got interested in Wi-Fi service models in the hospitality industry when it was called in to "recertify" existing Wi-Fi services for a couple of hotel customers. They came in to assess and evaluate the services and recommend changes or improvements.

When they started looking at the market, Syntegra consultants were shocked to discover that 50 percent of the time Wi-Fi services at hotels, resorts and convention centers failed users. The reason is that the service providers -- mostly local and regional players, not the Wayports and T-Mobiles, Harrison concedes -- often don't do top-grade implementations and rarely provide adequate monitoring and technical support services afterwards. "They just walk away."

As Syntegra points out, with the prevailing business model, when the service works, the service provider -- whose brand is front and center -- gets the credit. When it fails, the hotel bears the brunt of customer displeasure.

Syntegra argues that hotels, especially the big chains, must take control of Wi-Fi services on their premises. First, they're missing out on the customer loyalty benefits. Second, and more important, there is a strong trend towards hotels having to offer Wi-Fi service for free, and that will change the economics of guest-room Wi-Fi services.

Syntegra learned recently that two major hotel chains -- Best Western and Microtel Inns & Suites -- will be offering free Wi-Fi service in all of their properties by the end of this year. "That puts a lot of pressure on other chains [because] once other chains offer it free, there will be intense pressure for everyone to follow suit," Harrison says.

When that happens, the various revenue sharing models in use by third-party service providers will go out the window. "Now it becomes a cost," Harrison points out. "So what do we do with this cost? The question is, how to create more than brand loyalty from it?"

To help pay for Wi-Fi services for guests, Syntegra is recommending hotels and chains look at ways to leverage the Wi-Fi infrastructure they build by using it for internal applications, and to provide customer services that could generate additional revenues.

"There are a lot of things they can do to take cost out of the system, to absorb the cost of providing the free service to customers," Harrison says.

The network could be used for internal communications, including VoIP wireless phones, reducing reliance on much more expensive cellular services. Hotels could provide wireless terminals for patrons to order meals, reducing the need for wait staff in casual dining rooms. They could also use it to track assets using Wi-Fi RFID technology, helping reduce assets shrinkage, or to provide wireless check-in services for smart card carrying regular customers.

Hotels can also use the Wi-Fi network to provide content services, Harrison says -- information on local activities, advertising from nearby businesses, content about other hotels in the chain -- or give guests the ability track travel plans or rent a car through an affiliate.

"Now they've got a private network," Harrison points out. "They can use it not only to increase brand loyalty but also to generate new revenues."

Multi-use wireless networks require much more careful design, implementation and managing, however -- which is why Syntegra thinks its offering will strike a chord. Security, for example, is a huge issue. Harrison cites recent Gartner findings suggesting that 70 percent of successful wireless LAN attacks are a result of network misconfiguration.

"Wi-Fi networks really have to be done right, which means you have to truly understand the DNA and inner workings of wireless," he says. The implication is that Syntegra does.

The Syntegra and Single Digits pitches are not entirely original or new. Wayport is offering similar services and deals in its Wi-Fi World program with the MacDonald's restaurant chain. Some smaller local and regional Wi-Fi service providers focused on the hospitality industry offer hotels the option of paying a single fee for a turnkey service which the hotel brands and controls in much the way these two companies are suggesting.

Some hotel chains -- Starwood, for example -- have been exploring the notion of using Wi-Fi infrastructure for internal applications for over two years.

Still, it's clear that Syntegra and Single Digits are responding to real trends and pressures in the market. If Syntegra is right that hotels will soon be offering Wi-Fi or high-speed Internet access of some kind as an amenity, then commercial hotspot providers like T-Mobile may indeed have to rethink their business models.

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