Hotspots in the spotlight
Esat BT plans to be the leading provider of public wireless internet access in Ireland, according to Alan Hall (pictured), director of new business at BT Northern Ireland, with 300 hotspots in place by the end of March 2005 and ultimately 370 in the longer term. The company already has 50 such hotspots, branded under the name Openzone, on the island of Ireland.
Wireless internet access is the subject of much discussion at the moment. Some analysts see it as the 'Next Big Thing' while others question its long-term viability as a source of revenue. Several different business models exist from the pay model where the user pays the service provider to the value-added model where the hotspot provider such as a hotel or coffee shop provide the service free of charge in order to attract more business.
These and other models were addressed by Richard Dineen, research director at Ovum. While he agreed there was considerable hype surrounding the technology, he pointed out that the technology has many positive aspects including relatively low capital costs, no spectrum costs as it operates in the unlicensed 2.5GHz band and no Commission for Communications Regulation targets to meet for the same reason.
On the other hand, however, it suffers from fragmented markets, low awareness, poor coverage and limited roaming. Pricing is also variable, ranging from as low as US$13 per hour to as high as US$165 per hour.
Nevertheless, Dineen believes that ultimately the positives will outweigh the negatives and that the technology will deliver revenue. "There is no such thing as a bad hotspot," he said referring to the different business models. "Management experience will overcome in the end." However, he felt the strongest models were those similar to Openzone where the service provider – in this case Esat BT – installs and manages the infrastructure and then sells the service directly to the end user.
From the location provider point of view the costs are either shared with or shifted entirely to the service provider and revenue is shared. However, when pressed on the point that for some locations where they have to install the infrastructure anyway for their own business purposes, the cost of providing the additional hardware to allow free wireless access is marginal. While he accepted this point he contended that this approach had long-term problems in terms of scalability of bandwidth and network management as the levels of traffic grow.
According to Keelin Kavanagh, marketing manager of the Insomnia Coffee Company, this was the reason that her company decided to use Esat BT Openzone as opposed to doing it themselves. "We were looking for something to give customers a reason to come back," she said. However, she recognised that Insomnia's core business was coffee and not the internet and for that reason Esat BT was given the job.
But does internet access really add value in such an environment? After all, as Dineen pointed out, 85pc of sales in coffee shops such as Insomnia are takeaway. According to Kavanagh, most usage took place during off-peak hours when tables were mostly empty anyway. "Also we notice that people do drink more coffee while they use the service," she said.
Whatever the pros and cons of making wireless access available in small businesses, Esat BT believes that bars and cafes represent a major untapped market. To boost penetration into those locations, the company has launched Openzone-in-a-Box, a new €499.95 product that will be available before Christmas. The package will contain a wireless base station capable of delivering corporate-level connectivity, 60 scratch cards for sale to customers, signage to alert customers to the presence of the hotspot and instructions for installation.
According to Hall, Openzone-in-a-Box is a major step forward for wireless broadband access in Ireland. The package is similar to one already available in the UK but is carrier-agnostic and does not require an Esat BT DSL connection. In addition, the base station will offer additional functions such as virtual private network access and extra security.
Hall pointed out that the 370 Openzone hotspots he forecast for the island of Ireland were ones where Esat BT went in and installed the hardware from scratch. Openzone-in-a-Box, however, could boost the total number to over 500.
One major issue that could restrict the growth of wireless access is pricing. At the moment, Esat BT charges €10 for one hour of use spread over a 24 hours period or €24 for unlimited usage over 24 hours. There is also a subscription scheme whereby users get unlimited access for €120 per month. While this may suit some users, it makes the service very expensive for those who simply want to check their email and may only spend five minutes a day online. Joanna Bedward, head of BT Openzone product management, acknowledged that this could be a problem and said that the company was looking at alternative pricing structures.
By David Stewart