Public WiFi - where is that going then

I have been involved with public WiFi for four or five years now, initially at BT and then The Cloud.  I have been on something of a personal crusade for some time to make something happen in WiFi that nobody else seems all that bothered about.  Public WiFi for a consumer mass market.

I came to the conclusion at BT that the real market for public WiFi was not a small niche of mobile business users (although that isn't exactly an insignificant opportunity), but the huge number of consumers that are getting WiFi devices and want the same broadband experience they get at home, everywhere.

Doesnt 3G do this?  Well yes and no.  For the business market it absolutely does.  You can't move without an offer for a 3G data card for your laptop for £10 a month, and data access from a mobile handset is much, much easier these days.  It used to be that cellular was too expensive.  Go back 2 years and if you used cellular you were in for something of a bill shock at the end of the month.  Unless you were a critical business user, your company wouldnt have been too keen on paying for that. 

And that is how the public WiFi business found a niche and got some legs.  Sure the access was a little expensive at £6 an hour, but you didnt have to have a contract, you used it whenever you liked with no special equipment and importantly you put it on your credit card and charged it to expenses later.  for the vast majority of users speed and performance didn't really come into it - it was just connectivity for getting that all important email and getting to a website.  3G would have done it perfectly well but the operators set the usability and financial bar too high.

Well that has changed.  You can get cheap easy to use 3G/HSDPA for buttons with no contract.  Business users still dont really need high bandwidth (or very rarely) just connectivity.  Cellular is cheap, easy and all importantly ubiquitous - no need to hunt for a hotspot.  So at this point exit commercial public WiFi hotspot companies.  In a business market your product is largely dead.

There are those that will tell you that cellular networks won't be able to service the demand in 18 months time.  Its fine now because the networks are empty, but in 18 months when there are lots of users doing lots of bandwidth hungry things the network will come to a standstill.  Absolute rubbish.  Network operators and their vendors dont just stand still.  They have a solid roadmap for new technology that will ensure bandwidth is available and backhaul upgrade paths to service it.  If a network operator is finally making money from mobile data you can be sure they will intend to continue doing so.

So trust me that the public WiFi hotspot operator that focuses mainly on the business market is going to have its throat cut.  It wont have any domestic customers very soon, and will exist to service inbound foreign visitors that don't have a 3G connection. Even then the price of international cellular data is going to tumble, either through operator price plans or legislation forced upon them.

So regardless of how many WiFi laptops get sold, that market is not going to grow, and may even shrink.  

So what about consumers?  Well they are an interesting bunch, and are becoming very mobile very fast.  Does 3G work for them?  Well yes in many instances it does. But their usage habits are somewhat different.

For starters they do need proper bandwidth.  They like doing the things they do at home on broadband; streming video, downloading music, sharing photos on social networking sites and email. 3G and HSDPA just doesn't quite cut it in these scenarios.  Well not yet anyway. But as sure as mobile operators will improve the network for business users, they will do the same for consumers if they make money and have stickier customers.

However consumer are used to broadband at home - actually they are used to WiFi broadband at home. Over 50% of broadband connections have WiFi.  People are used to it, they know they get good speeds and its easy.  Whats more they have a lot of devices that simply don't have a cellular capability.  

The number of Sony PSP's, Nintendo DS and iPod Touch's dwarfs the number of active business users on the move with WiFi.  People take these devices out and use them, a lot.  Those devices simply do not have cellular.  But they do play network games, web, email, music and video.

So for those custoemrs WiFi is the only option.  Just a pity the manufacturers haven't really got their act together to make it happen.

Also mobile handsets increasingly have WiFi.  And whilst many tariffs now have data bundled have you ever tried using BBC iPlayer over cellular - it isn't nice.  Having said that it will get better.

Netbooks will increasingly make the consuer more mobile as well.  Although it has to be said there is a high chance mobile opertors will pump at least half of these out with a mobile contract.  But I will stick my neck out and predict that netbooks will comfortably outsell desktop and laptop PC's in the consumer market very, very soon.

The main problem with consumers is they don't really like paying for their WiFi access.  they are price sensitive and 36 an hour is just not in the ball park.  So they way to get them using WiFi is some alternative business models.  The easisest is lowering the price.  In my experience £5 a month for umlimited use in a month all of a sudden makes consumers interested.

But deep down they have already paid for their broadband at home - why pay again?  Advertising holds part of the key.  Offer a customer a limited service in exchange for seeing some very targeted ads.  either in theor browser or get them to eatch a video advert first.  Not very revolutionary, its being done in the US at the moment with JiWire pushing the agenda.  The problem is it seems alittle too early for the advertisers.  WiFi doesn't have enough users to make the volumes worth while so its hard to get them excited.  That and the WiFi operators don't really get enough money.  That is only going to change if WiFi becomes a lot more widespread.  it can be used as a loss leader to pull people into the experience and get them to pay for more.  But the audience is a little too small.

But wasn't I just saying this is a huge potential market?  If so why is the audience too small?  Well because the device manufacturers have to get on board along with the locations and really push the proposition. If they push they concept that their device comes with the ability to get free surfing you might be onto a winner.  Some of them are thingking about it, but not getting over the line fast enough.  Or perhaps the WiFi operators are not doing enough to entice them.  They are hooked on high cost business users and do not want to axe their margins for this opportunity.  The result is they set the bar too high for the device manufacturers to want to get involved.

If they sat down and looked at the long term they might realise that it was their only hope, as the business market is fast running in the other direction.

The last business model is sponsorship.  this really does make sense if you get locations, device manufacturers and Internet services/content players together.  For example if you get Apple to promoteBBC iplayer is free at all Starbucks on the iPod Touch that is really interesting to a consumer.  If Nokia tell you that as you go through the train station int he morning you can get free music people will sit up and listen.

The device manufacturer can use its marketing budget and brand to promote, the content owner can pay a sponsorship fee to make their content free and the location can pay for a hotspot in their location.

The result is the device manufacturer has a USP and great content that shows off its capabilities on the move.  The content or service owner can get customers it might not have had (and be in a smaller pool of providers than the Internet as a whole) and make money off premium content or advertising.  The location gets people through the door to use it and it can sell them more coffee/train tickets/books etc.

Everybody wins, it galvanises a mass market and fuels more hotspot growth.  Bonza!

The problem is cellular.  On many devices they can make this happen all by themselves without the involvement of others.  this suits them down to the ground as they like to push their single brand experience.

So where am I headed with this?  Well the model above would have worked really well in the UK market 24 months ago.  Sadly now cellular has caught up in performance and price and the WiFi operators were too scared in the short term to make it happen.  They simply didn't have the balls to go at it properly. So the window is closing fast. WiMax is coming around the corner fast and cellular will be LTE before you know it.  WiFi in the UK market will be around for another 5 years, but will never make the mass market, it will feed off very small niches and its niches will shrink month on month.

So is it all doom and gloom? In the UK is doesn't look too clever.  But there are hundreds of countries out there with the right environment.  Where cellular is not very advanced, where broadband has not happened on a mass scale, but where there is demand for content.  There are some amazing markets just waiting for WiFi services to meet a demand no other technologies can cover for a long time.  This is the subject of my next blog - WiFi in India............