Report: Not all Wi-Fi venues will be profitable

May 29, 2003
May 29, 2003--Researcher says that subscriber enthusiasm must match that of providers in order for the venture to succeed.

Only some Wi-Fi hotspots will prove profitable, says the new report "Wi-Fi Hotspot Opportunities: Exploiting the New Phenomenon." The 122-page report from Forward Concepts (www.fwdconcepts.com) differentiates between and among the various venues and assesses their profit potentials, the researcher says.

According to the report, the "land-grab" frenzy will propel the U.S. hotspot market to grow by an estimated 46,000 new locations this year. Next year, on the other hand, will see a dramatic slowdown in new buildouts as the industry seeks to identify appropriate applications, content, and terminal designs. The report predicts that growth will return in 2005 and by 2007 there will be 530,000 hotspots in the U.S.

The report further predicts that in Europe almost 800,000 hotspots will be installed by 2007, while in Asia, by even the most pessimistic estimates, there will be more than 1 million hotspots by 2007. A more optimistic estimate places that figure close to 4 million.

The report estimates the mean for hotspots in the U.S. to be about 190 sessions per year, with a disproportionate share going to business hotels and major airports. In 2007, the report predicts some 4 billion sessions for the U.S. The U.S. usage revenue for 2007 is projected to be $8 billion, or about $15,000 per hotspot. At such usage levels, profitability for the industry as a whole is contingent upon the lowest possible infrastructure costs, a fact that will force telco incumbents to re-evaluate their business plans, the researcher says.

According to study author Daniel Sweeney, "The purpose of the report is not to contribute to the hype, but to examine as dispassionately as possible the real market potential. We see the emergence of hotspots as almost a textbook case of effective repurposing of technology, but a closer look reveals some troubling deficits in the market thus far.

"In most cases where repurposed technology has succeeded in a big way, such as the Internet, it has exhibited a strong grass-roots component in terms of the user base," Sweeney continues. "In hotspots to date, the grass-roots aspect of the phenomenon resides in the service providers themselves, which are often very small, single-location businesses linked in a franchise arrangement with a hotspot aggregator or platform developer. Unless hotspots inspire a similar degree of enthusiasm among subscribers, the same fate could befall the hotspot industry as befell e-commerce at the turn of the millennium, where similar vendor enthusiasm far outstripped market acceptance."

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