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Three Business Models for Public Access Wireless LANs

Three Business Models for Public Access Wireless LANs. Chris Marsden Annenberg School 19 November 2003 Draft for comments to: ctmarsden@yahoo.co.uk +44 777 926 0376. Case Studies in Property Rights in ‘Free Spectrum’. Academic authors have typically concentrated on:

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Three Business Models for Public Access Wireless LANs

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  1. Three Business Models for Public Access Wireless LANs Chris Marsden Annenberg School 19 November 2003 Draft for comments to: ctmarsden@yahoo.co.uk +44 777 926 0376

  2. Case Studies in Property Rights in ‘Free Spectrum’ • Academic authors have typically concentrated on: • Standards – Lehr & McKnight, Croxford & Marsden (2001) • Spectrum – Cave (2001) • Developing technology in peer networks and mesh networks – Shirkey, Benkler, Lessig (2001-2) Werbach, Sawhney, Sandvig (2003) • This comparative law and economics study is of market developments

  3. LANs and WANs • Wireless public access markets are dominated by licensed oligopolists • Typically voice-dominated – even Euro SMS and DoCoMo Japan have only 10-25% data revenues • WAP was crap, picture messaging stillborn • Hutchinson ‘3’ has 250,000 UK and 500,000 Italian subscribers – Vodafone launching mid-2004 • Verizon launched San Diego and DC October • Video phone and video download not killer applications - yet

  4. What’s different about LANs? • Short range high bandwidth 11Mb\s-54 Mb\s • Mass market for base stations – very cheap • Backhaul on ADSL not dedicated leased lines • dependent on country, e.g. 256Kb/s in Spain, 8Mb/s in Japan, S. Korea, urban Sweden • Security and roaming less advanced • Note holes in WEP but look at USC security! • Standards: single, global, unified, American • WiFi and WiFi5 with 802.11g interim • European standards dormant both HIPERLAN and HIPERLAN2 • Spectrum – messy but workable, and FREE

  5. Economic Case for WLANs • No spectrum cost • Minimal backhaul cost – varies with business case • Minimal base station cost – $400-700 • Seamless networking unnecessary • Data not voice – IP and hotspot use • Network security, roaming and interface IP-based – intelligent device • Device simply add-on to laptop/PDA – corporate user installed base

  6. Case Against WLANs • Extreme short range – in-building effectively • Sharing only 5Mb/s bandwidth in WiFi devices – 20 users maximum • 5Mb/s dependent on premises having multimegabit backhaul – leased line in US, EU • Security still poor for most users • Start-ups have no subscribers or billing • No real alternative to 3G or wire broadband – supplement model

  7. 3 Models:WiFi as 3G Complement • Parameters: • Partnership model • With host locations and 3G networks • Billing and subscriber management • SIM-GSM interoperability • Software integration • User interface • Hardware integration • Security and QoS – VoIP or video capable? • Backhaul costing and integration

  8. Boingo; Classic Aggregator • Earthlink philosophical foundation • Santa Monica: 1601 Cloverfield Boulevard • Start-up with strong VC support & Mitsui, Sprint, Infonet • T-Mobile has 3314 locations in US – 50 in UK! • Claims 5100 hotspots (1900 ‘live’): • 1700 US, 2500 UK, 500 other Europe • but UK agreement is not roaming, just location-finding • 468 California, 75 New York State • 53 NYC, 25 cafes, 19 hotels • 118 UK, 12 Ontario • 47 hotspot partners including Telecom Italia • Earthlink and Fiberlink ISP partners • 3 months free for Centrino laptop purchasers

  9. Boingo – Unique Characteristics • Earthlink model and financing secured • Very California-centric culture • Using network of WiFi enthusiasts for value proposition • Is Silicon Valley duplicable in Santa Monica? • Caffeine addiction and Starbucks focus • Invented here! • Intel and T-Mobile support • Aggregator has roaming but no genuine national let alone international network

  10. Boingo – Transferable Knowledge • Aggregation creates critical mass • First mover advantage • Very solid financial backing • Simplicity focus on end user • Software and systems integrator • Branding of network and hotspots • Boingo in a Box • Additional activities solely to pump-prime market • Verizon and T-Mobile using WiFi to stop DSL churn – so why pay $22 a month for Boingo?

  11. The Cloud – Unique Characteristics • Inspired Broadcast Networks uses gambling ‘fruit’ machine installed base from Leisure Link • 90,000 in 30,000 locations, 12,000 payphones • 3000 hotspots end-2003; 21,000 further orders by end-2006 • Pubs – are European cafes so different? • Critical mass of users creates scale economies • Wholesale unbranded network • Backhaul solution belongs to parent • Expansion into Europe (probably France) • Based on local network and presence

  12. The Cloud – Lessons for Others • Backhaul costs critical • Symbiotic relationship with telco – each is the other’s largest customer • Openzone is biggest retail customer • MyCloud orders 20,000 DSL lines for franchisees • Franchisees see WiFi as ‘add-on’ to basic xDSL need – updating pub quiz games • No branding – black box product • High QoS • Including VoIP to cannibalize 3G revenues • Arguably only BTOpenzone would allow this

  13. KTNespot – Unique Characteristics • World’s most advanced broadband users • Broadband must-have with universal appeal • Triple play with 3G mobile and xDSL • Note regulatory constraints in retail • Backhaul on incumbent parent network • VDSL at 8Mb/s available to consumer • National coverage declared at outset • First mover demolishes competition

  14. KTNespot – Lessons for Others • Leveraging dominance: • Triple play replicable for e.g. Orange, KPN, T-Mobile, DoCoMo in French, German, Dutch and Japanese markets • First mover already used by Swisscom Mobile and Austria Telekom • Focus on low consumer price point requires massive subscription • Difficulty of using terminal equipment holding back subscription

  15. 1. Partnership model -franchisees • Boingo – aggregator = 5100 locations • The Cloud – wholesale network = 20,000 projected • Korea Telecom – integrator = 25,000 • Backhaul – franchisee pays B + C, KT uses parent network • Role of fixed networks – BT as sponsor through BT wifi initiatives

  16. 1. Partnership model - backhaul • Backhaul is highest cost • Base stations ideally require dedicated 11 Mb/s • That in UK costs $50,000 per annum • In South Korea $50 per month • Typically 512Kb/s ADSL – dedicated business lines at $50-100 per month • Franchisee pays…

  17. 1. Partnership model - wireless • Boingo and Telecom Italia • The Cloud and BT, NWP Spectrum • Korea Telecom and regulators – SKMobile • Verizon-Vodafone and Orange – fence sitters • What’s the price point for mobile data?

  18. 2. Billing and subscriber management • Weroam – GSM-SIM authentication from Togewanet ‘clearing house’ • TeliaSonera-Swisscom deal – includes Megabeam UK, WLAN AG, Service Factory, Homerun. • Note – Nespot charges $9 a month above $27 DSL charge – 250,000subs

  19. 3. Software integration • Boingo interface – 24 hour promise • Systems integrator as primary business focus • The Cloud – using: • Service Factory (TeliaSonera interest) • Sun Microsystems – virtual WISP • Nespot – private network only

  20. 4. Hardware integration • Centrino co-operation with all 3 • ‘Boingo in a box’ • The Cloud – ‘My Cloud’

  21. 2004 – Market Developments • National networks in UK and Korea • Centrino chipsets industry standard with critical corporate user mass • 802.11g usable in East Asia and Canada • Requires 50Mb/s xDSL for optimal use • WiFi moving into PDAs • 3G roll-out – will they use hotspots? • Having built the ballpark, will they come?

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