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GRANT BUCKLER

Tuesday, November 11, 2003

When Phil Fenton meets a client for lunch, he often chooses the Lone Star Café chain, and it's not just because of the fajitas.

Mr. Fenton, information technology manager and sales engineer at Roadpost Inc., a communications services dealer in Mississauga, likes using his notebook computer to check e-mail or resolve issues that arise during the meeting. He can do that at Lone Star restaurants using wireless Internet access hot spots provided by Ottawa-based Boldstreet Inc.

Hot spots use 802.11b wireless networking, commonly called WiFi. Any computer with a WiFi adapter can connect from within about 100 metres.

Hot spots are appearing in hotels, restaurants, coffee shops and airports. International Data Corp. (Canada) Ltd. says there are close to 450 commercial hot spots in Canada today, operated by about 10 service providers. It projects there will be around 1,200 by the end of 2004.

Mr. Fenton also uses Bell Canada's hot spots in Air Canada Maple Leaf lounges. But he isn't paying for access because Boldstreet, Bell and some other hot spot providers haven't started charging yet, though others do.

Mr. Fenton says his hot spot use could drop off sharply if access costs much. "It wouldn't be worth a lot," he says.

Even with many hot spots operating free, "there has not been a tremendous uptake in utilization," says Michael Rozender, an Oakville, Ont.-based consultant.

Given that, can hot spots pay?

So far, the numbers don't look all that promising. Boldstreet president Tom Camps says traffic on his hot spots is growing but can't yet sustain the business.

Vancouver-based FatPort Corp., which charges for access -- $4.95 an hour, $9.95 for 24 hours or $299.95 a year, with other options in between -- found that, on one day at the end of October, network statistics showed 19 active sessions on FatPort's 85 hot spots and about $475 in revenue in the previous 24 hours, says Fatport chief executive officer Sean O'Mahony.

"If there aren't some significant changes . . . it's probably not going to be the spectacular success that some people would have us believe," says Mark Quigley, research director at Yankee Group Canada.

Cost is one issue. Boldstreet plans to charge $10 for unlimited access within a 24-hour period. Rates for hot spots in Marriott International Inc. hotels are similar. Plans allowing unlimited access by the month, offered by companies such as FatPort and Toronto-based Spotnik Mobile Inc., typically cost $30 to $50. "We don't think a whole lot of people are going to pay another $30 or $40 a month," says Lawrence Surtees, director of telecom research at IDC Canada. Many will prefer one-time fees when they need the services, Mr. Surtees says.

But that won't sit well with operators, who obviously would prefer the steady revenue of monthly fees.

One answer for the providers may be to sell hot spots as add-ons to other services such as residential Internet access. This isn't happening yet, but Mr. Quigley observes that major phone companies Bell Canada, a unit of Montreal-based BCE Inc., and Telus Corp., which offer dial-up and high-speed Internet access, are experimenting with hot spots -- Bell Canada through its AccessZone trials in train stations, airports and a few other locations, and Telus through an alliance with Spotnik. The next move could be to offer hot spot access as a low-priced option to Internet subscribers.

Excilan SA, based in Luxembourg, runs a service that lets mobile telephone users charge hot spot use in most European countries and in the Vancouver area to mobile phone bills. Six European mobile phone carriers in France, Austria, Britain, Switzerland and Iceland currently offer it, says Lodewijk Cornelis, Excilan's chief executive officer. More than 2,300 hot spots in Europe support it.

Another option: hot spot operators could limit or eliminate access charges by finding revenue elsewhere. For instance, businesses such as the Lone Star Café pay Boldstreet an initial fee to install hot spots on their premises but don't share in access charges that Boldstreet collects. Mr. Camps says the restaurants and other purveyors benefit from increased business from customers like Mr. Fenton.

Another option, Mr. Rozender says, is to add advertising to the mix. For instance, a hot spot user might see a startup screen including a special-offer ad at the establishment providing access. Some providers are experimenting with this, he says.

The next essential ingredient for hot spot success: roaming. Hot spots need what the cellular phone business has had for years: roaming agreements that let a customer use whatever network is available and pay one bill. Roaming is coming. In late August, the Canadian Wireless Telecommunications Association (CWTA) announced that Bell Mobility Inc., Microcell Solutions Inc., Rogers Communications Inc.'s Rogers AT&T Wireless unit and Telus are co-operating on hot spot roaming standards. They hope to introduce roaming by early 2004, says Peter Barnes, CWTA president, and other operators, like BoldStreet, FatPort and Spotnik, will be able to join in.

Roaming will give users access to more hot spots, but so will continued deployment. Murray McCaig, CEO of Spotnik Mobile, believes the industry is nearing the "critical mass" of hot spots to be attractive to business users.

Mr. Rozender thinks hot spots' real future might lie in a new version of WiFi -- 802.16 or WiMax -- that will extend wireless devices' range to as much as 50 kilometres. The first commercial WiMax products are expected late next year. Mr. Rozender says this could extend the reach of hot spots to almost-anywhere access in urban areas.

Roaming is part of the broader issue of ease of use. Mr. Rozender says signing on to some hot spot services remains troublesome. Installing and setting up the WiFi card that allows a notebook to use hot spots can also be tricky.

Increased hot spot usage will also depend on more people having wireless-networking hardware in their computers. Laptop owners can add WiFi adapters for less than $100. Hot spots will have to be quite widespread before many people will install one for that purpose. "Like a lot of new technology adoption, there's a chicken-and-egg question," Mr. Surtees says.

However, two other factors will help. One is the increasing use of WiFi in wireless home and office setups. "You'll have it at work, you'll buy it for home and you'll demand it on the road," says Doug Cooper, country manager for Intel of Canada Ltd.

The other is Intel's Centrino chip set for notebook computers, which has WiFi capability built in. This means a growing number of notebooks will come with hot spot hardware as standard equipment. By year-end, Mr. Cooper says, about 20 per cent of all new laptops will have Centrino chips.

Even when all these issues are resolved, it will take time for people to discover their need for hot spots. "We need to get demand out there," Mr. Camps says.

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