August 16, 2004Wi-Fi ProjectionsWow – wi-fi! A rapidly emerging market offers many opportunities for prepaid providers by: Bridget Mintz Testa For prepaid providers, precise future hot spot numbers are far less important than wi-fi's potential opportunities. FTS Wireless and WiFiMinutes, two pioneering firms with very different prepaid wi-fi business models, are exploring those opportunities now. Leveraging access FTS Wireless distributes a wide range of mobile wireless products through six retail stores in Florida's rapidly growing Tampa/St. Petersburg area; one store in Pennsylvania, where the company is headquartered; and one kiosk that is located in an indoor-outdoor market in Oldsmar, Fla. Besides selling prepaid phone minutes in its stores, FTS Wireless also wholesales prepaid services to c-stores and other retailers. Each store is being equipped with wi-fi access points. To expand coverage, CEO Scott Gallagher says, "We have joined the national AirRover network, which lets us sign up with other hot spots. It lets business users from anywhere get wi-fi access." Hourly, daily, weekly, monthly and prepaid access plans are available for users. If this sounds like a perfectly ordinary way to make money, it is. But there's a twist. "I don't expect to make money off the wi-fi," Gallagher says. "I expect to leverage it as a way to bring people in and sell them wi-fi-based accessories and products." Gallagher does expect to make money selling VoIP phones to more than 100 small Florida business accounts acquired when he purchased the six retail stores that now make up most of the company. "Small businesses are more willing to take chances on VoIP," he says. Travelers to Tampa/St. Petersburg make up Gallagher's third target group. "It's a very transient market," he says. "It has a high churn rate. The cell and prepaid markets there are different from anywhere else I've been. There are great opportunities for sign-up due to the transience and growth." Despite Gallagher's belief that he won't make money from the hot spots, he might be surprised. "The real cost to putting up a wi-fi hot spot is the phone circuits," says David Gross, senior analyst at Wireless Data Research. Such connections are required to backhaul wi-fi traffic to the internet. "With those circuits in place," Gross continues, "it would be hard not to make money." Gross says Gallagher's recurring gross margin on the wi-fi access service should be nearly 90 percent. Making comparisons easy WiFiMinutes was founded as a result of owner Chris Barry's personal interest in the technology. Researching wi-fi online, Barry quickly discovered that no single website allowed side-by-side comparison of wi-fi access plans. He also realized that wi-fi providers have established few roaming agreements, meaning that people who need wide access must sign contracts with multiple companies. Thus was born the idea of selling two-hour blocks of prepaid wi-fi access to people who use geographically dispersed hot spots operated by different providers. "I'm establishing agreements with providers who have extensive access within a region," says Barry. "They may already have established roaming agreements, or they may simply have a good number of hot spots." Barry's customers – business travelers, vacationers and students – can buy prepaid access in many places or in a large region for a couple of hours without comparing multiple plans or signing multiple contracts. When wi-fi providers inevitably develop roaming agreements, Barry simply plans to negotiate contracts with them. However, he says, "That's a while away." Gross thinks that Barry's business plan is a bit strange. "People don't want to buy per-minute plans for wi-fi access," he says. "They want flat, fixed rates." Barry disagrees. "General users will either get monthly subscriptions or find free hot spots," he says. "This isn't the market I'm after. For my target market, it makes sense to get the access before they go. This is what I see over and over in e-mails from customers." Barry's model also evidently makes sense to prepaid distributors. Six prepaid distributors approached Barry in WiFiMinutes.com's first nine weeks. The distributors weren't interested in negotiating provider relationships themselves. They just wanted to resell Barry's access plans. "I'm planning to set up arrangements with prepaid distributors," Barry says. However, he wants to get more wi-fi agreements in place first. While he does that, he's also setting up private-label capabilities for his prepaid wi-fi access plans to make it easier for distributors. Barry is planning to advertise in travel publications, but he says, "Distributors and resellers will be the revenue generators." Day passes and minutes While Gross is skeptical of the prepaid-minutes wi-fi model, he sees potential in selling packages of discounted "log-ins," which are the equivalent of day passes. T-Mobile, the 900-pound wi-fi gorilla, sells 24-hour access for around $10. "This is way above cost," Gross says, "so the wi-fi prepaid model is to sell packages of 24-hour access and undercut T-Mobile with rates of $3, $4 or $5 per day." Monthly discount packages would also be good offerings, Gross says. Prepaid wi-fi minutes may yet come when wi-fi-enabled cell phones arrive this fall. When that happens, the big cell providers – several now sell wi-fi access – may package cell and wi-fi minutes together. Prepaid sales of such plans won't be far behind. More to come If these models don't fit your business plan, don't worry. Wi-fi is just getting started; more ideas will inevitably emerge. Intelecard News Online | Feature Stories |