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Three Business Models for Public Access Wireless LANs

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... s bandwidth in WiFi devices 20 users maximum ... network of WiFi enthusiasts for value ... Franchisees see WiFi as add-on' to basic xDSL need updating ... – PowerPoint PPT presentation

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Title: Three Business Models for Public Access Wireless LANs


1
Three Business Models for Public Access Wireless
LANs
  • Chris Marsden
  • Annenberg School
  • 19 November 2003
  • Draft for comments to
  • ctmarsden_at_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
Whats 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 ModelsWiFi 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
    others 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
  • Worlds 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
  • Whats 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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