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Business News & Technology News > Aug 2008
 
 

With Hotspots, Not all Things Grow Equally

By: Daryl Schoolar, Senior Analyst, In-Stat
(Business News & Technology News, 1 Aug 2008)


Here are a few things that should make the hotspot community happy:
- The number of hotspots providing public wireless LAN access continues to grow globally.
- The numbers of people who are using hotspots continue to grow.

Here is the bad news, access revenues do not appear to be keeping up with growth in use. A survey soon to be published by In-Stat, "2008 Global Hotspot Market—A Time of Change and Growth", shows that nearly 50 percent of respondents said they would only use a free hotspot. This trend was further reinforced with other questions regarding respondents' willingness to pay. Because of this trend, hotspot operators are turning to other methods to generate revenues.

One of the bigger trends developing in the hotspot market has been bundling. Operators have started bundling hotspot access with other services, such as fixed and mobile broadband. This way consumers can access hotspots without paying a separate fee, and operators can generate some access revenue by bundling the cost of the service into a bigger service package that consumers are willing to pay. While this grows revenues for operators, it does not grow revenues as fast as it would if they could get each user to pay directly for access. Another similar method to growing revenues has come from positioning hotspot access as an amenity service.

A well publicized example of hotspot as an amenity service comes from Starbucks. With Starbucks' recent transition of its hotspot service from T-Mobile to AT&T, Starbucks now offers hotspot access as an amenity service. Users of Starbucks' reward card can access Starbucks hotspot network for free. In this way the cost of the hotspot is built into the cost of the coffee. Hotels have used this strategy for the last several years.

Free in room Wi-Fi has replaced free HBO on hotel marquees. Hotels see Wi-Fi as just another amenity expected by travelers. The cost of the service is built into the room fee. Since many hotels outsource their hotspot networks, the operators of those networks are paid by the hotel, and not by the end-user. In-Stat believes bundling and positioning the hotspot as an amenity service will continue. People want to use hotspots; they just don't see paying for them as an extra service. As consumer budgets get tighter, this trend won't change. Hotspot operators need to adjust their business practices to address this trend.

 
 
 
 
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