The Wireless Lan (Wi-Fi) hotspot industry could go the
way of the dotcoms unless there is grassroots market acceptance of
this technology, a report has warned.
The report, titled "Wi-Fi Hotspot Opportunities: Exploiting the
New Phenomenon", from Arizona research firm Forward Concepts, said
that although the Wi-fi hotspot "land grab" is now in full swing,
only a few venues will end up profitable.
"We see the emergence of hotspots as almost a textbook case of
effective repurposing of technology, but a closer look reveals some
troubling deficits in the market thus far," said Daniel Sweeney,
the author of the study.
"In most cases where repurposed technology has succeeded in a big
way, such as the internet, it has exhibited a strong grassroots
component in terms of the user base."
"In hotspots, to date the grassroots aspect of the phenomenon
resides in the service providers themselves, which are often very
small, single-location businesses linked in a franchise arrangement
with a hotspot aggregator or platform developer."
Unless hotspots inspire a similar degree of enthusiasm among
subscribers, the same fate could befall the hotspot industry as
befell e-commerce at the turn of the millennium, where
similarsupplier enthusiasm far outstripped market acceptance,
Sweeney warned.
A "land grab" frenzy will propel the US hotspot market to grow by
an estimated 46,000 new locations this year, according to the
report. By the year 2004, on the other hand, there will be a
dramatic slowdown in the creation of new hotspots as the industry
seeks to identify appropriate applications, content, and terminal
designs for existing capacity.
The report predicted that growth in the number of hotspots will
return in 2005, and by 2007 there will be some 530,000 hotspots in
the US.
The report also predicted that in Europe almost 800,000 hotspots
will be installed by 2007, while in Asia, by even the most
pessimistic estimates, there will be more than one million hotspots
by 2007. A more optimistic estimate places that figure at
almost four million by that year.
Revenue from hotspots in the US is forecast by Forward Concepts to
be $8bn by 2007, working out to about $15,000 per hotspot. At such
revenue levels, margins will be tight, and profitability for the
industry as a whole is contingent upon the lowest possible
infrastructure costs, which will force service provider incumbents
to re-evaluate their business plans.
There will be winners and losers among the hotspots depending on
the kind of venues in which they are located. Various venues will
have different profit potentials and liabilities, according to the
report. The average for hotspots in the US is estimated to be about
190 sessions per year, with a disproportionate share going to
business hotels and major airports.
John Ribeiro writes for IDG News Service