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