The State of Wireless London


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Commercial Providers

.. image:: img/commercial.png
:alt: Commercial hotspots

The second major group that are operating wireless networks in London are the Commercial Wireless Providers, largely made up of telecoms industry players such as BT and T-mobile, but with a number of start ups and independents represented as well, WiFi [23]_ as 802.11b is marketed has become a hugely hyped buzz word industry for commercial network providers.


Back in 2000 the UK regulatory environment prohibited use of the 2.4 Ghz spectrum ‘by way of business’, and this precluded any paid-for services from being offered. The Radio Authority genuinely maintained that this legal framework was designed to benefit community networkers, though the fact that the restriction protected the 3G license auctioning business was probably not an unwanted side effect.

WLAN and 3G technologies can provide similar functionality though the opportunity costs of spectrum usage are very different. Use of spectrum for WLAN is free of charge, whereas 3G requires spectrum licenses that were auctioned for billions of pounds. The ‘by way of business’ restriction effectively stopped commercial providers from using WLAN to build their new high speed networks and forced them into buying 3G licenses netting a substantial revenue for the government.

From 2000 onwards WLAN received a lot of publicity in part due to the freenetwork developments, and this occurred just at the time of the 3G licensing fiasco. On the crest of the hype wave, telecoms companies massively over valued the 3G spectrum licenses and burdened themselves with unsustainable debt. At around the same time the story broke that freenetworkers were going to build a national WLAN based network that outperformed 3G, and this was taken up by finance houses such as Nomura [24]_ and subsequently in the mainstream media [25]_. This and the many other criticisms of the 3G spectrum valuations were contributing factors to the telecoms bust in Europe.

Unable to compete in the 2.4 Ghz band, the telecoms companies saw WLAN as a threat and engaged in intense lobbying. A public consultation was undertaken by the Radio Authority and the law was subsequently changed in February 2002. Effectively this left commercial wireless providers 2 years behind freenetworkers in the UK though many had been operating test networks and fully fledged businesses in other countries.

The Hotspot Model

The model that commercial providers opted for was not the meshed infrastructure model that freenetworkers had proposed, or even on the provision of primary broadband network access. Oftel figures for Public Telecoms Operators show that the broadband access market was dominated by ADSL(49.5%) and cable in the UK (49.9%) [26]_, both ways re-purposing of existing plant. Commercial providers did not deliver broadband wirelessly in the UK or opt for the mom and pop wireless ISP model that had been popular in the states. Wireless doesn’t even achieve a categorisation and is grouped under ‘other’ with all other broadband delivery technologies (0.3%).

The commercial response to wireless was really to follow the access point model outlined above. They had perhaps seen the popularity of node databases with their charts of wireless enabled locations and instigated a model based on providing those. It was maybe a misunderstanding of the node map, which was originally designed as a way to find network peers, but one that provided no threat to the existing broadband provision model.

These WiFi enabled locations were termed Hotspots and began to pop up in high value locations such as airports, hotels, stations and other areas where the target audience, the mobile professional could be found. The road warrior or office warrior [27]_, pausing between bites of a blueberry muffin to check sales leads on the way to baggage reclaim.

What these locations had in common with each other, was that they were places where telecoms providers could negotiate an exclusive commercial contract with the location owner. Motorway service stations and airports are obvious examples, but restaurants such as Starbucks and Mcdonalds also followed suit.

In these locations, the enclosure of spectrum that is license exempt as a free resource usable by everyone is achieved by virtue of an enforcement of the land right. The hotspot location, and hence access to the network ‘in that location’ is governed by who owns the physical space, the restaurant owner etc. This creates a local scarcity of network access that can then be sold at a high price.

It is also interesting to note that these points exist at points of high user flow, super-nodes in the transport network, and are in effect intermodal control points between the information network and the physical one.

The hotspot model is not one of blanket coverage, but of highly selective coverage. Hotspots cover places where people need network access and in the case of commercial hotspots are prepared to pay for it.

London Hotspot Operators

.. image:: img/commercial-key.png
:alt: Commercial hotspot operators

======================================  =====
BTopenzone                   		173
Surf n Sip                   		91
The Cloud                    		78
ReadytoSurf                  		71
Boingo                       		70
Ipass                        		67
Trustive                     		64
T-Mobile Hotspots		        31
Swisscom Eurospot			14
STSN iBAHN                   		13
iyzone                       		7
Wayport                      		2
Broadreach                   		2
Broadscape                   		2
AT&T Wireless Wi-Fi Service		1
**Total**                          	**686**
======================================  =====

Hotspot Access – How Much Does it Cost?

==============  ==============================  ======================  ==========================
BTopenzone	                             	15.00 per day   	6.00 per hour
Wayport  	49.95 per month w/o     	9.95 per day,		29.95 per month w/contract
T-Mobile	47.00 per month         	16.50 per day   	5.50 per hour
STSN iBAHN	19.95 per month,        	9.95 per day,		no contract
Boingo	        21.95 per month,        	7.95 per day,		no contracts
The Cloud                               	6.00 per day
Surf and Sip                            	5.00 per day
AT&T                                    	9.99 per day
Broadscape      'virtually free'
									Prices: GBP
==============  ==============================  ======================  ==========================

Most providers offer access at what are actually quite high rates when compared to normal network access costs such as ADSL.

One exception is Broadscape who offer what they call a ‘virtually free’ service as described here, which offers wireless access as a way of encouraging people to spend money in locations such as coffee shops.

‘Our customers are free to charge for the hotspot service as they wish but based on our experiences we do strongly advocate the ‘virtually free’ model as the being the one of choice. . . . What is ‘virtually free’ ? ‘Virtually free’ is virtually free to the end-user. The coffee shop customer, for example, does not pay for the wireless access explicitly but earns the right for a limited connection time with a purchase. A typical implementation of this might be to hand over a 30 minute access code to the customer if he or she spends more than £2 on coffee and a danish.’ [28]_

This model was pioneered by freenetworkers who encouraged proprietors of coffee shops to shoulder the minimal cost of installing access points and offering free internet access to their customers. Similar in idea to a cyber-cafe, but without the expense of installing and maintaining equipment, free network access is used as a way of attracting people to a location, and justified as a small marketing expense for the food and drink that will be sold. In this broadscape formalisation of the idea, the access becomes an integral part of the ‘offering’- the blueberry and internet muffin.

Hotspots – Users

The take-up for hotspot services has not to date been dramatic, especially when compared to the number of wireless devices installed in laptops. Here are some comments from industry sources:

“Our 250 hotspots have anything between 0 to 100 users/day and 10% are profitable (average 5 to 10 connections/day).” Robert Lang, VP Bus Dev, Swisscom Eurospot

“Seventy percent of online consumers are aware of public hotspots, but only six percent have used the service in a public place, and only one percent has paid to use it in a public place.” [29]_

16,000 Europeans pay to use WiFi currently, only 4000 are regular subscribers [30]_

Press reports of Starbucks usage in April said that of the 22 million people who visit one of the coffee outlets in North America in an average week, just 25,000 were taking advantage of the service. [31]_

However the marketing and expansion effort has only just begun in the UK. BTopenzone for instance is planning a major expansion of up to 2000 hotspots this year including 232 in Mcdonalds, mainly in motorway service stations. On the 26th January 2004 they launched ‘Free Wireless Week’ offering subscribers the chance to use BTopenzone hotspots without charge for a week.

But there are doubts about the viability of the hotspot model, with some commentators believing that there is no sustainable business model. Others point to the arrival of voice over WLAN as the real market that the UK hotspot providers are looking towards as an alternative delivery mechanism for 3G and similar services.

“As suitable devices and public hotspots proliferate, we think leakage from the PSTN and mobile networks into the cloud of free/cheap VOIP IP over WiFi is a potentially huge phenomenon. Wi-Fi/multi mode handset initiatives from BT Group and other more forward-looking incumbents and mobile players will seek to address this issue, and BT has a relatively free hand, in having no cellular business to cannibalise.” [32]_

How does this compare with freenetwork model?

.. image:: img/commercial-consume.png
:alt: Commercial and Freenetwork nodes

The reason that it has been possible to operate freenetwork access point type nodes without charge is that once the equipment is installed, the incremental cost of allowing others to use it is very low. If you are already paying for network access for yourself, and have installed a wireless network, the additional cost of offering it to the public is negligible. The initial hardware costs are also low, at less than 100 GBP for an access point, and with running costs of 25 GBP per month it makes for a very affordable system.

However, commercial hotspots are faced with significantly more costs over and above the minimal equipment and networking costs, such as a billing infrastructure, help desks, credit checking, location payments, maintenance contracts, share holder dividends and marketing, to name a few. This is inevitably reflected in prices charged for the service.

It remains to be seen how these commercial models burdened with such overheads will compete with the freenetworking ones, and whether the marketing spend, and the strategy of local monopoly will be justified by the returns.

Currently the consume database [5]_ mentions 143 active nodes in London, which places it as the second largest hotspot provider in London after BTopenzone with 173.