1
Three Business Models for Public
Access Wireless LANs
Chris Marsden
Annenberg School
19 November 2003
Draft for comments...
2
Case Studies in Property Rights in ‘Free
Spectrum’
 Academic authors have typically concentrated
on:
 Standards – Lehr...
3
LANs and WANs
 Wireless public access markets are
dominated by licensed oligopolists
 Typically voice-dominated – even...
4
What’s different about LANs?
 Short range high bandwidth 11Mbs-54 Mbs
 Mass market for base stations – very cheap
 Ba...
5
Economic Case for WLANs
No spectrum cost
Minimal backhaul cost – varies with
business case
Minimal base station cost ...
6
Case Against WLANs
 Extreme short range – in-building effectively
 Sharing only 5Mb/s bandwidth in WiFi
devices – 20 u...
7
3 Models:WiFi as 3G Complement
 Parameters:
1. Partnership model
 With host locations and 3G networks
2. Billing and s...
8
Boingo; Classic Aggregator
 Earthlink philosophical foundation
 Santa Monica: 1601 Cloverfield Boulevard
 Start-up wi...
9
Boingo – Unique Characteristics
 Earthlink model and financing secured
 Very California-centric culture
 Using networ...
10
Boingo – Transferable Knowledge
 Aggregation creates critical mass
 First mover advantage
 Very solid financial back...
11
The Cloud – Unique Characteristics
 Inspired Broadcast Networks uses gambling
‘fruit’ machine installed base from Leis...
12
The Cloud – Lessons for Others
 Backhaul costs critical
 Symbiotic relationship with telco – each is the
other’s larg...
13
KTNespot – Unique Characteristics
World’s most advanced broadband users
 Broadband must-have with universal appeal
T...
14
KTNespot – Lessons for Others
 Leveraging dominance:
 Triple play replicable for e.g. Orange, KPN, T-Mobile,
DoCoMo i...
15
1. Partnership model -franchisees
Boingo – aggregator = 5100 locations
The Cloud – wholesale network = 20,000
project...
16
1. Partnership model - backhaul
Backhaul is highest cost
Base stations ideally require dedicated 11
Mb/s
That in UK ...
17
1. Partnership model - wireless
Boingo and Telecom Italia
The Cloud and BT, NWP Spectrum
Korea Telecom and regulator...
18
2. Billing and subscriber management
Weroam – GSM-SIM authentication from
Togewanet ‘clearing house’
TeliaSonera-Swis...
19
3. Software integration
Boingo interface – 24 hour promise
 Systems integrator as primary business focus
The Cloud –...
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 corpor...
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USC 3 Wifi case studies 2003

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A perspective on the development of Boingo, Cloud and KT Nespot Wifi services in autumn 2003, based on field research in California, UK and Korea.

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Transcript of "USC 3 Wifi case studies 2003"

  1. 1. 1 Three Business Models for Public Access Wireless LANs Chris Marsden Annenberg School 19 November 2003 Draft for comments to: ctmarsden@yahoo.co.uk +44 777 926 0376
  2. 2. 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. 3. 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. 4. 4 What’s different about LANs?  Short range high bandwidth 11Mbs-54 Mbs  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. 5. 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. 6. 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. 7. 7 3 Models:WiFi as 3G Complement  Parameters: 1. Partnership model  With host locations and 3G networks 2. Billing and subscriber management  SIM-GSM interoperability 3. Software integration  User interface 4. Hardware integration  Security and QoS – VoIP or video capable?  Backhaul costing and integration
  8. 8. 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. 9. 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. 10. 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. 11. 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. 12. 12 The Cloud – Lessons for Others  Backhaul costs critical  Symbiotic relationship with telco – each is the other’s 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. 13. 13 KTNespot – Unique Characteristics World’s 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. 14. 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. 15. 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. 16. 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. 17. 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 What’s the price point for mobile data?
  18. 18. 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. 19. 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. 20. 20 4. Hardware integration Centrino co-operation with all 3 ‘Boingo in a box’ The Cloud – ‘My Cloud’
  21. 21. 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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