Hotspots on the road to profits

Lately, I've been reading so many reports on the death of the hotspot business that I just had to respond. In my view, hotspots will not only survive, they will also become really pervasive and at least marginally profitable over the next few years. Why? Because the cellular carriers, most of whom are assumed to see wireless local-area networks as a tool of the devil, undercutting their vast (and overpriced) investments in licensed spectrum, will in fact shortly embrace the public WLAN business with a remarkable fervor. Why? For just one reason-spectrum.

It's a well-known fact that the cellular operators see data services as a big growth opportunity. The voice market is reaching the saturation point in many parts of the world, and data is a great path to future expansion. But we also occasionally see the saturation of voice capacity, especially in congested urban areas. Hence the 3G opportunity: voice, data, everything, in one package. The only problem is that 3G needs new spectrum, which is vastly overpriced because too many companies beat each other up for the privilege of forking over vast amounts of cash to the government for said spectrum. So, with all that cash tied up, 3G rollouts are going slowly, and they may be applied more toward voice capacity than high-speed data.

Enter public WLANs, with high-speed data, free spectrum, cheap equipment and a rapidly growing user base. And there are more than a few companies rolling out public access with little regard to such niceties as roaming (intercarrier) agreements, reasonable prices, business models that make sense and marketing savvy. That's just what one would expect in the early, entrepreneurial days of any new opportunity. Soon, however, the big boys will arrive, motivated by the ability to move data services onto free spectrum, market to customers who already buy mobile services from them and even the promise of voice-over-Internet Protocol on WLANs. The business opportunities will be simply irresistible.

Sure, the spectrum is unlicensed. But this is really a real estate business, and the carriers are going to work hard to lock up good locations. Most customers won't know-or care-which spectrum they're using. But both suppliers and customers are going to be very happy with the result.

Craig J. Mathias is principal of Farpoint Group (Ashland, Mass.).

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