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.

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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
4. Hardware integration
Centrino co-operation with all 3
‘Boingo in a box’
The Cloud – ‘My Cloud’

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?