Online Exclusive: Choppy Air

The launch and seemingly effortless rise of Boingo Wireless is just one of the factors that has helped create so much hope around the burgeoning wireless LAN market. With so many other telecom sectors still flailing, it is good to see the wireless industry launch companies and negotiate partnerships with such fervor again.

However, all this activity also means that the wireless LAN sector could very well be the industry’s next bubble--and we all know what happens to bubbles that get too big for their own good.

Today, strategic thinking about the wireless LAN market can be summed up in three simple words: Populate and aggregate. The market is all about expansion and cohesion. If you are playing in this market and you are not one of the hundreds of independent operators or communities building free local Wi-Fi networks, you are probably one of the new multiple-market service providers or hot-spot aggregators like Boingo.

The landline ISP business used to be much the same way. It is difficult to remember now, but populating markets and aggregating various players or access into economies of scale completely characterized the early years of that business. But it wasn’t long before things became much more complicated.

Some of that complication was caused by service providers that undermined the ISP industry’s fragile pricing structures. First, aggregators such as EarthLink (founded by Boingo CEO Sky Dayton) moved to flat-rate pricing that threw telcos’ higher Internet access rates out of whack. Later, cheaper access and even free access became available from a variety of players. Even though the free-access players later went out of business or changed their models, the collapse of the market’s pricing structure altered the landscape by making it difficult for small ISPs to remain competitive.

Will the same thing happen in the Wi-Fi market, which accounts for a big chunk of the wireless ISP business? Already, a new service provider named Sputnik is coming to market with plans to offer free service and Wi-Fi software downloads. The company hopes to make money off of the modest charges for equipment like wireless Ethernet modem cards.

It is unclear how much havoc this will wreak on the young Wi-Fi market’s economic framework, but when you consider that Boingo charges $24.95 a month for service, there is likely to be some effect.

The Wi-Fi market is still evolving, making it an exciting and potential lucrative place to be. It also makes it an environment in which we should expect some turbulence. Now we just have to figure when and where we will be flying into it.