WI-FI CHECKS IN

Say what you will about the public Wi-Fi market, that it's either an economic black hole or else the biggest thing going. But while expectations for numbers of hot spots, cost of service and utility in combination with 3G wireless continue to fluctuate depending on whom you ask — and what they had for breakfast that morning — public Wi-Fi does have its success stories. One of the biggest ones is the hotel market.

There was a time, not so many years ago, when most business travelers, upon checking into their hotel rooms, had to engage in a strange ritual: They would set up their laptops on the desks in their guest rooms — you can imagine them, suit bag half unpacked on the bed, shoes off, a preliminary call to room service made, the mini-bar seal cracked. Next, they would look for a data jack on the desk phone. If there wasn't one, they would have to wrestle with that phone to remove the one jack that existed, either to insert their own phone cord or to get the room cord plugged into their laptops — not always as easy as it looked. Assuming they could successfully dial into their ISPs, they could finally get started at waiting, as Web pages slowly built at 14.4 kb/s, 26.2 kb/s, 28.8 kb/s or whatever low data rate they were able to squeeze from overworked hotel phone lines.

There they were, hundreds of hotel guests, perhaps simultaneously going through this ritual, in a 30-story grid of cookie-cutter rooms, framed by parted curtains of a color long out of fashion.

But now, like those curtains and the bedspread with which they were so poorly matched, this ritual itself is rapidly falling out of fashion. Progress came first in the form of high-speed wired Internet access, as rooms were outfitted with Ethernet jacks, and guests could find Ethernet cables hanging in a clear, plastic pouch in their closets. More recently, Wi-Fi has begun to sweep through the hospitality industry. It arrived first in the lobbies and common areas of the individual hotels most heavily traveled by businesspeople, but within the last two years it has been adopted across the board by several major hotel chains. More recently, it has moved from the lobby to the guest room, meaning those once put-upon business travelers can now work without being tied down by a phone cord or Ethernet cable, yet still happily surf the Internet at multiple megabits per second.

The companies bringing it to them are not the telcos that long have supplied these hotels and their guests with local and long-distance voice calling and dial-up access to the Internet. Instead, they are companies such as STSN, Wayport, StayOnline, iPass and Futuretech Enterprises, to name a few.

As the stalwart broadband service provider to the hospitality industry since 1998, STSN had leverage to use as hotels and their guests became interested in wireless coverage — and plenty to lose if it didn't answer the need. And for a while, anyone watching Wi-Fi coverage appear in hotels probably thought STSN was missing out on the trend.

“A lot of people don't know STSN has been offering Wi-Fi. So far, we've been all hat, no cattle,” acknowledged Dave Garrison, CEO of STSN, which is based in Salt Lake City. “We need to promote wireless more.”

Currently, STSN offers its iBahn broadband service in more than 900 hotels in North America, Western Europe and the Asia-Pacific Rim region, and as of the end of 2003, about 550 of those hotels included 802.11b/a Wi-Fi installations. At least 50 of those hotels are completely outfitted with wireless access in every guest room.

“We're now doing 600,000 secure Wi-Fi connections per month,” Garrison said. “Though it's still a smaller number than our wired connections, that number was at zero in January 2003.” He still expects usage at individual hotels to double every three months.

It's clear who is using all that Wi-Fi access, and what they are using it for, he added. About 70% of those 600,000 connections are being made by business travelers to their corporate VPNs.

Weekly and monthly business travelers represent the portion of the traveling public that is most interested in having high-speed, including Wi-Fi, during hotel stays, according to Julie Ask, senior director of wireless analysis with Jupiter Research, which recently issued a report called “Public Hot Spots on the Road.”

That kind of market opportunity, combined with the rapid growth of Wi-Fi as a preferred flavor of high-speed access worldwide, also has given STSN reason to speed its international expansion. The company announced earlier this month that it is acquiring MyCall, a service provider based in Amsterdam, Netherlands, which offers Wi-Fi access in about 1000 hotels throughout Europe.

Garrison said STSN expects to see some of the same users in European hotels as it does on the U.S. circuit. “This acquisition fits in with our service sweet spot,” he said. “As in the mobile industry, you will see a lot of cross-investment between the U.S. and Europe. A lot of the same business travelers will be flying in and out of the European gateway cities. There is still significant growth left for Wi-Fi in the U.S. market, but this is our attempt to follow the customer and the customer's needs.”

But MyCall also brings a new twist to using Wi-Fi in hotels. Reflecting the notion that many U.S. businesspeople traveling abroad don't want to lug their laptops and outlet-adapter kits overseas, MyCall supplies hotels with computers for public usage in their lobbies and business centers. Business travelers can purchase MyCall prepaid cards that give them time on the computers to check their e-mail and do other business. When a user is finished with a session, the history of that session is completely wiped from the computer to protect user's security.

STSN also expects this method of Wi-Fi access to emerge in the U.S. hotel industry and already is testing a prototype of the service, Garrison said.

While prepaid service is the latest economic approach to offering Wi-Fi access to hotel guests, other billing models continue to thrive among U.S. hotels. STSN currently works under two different transaction models. In some situations, STSN sells its service directly to hotel guests through a page that pops up automatically when hotel guests first connect and open their browsers. The price can vary, but averages around $9.95 for a 24-hour access session.

However, STSN also is open to deals with hotels in which the hotel pays STSN for Wi-Fi access, which is then offered to guests for free. Garrison said both economic models have viability, depending directly on an individual hotel's core market. “Hotels that offer free continental breakfasts will also offer free Wi-Fi. That's part of their essential business strategy. That doesn't mean that fee-based Wi-Fi won't work,” he said.

Still, the attitude about free vs. fee varies across the service provider industry. Futuretech Enterprises, a smaller service provider that competes with STSN for hotel deployments, will only support deployments in which Futuretech gets paid directly by the hotel, rather than having to depend on its own direct sales. “We used to put the equipment in for free and charge the hotel guests directly,” said Bob Venero, CEO of Futuretech Enterprises. “We don't entertain those arrangements anymore because we see some hotel chains mandating that Wi-Fi access be free to their guests.”

Marketwide, the current breakdown between hotels that charge guests for Wi-Fi access and those that offer it for free is about 50/50, according to Ask. “It's clear that many travelers are willing to pay for high-speed access,” she said. “That could change more as Wi-Fi access becomes much more widely available in the hotel market, but that could take several years to develop.”

As the market continues to develop, and all kinds of hotels from bargain-basement inns to upscale resorts adopt Wi-Fi, there are other trends that will shape and change this public usage arena from how we know it today.

For instance, while some hotels with existing wired broadband service in their guest rooms have been uninterested in in-room Wi-Fi, the capability probably will become an intrinsic feature of new hotel construction.

“Wi-Fi access for each guest room in a large hotel is not a trivial thing to construct,” Ask said. “In new hotel construction, it will be cheaper and easier to plan for this.”

In existing properties that don't adopt Wi-Fi, some industry watchers are seeing an embryonic trend of broadband-savvy business travelers bringing their own Wi-Fi routers or access points on the road, and using them to turn Ethernet-wired rooms into Wi-Fi hot spots. Futuretech's Venero admitted to having done this before.

“People are going to start doing this if they can't get a hotel that has Wi-Fi,” he said. “If they have Wi-Fi at home, they aren't going to take a step back when they go on the road.”

Ask also said she has heard of travelers setting up their own equipment in hotel rooms during their stays. However, STSN's Garrison cautioned users against following the trend. “You could have overlapping networks that aren't secure, and that could be a disaster,” he said.

While STSN's users mostly use corporate VPN security, Garrison said assurance of secure connections is important to all business travelers. The company has its own patented security solution and makes a habit of maintaining off-property points of presence, so that there are no Internet-routable IP addresses on the hotel network itself.

Still, Ask said differences in security from one hotel network to another have not yet become valuable marketing leverage for service providers. “It's very complicated for one hotel to market itself as having a more secure network than another,” she said. “It's not really a factor in the buying decision yet.”

Likewise, hotels and their guests, while being among Wi-Fi's trendsetters, also don't seem to be concerned with bandwidth advantages of 802.11g over 802.11b. For most of them, the 11 Mb/s peak speed of 802.11b is sufficient.

“Some hotels will ask us about 802.11g, but we ask them what they really would use it for,” Venero said, adding that even if hotels use the Wi-Fi coverage for their own organizational data needs, 801.11b gives them all the bandwidth they need.

Futuretech is, however, installing 802.11g in some meeting space and convention centers that could see more intense simultaneous usage.

Garrison added, “The amount of bandwidth congestion you get is really about the pipe that is leaving the premises. B or G doesn't make a difference.”

However, while the hotel market testifies to the ongoing viability of an earlier technology standard, the market doesn't lack for innovation. In the near future, you might see hotel staff such as housekeepers and valets using Wi-Fi-powered PDAs to address guests' needs more quickly and function more efficiently in their jobs.

Also, hotels with Wi-Fi could become proving grounds for the overall trend toward increasing usage of voice over IP. Bargain hotel chain Microtel recently hired Futuretech to supply VoIP technology to its hotels. Microtel plans to offer its guests free local and long-distance calling by running its voice service over Wi-Fi.

STSN's Garrison said some hotels are unlikely to try packaging Wi-Fi-based Internet service with voice services. “It will become more of a factor in the years ahead as it gets into the handsets everyone is carrying around,” he said.

“Voice over IP could become an application over wireless LANs in hotels, but it's unlikely to be common for many years to come,” said Ask, citing the expense and scant availability of converged devices.

Still, if and when that starts to happen, the trend could strain the tenuous foothold that traditional telcos still have as suppliers of voice and data services to hotels. While telcos will continue to provide the T-1s or other circuits that connect hotels to the outside world, the absence of their brands in front of end users would help fuel the “dumb pipe” analogies that are beginning to haunt traditional service providers.

Ask said there is plenty of room left in the hotel broadband market for many different service providers to play. “STSN is dominant, but they aren't the only one with the hotel relationships,” she said. “It depends what the hotel chain wants, how big the hotel is, what its core guest audience really is looking for.”

While a big-name telco, such as SBC, could have some leverage marketing to hotels in its own region, it would have less of an argument with which to win over national hotel chains.

For Garrison, success as a provider of broadband service — whether wired or unwired — to hotels is about recognition of how hotels make their money, and they don't make it off of technology.

He illustrated his point by giving the example of a European hotelier and customer of STSN who was being wooed by a competing service provider, and was told the competitor would install Wi-Fi hot spots throughout the facility. But, Garrison said the hotelier told his competitor, “Sir, I'm not a ‘hot spot’ — I'm a four-star hotel.”