Days of independent Wi-Fi operator numbered, says former head of Spotnik

The former co-chief executive of Spotnik Mobile Inc. says independent Wi-Fi operators are living on borrowed time. He argues that the writing was on the wall for the country’s independent players from the day the country’s national wireless operators formed an alliance promoting inter-carrier public Wi-Fi. The carriers announced an inter-carrier roaming and interoperability agreement in August 2003 and finalized details of the common plumbing deal in March 2004 (RoW, Aug. 26/03, March 10/04). "I don’t think there’ll be many left standing. Either they’ll be consolidated or they’ll run out of cash and the carriers will come in and scoop up what valuable locations they have, if any," Mark Wolinsky tells Report on Wireless in a wide-ranging interview on the state and future of the Canadian Wi-Fi market. His comments come a few months after Telus Mobility purchased the remaining interest in Spotnik that it didn’t already own (RoW Update, July 5/04). The wireless operator had invested $6.1 million Spotnik in November 2002 and charged the Wi-Fi operator with building out a footprint of 300 hotspots over three years. While the unveiling of the inter-carrier roaming agreement might be considered the beginning of the end for independent players, many of them were still expressing optimism at the time of the March 2004 announcement. BOLDstreet Wireless Internet president Tom Camps said at the time that "this is a first and important step" to gaining access to the wireless carriers’ subscribers. "The shortcomings in our industry are not related to numbers of hotspots, equipment or anything else. It’s 100% about where are the users and the carriers have the users," he told RoW in March. Quietly, however, there was a lot of talk that the inter-carrier Wi-Fi roaming agreement immediately upped the ante for entry by independents into the market. Some even mused that there were competition issues that needed to be addressed. Wolinsky says that there will be benefits of the wireless carriers cooperating on common standards and a common marketing brand, but that he didn’t feel comfortable that the inter-carrier Wi-Fi deal was good for the smaller independent players, suggesting there were anti-competition issues in the agreement. "I see benefit for the consumer and the customers to some degree, but it’s a very fine line because when you have all major players in a marketplace getting together to decide how they’re going to play, compete and operate, now the marketplace starts becoming somewhat less competitive which ultimately doesn’t have the best interest of the customer in mind, it has the best interest of the carriers in mind," he says. "I had some problems with the way that was shaping up because I felt that in a lot of ways it was very anticompetitive and that it provided a foundation to give the (wireless carriers) an unfair competitive advantage over the independents," he tells RoW. Continues Wolinsky about the inter-carrier Wi-Fi agreement: "It placed a lot of restrictions on us in the sense that they wanted us to do things that we didn’t feel were necessarily right for the business, but because they were a strategic investor and really driving the bus on the inter-carrier agreement, we really weren’t in a strong position to be able to negotiate our way out of that." Some suggested that the wireless carriers’ Wi-Fi agreement forced the independent operators to scale upwards to a large degree the number of hotspots in their network. Spotnik’s Murray McCaig told RoW back in March that that’s how he saw the impact of the carrier agreement bearing down on the independent hotspot operators. One thing was for sure, says Wolinsky: with the way the Wi-Fi industry was evolving Spotnik needed to bulk up in terms of hotspot numbers. He estimated that it needed between 3,000 and 4,000 hotspots to get an adequate level of coverage to make Wi-Fi a compelling enough subscription service. "Two hundred to 300 hotspots was great as a starting point, but as you know the industry really requires a lot of coverage to make it a very strong proposition for the customer from a subscription point of view," he says. But for Spotnik to accomplish a 10-fold increase in hotspot numbers, the company needed additional financing and this is where the company ran into trouble with Telus Mobility. Wolinsky says the company was caught between pressure from Telus Mobility to continue with its network build and Telus’ unwillingness to cede any of its 51% ownership in the company. Wolinsky explains that the company said to Telus that if it wanted to continue with its strategy of building a network of hotspots for a large wholesale network, then it needed additional financing. Telus refused to provide Spotnik with additional funding. The wireless operator did permit the company to seek financing elsewhere but with the caveat that Telus would maintain a minimum of 51% ownership in the company. "They put some restrictions on us that made it virtually impossible. They wanted us to go do it, but they didn’t want to give up control from an ownership perspective. We said this doesn’t make a lot of sense, either we have to change our strategy and direction in order to accommodate our business interests or we’ve got to go out and raise more money…we said then you better buy us out because you’re not giving us a lot of choices," he explains. When contacted for reaction to the comments made by Wolinsky, a Telus Mobility spokesperson had no comment.

Days of independent Wi-Fi operator numbered, says former head of Spotnik

News | October 21, 2004

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