Independent hotspot operators maintain competitive spirit despite new options

Entry into the hotspot market by the national wireless carriers and municipal Wi-Fi coverage, such as the Toronto Hydro Telecom network set to blanket all of Toronto within the next three years, raise not only the profile of Wi-Fi services in this country but also questions about the ability of independent companies to compete in this market. Roaming agreements, more bandwidth and free service will be among the main factors for those looking to claim a space as this sector evolves. An overview of Canada’s current hotspot market quickly reveals who the key players are. Each of the three national wireless carriers has already signed agreements to provide location coverage with national franchises – Telus Mobility with Timothy’s World Coffee, Rogers Wireless Inc. with Second Cup, and Bell Mobility with Starbucks and Mailboxes Etc. These partnerships have helped Bell, Rogers and Telus to amass 616, 289 and 178 hotspots respectively according to the Canadianhotspot.ca website. In comparison, Vancouver’s Fatport Corp. leads the independents with 293 hotspots, but this group also includes companies like Montreal-based Tadaa Wireless with 39 locations and Mainspot Inc. with seven locations in Toronto. While the nature of the market has allowed multiple entries, whether they can be successful remains to be seen. "The reality is the numbers are far lower and the amount that people want to pay is just too low to make it an interesting model at a small scale," Tom Camps, CEO of Boldstreet Wireless Internet, tells Report on Wireless. "So it’s kind of a discredited business model except it’s still being pursued because the barriers to entry are low." Johanne Lemay, co-president of consulting firm Lemay-Yates Associates Inc., agrees. "It’s not that hard to get up and running for a few locations," she says, but adds the business case doesn’t look attractive when considering the metrics of costs versus the level of potential revenue. Camps says Boldstreet realized shortly after it got into the hotspot market that the business model definitely worked best with a large number of users, making it ideally suited to the carriers who already deal with millions of their own subscribers. To that end, the company realigned and now manages hotspots for Bell Mobility, including installation, monitoring, billing, and pre-paid services. Although not a member, Boldstreet is currently the only independent Wi-Fi provider working with the carriers as part of the Canadian Inter-Carrier Roaming Agreement (CIRA). The agreement allows subscribers from each of the national wireless carriers to access service in any of the others’ hotspots, but could also hinder the independents’ ability to grow (RoW, May 17/05). According to Fatport’s VP of sales and marketing, Gary Stahlbrand, entry by the big three hasn’t really challenged the company’s ability to acquire new locations. That being said, by signing the large franchises it’s inevitable that Bell, Telus and Rogers will be competing, location-wise, with Fatport sites. "Obviously there’s going to be a Starbucks within close proximity to one of our hotspots when before there were none," he says. With almost 300 hotspot locations, Fatport already has contracts with chains like Boston Pizza, Mac’s convenience stores, Best Western and Holiday Inn, not all franchise-wide however. Fatport also has roaming agreements with eight other companies, including SaskTel Mobility and Tadaa, and has had some discussions about joining CIRA, but nothing has been arranged yet. Stahlbrand says roaming alliances aren’t a necessity, but definitely benefit the end user and are good for the industry as a whole. Most hotspot providers echo the sentiment that proliferation of Wi-Fi, even by competitors, is good for business because it increases the exposure of wireless broadband. "Wi-Fi up until now has been almost a hobby sport," says David Dobbin, president of Toronto Hydro Telecom, which plans to have the first phase of its municipal Wi-Fi network set up in Toronto’s financial core by the end of this June. "I would have to think that independent hotspot operators would be happy about it because it really raises the profile of the product." At the very least, the independents don’t seem concerned about losing subscribers to municipal networks. "It’s really just another carrier right?" says Stahlbrand. "So although the claims will be that it’s a ubiquitous service across a municipality, we’ll see how that actually works. For example, in my office building right here, right now, my cell phone hardly works, so I don’t anticipate that Wi-Fi will work much better." Paul Min, president of Mainspot, will find out the effectiveness of municipal Wi-Fi right away as one of his locations will be encompassed by the first phase of the Toronto network. Min says he’s not worried about losing customers because that particular location receives mostly out-of-town business and his roaming agreement with iPass will help secure business as well (RoW, May 4/05). Beyond that, hotspot operators give multiple reasons why municipal Wi-Fi won’t affect them. Boldstreet’s Camps says broadband in a hotspot will always be faster and more secure than urban networks, particularly with the number of people potentially sharing them. He also sees municipal coverage being a good collaborator for hotspots. Says Camps: "If you have ability while you’re out on the street or while you’re driving to see there’s an important file or you know that there’s something you want to watch you can then go to a hotspot that gives a good broadband experience at a lower cost." Additionally, many consumers still choose hotspots because of what they offer other than broadband – coffee, food, location, etc. – and will likely continue to do so. Increases in free hotspots, as some predict, will also negate the effects of municipal Wi-Fi. Free wireless is already a staple at many hotel chains and is becoming more prevalent in other hotspot locations as well. It provides a value-added service for businesses to attract more customers and the operators still collect a fee from the establishment for setting up and maintaining the network. But free Wi-Fi offerings, says Joe Verdecampo, director of business development for Tadaa, are not without flaws. "Free is nice, but when something is free the end user really doesn’t have much say when it’s not working properly," he says. "When you’re paying for something, you can demand quality service." How users will react, however, will depend greatly on what they are going to use the service for, which will segment the market and lead to specialization. While Verdecampo says carrier entry doesn’t deter Tadaa from pursuing more locations, any additional sales by the company at this point are to show that the technology works and that Tadaa can maintain the network. "We’re not necessarily the type of company that’s going to go out and try and grab all the Chapters and all the big chains," says Verdecampo. "What we’d rather do is show off our technology to the ISPs for example… and do a joint venture." This business model, similar to Boldstreet’s, is just one direction the independents can take to service more users. And Verdecampo says the number of users to compete for is far from reaching its peak: "Not everyone’s holding a Wi-Fi device just yet."

Independent hotspot operators maintain competitive spirit despite new options

News | March 22, 2006

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