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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.
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Three Business Models for Public Access Wireless LANs
Chris MarsdenAnnenberg School
19 November 2003Draft for comments to:
ctmarsden@yahoo.co.uk+44 777 926 0376
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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
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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
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What’s different about LANs?
Short range high bandwidth 11Mb\s-54 Mb\s 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
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Economic Case for WLANsNo spectrum costMinimal backhaul cost – varies with
business caseMinimal base station cost – $400-700Seamless networking unnecessaryData not voice – IP and hotspot useNetwork security, roaming and interface
IP-based – intelligent deviceDevice simply add-on to laptop/PDA –
corporate user installed base
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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
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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
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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
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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
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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?
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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
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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
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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 outsetFirst mover demolishes competition
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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
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1. Partnership model -franchisees
Boingo – aggregator = 5100 locationsThe Cloud – wholesale network = 20,000
projectedKorea Telecom – integrator = 25,000Backhaul – franchisee pays B + C, KT
uses parent networkRole of fixed networks – BT as sponsor
through BT wifi initiatives
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1. Partnership model - backhaul
Backhaul is highest costBase stations ideally require dedicated 11
Mb/sThat in UK costs $50,000 per annumIn South Korea $50 per monthTypically 512Kb/s ADSL – dedicated
business lines at $50-100 per monthFranchisee pays…
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1. Partnership model - wireless
Boingo and Telecom ItaliaThe Cloud and BT, NWP SpectrumKorea Telecom and regulators – SKMobileVerizon-Vodafone and Orange – fence
sittersWhat’s the price point for mobile data?
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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
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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
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4. Hardware integration
Centrino co-operation with all 3‘Boingo in a box’The Cloud – ‘My Cloud’
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2004 – Market Developments
National networks in UK and KoreaCentrino chipsets industry standard with
critical corporate user mass802.11g usable in East Asia and Canada
Requires 50Mb/s xDSL for optimal useWiFi moving into PDAs3G roll-out – will they use hotspots?Having built the ballpark, will they come?
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