Wireless Wealth
This story appears in the July 2003 issue of Entrepreneur. Subscribe »
If you've been watching the technology industry at all lately, you've likely heard the word "Wi-Fi." Over the past two years, it has quickly moved from a relatively obscure technology in the land of network administrators to one of the hottest growth opportunities in the tech sector.
Wi-Fi is fast becoming the industry standard for wireless networking and is being used in homes and businesses to untether the network and provide more flexibility. In public spaces, Wi-Fi provides consumers and business travelers with wireless Internet access at broadband speeds. Wi-Fi adoption is accelerating as manufacturers such as Dell, HP, Intel, Sony, Toshiba and others are equipping laptops, PDAs and other electronic devices for wireless network connections. There are already millions of devices--in a variety of different styles and formats--looking for Wi-Fi networks to latch on to.
While the use of Wi-Fi in homes and offices is skyrocketing--to the delight of equipment manufacturers--there also are broad-based entrepreneurial opportunities providing wireless Internet access in public spaces. Because it complements their main lines of business, established and well-financed companies like AT&T, IBM, Intel, T-Mobile and Toshiba have various partnerships and plans to install tens of thousands of "hot spots" (public Wi-Fi locations) across the country--and perhaps hundreds of thousands around the globe. But the key link in that value chain will inevitably be the small to midsized businesses that already own the venues where this service can be provided.
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Whether you want to turn your existing retail business into a Wi-Fi hot spot or make that part of your start-up plan, it can be a relatively low-cost proposition. |
Whether you want to turn your existing retail business into a Wi-Fi hot spot or make that part of your start-up plan, it can be a relatively low-cost proposition. If you partner with aggregators like Boingo Wireless or with hot-spot operators like NetNearU, Pronto Networks or Surf and Sip, you don't even need a technical background or much day-to-day involvement in the network's operation. A wireless network can help drive traffic to your location, give you digitally acquired insights into customer preferences, and even be used as a medium for advertising or merchandising your other goods and services.
By partnering with hot-spot owners and operators, Boingo alone has already built a roaming network of more than 1,400 hot spots in airports, hotels, coffee shops and other high-traffic locations in 300 U.S. cities. But according to Boingo's research, there are nearly 2 million potential hot-spot locations in the United States. Your business could provide one or more of those sites.
Even if you don't have a location, you can still participate in the Wi-Fi opportunity by making a business out of installing and maintaining hot spots, or offering other value-added services to hot-spot operators and wireless users. Partners like those already mentioned can help you launch your business. Many companies, including Colubris Networks, Nomadix and Vernier Networks, provide hardware that makes rolling out hot spots a breeze.
4 Ways to Begin
There are a number of ways to kick-start your involvement with Wi-Fi, depending on your current business situation, your level of technical proficiency and your ultimate goals for your business:
1. Leverage your planned or existing location. If you currently own (or plan to own) a business that provides a high-traffic, high-loitering location (such as a coffee shop, a barbershop or a laundromat) you can add Wi-Fi services to enhance your core business, generate incremental sales and increase traffic to your location. With today's many pre-configured access points (including Boingo's Hot Spot in a Box), going wireless is as easy as getting a DSL or cable Internet connection and plugging it in to the Hot Spot device.
2. Extend your current line of business. If you already work in computer networking, selling Wi-Fi is an easy way to increase revenue opportunities and expand your customer base. If you're in the start-up phase, consider including this option in your plan. The easiest way to start is to partner with a turnkey systems provider, but you can also devise your own system using off-the-shelf components or building from scratch. Any company that needs a network is a potential wireless network customer.
3. Deploy hot spots as a hot-spot operator. If you don't have your own locations or network installation business, but your strengths are in negotiating with business owners and maintaining those relationships, you can explore the turnkey hot-spot solutions available today. These operate much like Wi-Fi franchises for the hot-spot operator and allow the entrepreneur to establish a branded local service that can be sold into local business and target venues.
4. Become a wireless Internet service provider (WISP). If you are more technically proficient and want to get into the business on a deeper level, consider developing your own turnkey solution that can be re-sold to hot-spot operators looking for quick and easy ways to deploy public Wi-Fi locations. This involves developing a hardware device that combines a Wi-Fi access point, a network access controller, a DHCP (dynamic host configuration protocol) server and a small Web server. You'll also have to integrate that equipment with back-end authentication, authorization and accounting software/services for the hot-spot operator. That requires knowledge of RADIUS (remote authentication dial-in user service) authentication protocols and network management systems, and the willingness to establish a full-fledged service offering with support and network operating center oversight.
Got Wi-Fi?If you've decided to install a broadband connection in your place of business, you can add a public hot spot to help offset the cost, but you may need to upgrade your service and add some hardware. Here's how:
1. Request three usable IP addresses from your broadband provider. Sometimes called a /29 (slash-29) space, it includes eight IP addresses (three for systems and five usable addresses). The three you'll use are for the DSL or cable modem/router, the router/firewall and the hot-spot device.2. Add an Ethernet switch. This allows you to split the DSL or cable broadband service for multiple uses. Something like the NetGear FS-105 will run $30 to $40.
3. Add a router with integrated firewall. This separates and protects your private network from the public hot spot and provides an additional DHCP (dynamic host configuration protocol) station for assigning private IP addresses, so you can expand your private LAN at will. It's about $50 to $60 for an SMC Barricade.
4. Choose a hot-spot device. Like the router/firewall, this contains a DHCP server as well as other functions--an access control device to keep unauthorized users off the Internet and a Web server to provide local login pages for your service. These can run from $300 to $700. -S.D.
Location, Location, Location
What makes a good hot-spot location? The best is someplace with a built-in audience and a high number of repeat customers. You should put less emphasis on using Wi-Fi to draw new crowds, as the added promotion will probably cost more than it's worth. Find locations with established foot traffic, especially if they're also high-loitering locations where people sit for a while--like coffee shops, train stations and airports. Or target a premium location along the travel ribbon, where businesspeople on the road gather--airports, hotels, restaurants adjacent to hotels and so on. Wireless is invisible, so no matter what, make sure you put up signs to promote the hot spot.
Understanding more about Wi-Fi users can help you identify the best places to locate a hot spot. There are three primary kinds of Wi-Fi users:
- Business travelers: They're constantly looking for ways to connect to their homes or offices to get e-mail and access to files. According to the Department of Transportation, there are 27 million business travelers with laptops traversing the United States. Some of these users buy the connectivity themselves, and some are on enterprise connection plans.
Learn More Want to use Wi-Fi while you're doing business on the road? Click here for news for you. - Local subscribers: They use public Wi-Fi in addition to or as a substitute for broadband and visit the same hot spot (such as a particular coffee shop) several times a week. Most local Wi-Fi plans have unlimited access for around $20 to $30 per month, so this is less expensive than installing cable or DSL at home for $40 to $50 per month.
- Occasional surfers: These users catch a few minutes here and there but don't have a set pattern. The cost of the connection isn't important to them because they don't connect frequently enough to incur huge charges. To generate consistent sales, though, you're better off targeting other users.
CEDX Corp. has been installing all kinds of networks since 1997. Founded by Craig Plunkett, 40 (pictured, using Wi-Fi on the go), the company has designed and installed both wired and wireless networks. Despite losing his largest account in the World Trade Center attack, Plunkett says the company will hit sales of half a million dollars this year.
The East Northport, New York, company rebounded from 9/11 due in large part to its expertise with Wi-Fi networks. CEDX uses the highly flexible NetNearU Wi-Fi access point hardware to roll out networks for both public hot spots (typically owned by CEDX) and private corporations. Once in place, Plunkett uses the back-end services of NetNearU to provide exceptional customer service. With a Web-enabled monitoring system, CEDX can watch the activity and status of each hot spot on every network it has deployed.
Plunkett is quick to share one secret of his success: industry partnerships. "Besides NetNearU, we also have partnerships with the local carriers," he says. "They point us to new accounts, and we install their services. We resell DSL, e-mail services and Web hosting, plus we do Web development. We really aim to be a one-stop shop." -D.W.
Getting Started
Ready to roll out a hot spot? Using one of the turnkey products already on the market is the accelerated path to Wi-Fi involvement. Even with limited technical proficiency, you can become a hot-spot operator, and the hardware costs have come down significantly--$300 to $700 today, compared to $1,000 to $2,000 a year or so ago.
Ready-to-go solutions include the Hot Spot in a Box from Boingo Wireless, FatPoint from FatPort, the Routing Access Point from NetNearU and the Hot Spot Controller from Pronto Networks. Each solution provides a slightly different set of features. Some are more customizable, some provide better revenue-sharing opportunities, some are easier to set up and maintain, and some include marketing and promotional help. All these solutions include roaming agreements with one or more major aggregators--so you can capitalize on business travelers passing through town who need Internet access.
Whether you're choosing a turnkey hot-spot solution or developing your own, you need to consider roaming arrangements with hot-spot aggregators as a fundamental part of the value proposition. Roaming is essential to attract the 27 million business travelers who take laptops on the road. Traveling employees need to know they can connect in any hot spot without joining a new network.
Roaming partners publish up-to-date directories of partner locations so customers always have the most current list of hot spots, and some roaming partners like Boingo publish that directory directly to the software on users' laptops. Increasingly, Wi-Fi customers are looking for roaming locations when they choose hotels and airports for travel. If you haven't ensured a roaming deal, you won't be in the database when that traveler is looking for a connection in your town.
Finally, some roaming providers will pay you a cash bounty for new customers you sign up for their service. This can be a great revenue stream, so ask about customer acquisition bounties when choosing a hot-spot solution.
Covering All the BasesDeep Blue Wireless in Menlo Park, California, is making money from Wi-Fi on a spectrum of services. Founder Alan Gale, 39, explains the business: "As a hot-spot operator, we seek out and establish relationships with location owners and deploy a wireless solution. As a wireless Internet service provider, or WISP, we seek out customers who gain access at those locations."
There are five parts to the Deep Blue business model: public hot spots, public access kiosks, tech services (like faxing, printing and voice), residential broadband and consulting. "We're integrating all these things together," says Gale. "And we're layering tech services over access to increase revenue per user." The company stays focused on core business issues by using Pronto equipment and back-end services, to keep the technical complexities to a minimum. Gale knows the wireless industry is still evolving. He's seen even well-funded wireless companies close their doors. "But we'll survive by being smart and not moving too quickly with the rollout. We get rid of bad locations and tweak our pricing and offering for each new market."
The company's networks attract more than 1,000 unique logins per month and generate 400,000 network minutes. Deep Blue hopes to hit $1 million in sales this year. -D.W.
Maximizing Your Return
No matter how you decide to get into Wi-Fi, you will have a vested interest in getting people to sign up and log on to the network. That will require marketing. Hundreds of thousands of people pass through hot spots each day and don't realize that a broadband Internet connection is available. Every day, almost 150,000 people go through Dallas/Fort Worth International Airport, 100,000 through Denver International Airport and 75,000 through Seattle-Tacoma International Airport-three of the largest hot spots in the country. Yet in-terminal surveys show few people know the network is there.
You can't see Wi-Fi, and neither can your customers. You have to actively promote it in the venue. Placing highly visible signage where customers can see it--in the window, on the tables, near the cash register--can dramatically increase hot-spot activity. Even in premier locations, a noticeable drop in sign-ups and connections have been noted on the days that the owner/operator forgot to place the sign in front of the hot spot.
If you remember when mobile phones were monstrous "car" phones hard-wired to vehicles, then you can see where Wi-Fi is today. At that time, people couldn't imagine having a small, handheld phone they would carry and talk on everywhere they go. Today, small omnipresent Wi-Fi devices are on their way, and their owners will be looking for wireless connectivity.
Imagine the prospect of earning a nickel or even a penny for every minute of local cellphone traffic if you had placed a cellular tower on the top of your business office during the last wireless revolution. There's a new opportunity just as compelling but much less expensive to get into with wireless data. Entrepreneurs can benefit by establishing hot spots and providing the cellular towers of Wi-Fi. With hardware manufacturers' dedication to proliferating wireless devices of every kind imaginable, it won't be long until everyone is carrying Wi-Fi devices and looking for Wi-Fi networks in order to get connected. Now is an ideal time to start putting the network in place for all those people in search of Wi-Fi.
The Surf's UpRick Ehrlinspiel, 44, founded San Francisco-based Surf and Sip Inc. in 2000. After just three years, the company is already recognized as one of the largest hot-spot operators in the country, with nearly 250 locations in the United States and more than 100 in the United Kingdom.
Funded with about $1 million in angel capital, Surf and Sip designed and deploys a proprietary hot-spot device, plus its own back-end network monitoring, authentication and billing services. "We worked with an engineer to build this device--an access point and server together in one box, about the size of a DVD jewel case," says Ehrlinspiel. "We brought our costs down to about $200 per location."
Early on, Surf and Sip recognized that people wanted Internet access at cafes and other hot spots, but few folks actually carried laptops with them. The solution? "Rental laptops," says Ehrlinspiel. "Without the revenue stream from rental machines, we'd have had no value proposition to the shop. There were just too few wireless users, and I wasn't going to sit here for three years while people decided to bring laptops with them." With just five employees, the combination of access and equipment seems to be working for Surf and Sip. Says Ehrlinspiel, "We have some coffee shops that gross $2,000 a month, and we split that revenue with the shop owners." -D.W.
