Getting in on Wi-Fi action means playing defense

Many of the publications that consulting groups spit out are, frankly, ignorable. The mind tends to wander when confronted with the latest variation on ”Leadership Is Important” and ”Don’t Forget the Bottom Line.” But when the Boston Consulting Group issued a six-page ”opportunity for action” report a few weeks ago on the topic of Wi-Fi, it’s safe to assume that it received an eager, attentive reception from the telecommunications providers on BCG’s e-mail list.

By D.C. Denison, Boston Globe Staff

That’s because Wi-Fi, the high-speed technology that allows people to connect to the Internet wirelessly, is a technological wild card that is causing flashbacks to recent wrestling matches with uninvited guests like the Web and instant messaging.

Wi-Fi is particularly challenging because, like those earlier technologies, it has arrived with no apparent business model. Yet as the BCG Wi-Fi report admits upfront: ”It’s cheap. It works. And early adopters love it.”

One particularly vexing problem for the telecommunications companies is the proliferation of Wi-Fi in public locations like hotels, coffee shops, and airports. T-Mobile, for example, has turned on Wi-Fi in thousands of Starbucks coffee shops. There is also a free Wi-Fi movement; in Boston, Tech Superpowers is bringing free Wi-Fi to upper Newbury Street, one building at a time. And on the horizon, there’s the recently announced Cometa Networks, a joint venture among AT&T, IBM, and Intel, that plans to offer Wi-Fi coverage in the country’s top 50 metro markets.

So how to tame this beast? This is where consulting firms earn their fees. And where the reading gets interesting.

In the case of public Wi-Fi services, BCG is recommending the same strategy that many vocal fans have been urging on the Celtics: De-fense!

The BCG report concedes that much of the value associated with Wi-Fi will be captured by property owners who control the most vital public hot spots: airport lounges, hotel lobbies and rooms, and coffee shops. They’ve got the location and they can blanket these spots with wireless signals. In many cases, they are happy to provide the service for free. Hotels that want to inspire loyalty among laptop-toting travelers are already providing free Wi-Fi service.

The challenge for wireless service providers will be to find ways to get their customers access to these signals. If that means cutting a deal with the Wi-Fi provider who has the territory locked up, it will be worth it, BCG says, even if the potential profits are slim.

This will not be an easy decision for many telecommunications providers, I learned when I called Joe Manget, a vice president and director at Boston Consulting Group and one of the authors of the report. Many of these wireless services, Manget explained, have already lavished billions of dollars on next-generation high-speed wireless licenses and technologies like ”3G.” After spending all that money, and stoking the hype for the promise of these high-speed wireless services, these providers are in no mood to ramp up yet another delivery system.

Nonetheless, BCG’s defensive strategy urges telecoms to do some ”careful thinking” about who’s going to use next-generation wireless phones, who’s going to use Wi-Fi, and where.

For example, a wireless service subscriber in an airport lounge or a coffee shop, with a laptop comfortably resting on a table, will be looking for a Wi-Fi signal for its speed and capacity. A coffee shop, after all, is a good place to surf the Web, or download a late-arriving document before a meeting. On the other hand, a passenger in a taxicab on the way to the airport is not in a position to surf the Web: traditional cellphone service will probably do the trick.

Unfortunately, that means the solution to the 3G or Wi-Fi quandary is . . . ”both.”

The payoff for wireless service providers may come down the road, Manget said, as more and more exciting applications are built on top of these Wi-Fi networks. That’s when sustainable business models will start to emerge. But in the meantime, the recommended strategy is a defensive one: Give your customers Wi-Fi access even if you have to cede control and profit margins to third parties.

After all, customers who have to use another service for Wi-Fi may never come back. Think about a Wi-Fi-enabled, business-class ”road warrior”: If he or she discovers that a certain wireless service offers Wi-Fi in all the right airport lounges and hotels, the consumer might be inclined to give them his or her cellphone service business as well, just to keep all wireless accounts on one bill.

”The overall message is never, never lose a customer of your service,” Manget said. ”As soon as a customer starts using a wireless network that’s not yours, you’re in trouble.”

D.C. Denison can be reached at [email protected].

This story ran on page C2 of the Boston Globe on 2/9/2003.
© Copyright 2003 Globe Newspaper Company.

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