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When it comes to wireless Internet, free is the key

‘Hot spots’ draw business, as long as users don’t have to pay for access

* A map of Wi-Fi spots in Austin http://www.statesman.com/business/content/norails/business/1102wifi.html

By Kirk Ladendorf

AMERICAN-STATESMAN STAFF

(Thanks to Geoff Badenoch for passing this along- Russ)

On a gorgeous fall afternoon last week, a single customer was seated at the Starbucks at Sixth and Congress, surfing the Internet from his laptop and gazing occasionally at the sidewalk traffic that included a guitar-toting street-corner preacher.

Across town in West Austin, eight patrons were online at Mozart’s Coffee Roasters Inc. on Lake Austin Boulevard near Tom Miller Dam.

Two nice locations for coffee shops on a nice day. The difference? The wireless "hot spot" at Starbucks is run by T-Mobile USA Inc., a wireless service provider, and costs $6 an hour or $30 a month for access. At Mozart’s, Internet access is free.

Free seems to be the right price for hundreds of Austinites who want Internet access away from their homes, offices or dorm rooms.

Austin has about 50 free "hot spots," or wireless networks, in coffee shops, bars, restaurants, bookstores and at least one church; there is probably an equal number of paid locations.

The city is part of a wireless Web explosion based on an inexpensive networking technology popularly known as "Wi-Fi." The new wireless networks are so easy and inexpensive to set up that hot spots are springing up like dandelions.

IDC, a tech-research company, estimates 11,000 will be operating in the United States by the end of this year, up from about 4,000 last year. Next year, another 15,000 are expected to be built.

There are so many hot spots because the networks are small. A Wi-Fi network extends only 300 feet or so from a small central antenna.

While many companies, including T-Mobile, are rushing into the technology with dreams of making millions, some tech advocates envision improving the world by creating chains of free hot spots.

Led by volunteer techies, groups such as the Austin Wireless Group and the Austin Wireless City Project are a powerful force in bringing Wi-Fi to the masses. Using donated computers and networking gear, they’re creating hot spots throughout Central Texas.

"It’s all about connectivity and getting people to communicate with each other," says Rich MacKinnon, a 39-year-old software entrepreneur who is spearheading the Wireless City effort. " ‘Community’ is an overused term, but this is creating a wireless community."

MacKinnon’s group has brought up wireless service at nine local venues: two coffee shops, five bars and two bookstores. They are linked through a common server located at MacKinnon’s startup business, Less Networks.

As long as the sites don’t charge, they don’t pay MacKinnon. The volunteers use donated computers and communications gear to set up a network for the cost of a broadband Internet connection.

MacKinnon says he’s talking with the owners of 59 other venues, some of which offer paid service, to convert to free service and join the Wireless City network.

The idealistic MacKinnon admits he is trying to change the world. He hopes to build the world’s largest group of free, interconnected wireless hot spots.

"It’s easy to have the idea for a movement in your head," he says, "but there needs to be a flash point to get it going in the real world. I am trying to create that flash point here."

Out of the cubicle

Regular users include Adam Weinroth, who leaves his home office several times a week to do computer work at one of three coffee shops — Mozart’s, the Green Muse in South Austin and the Flightpath on Duval Street.

Doing work in a public place has a different vibe and a different energy than working alone at home, Weinroth says.

"It’s nice to have other beings around you," he says. "It’s better than being solitary."

When he’s working at a coffee shop, Weinroth checks e-mail and manages Easyjournal.com, the Web site he created for Web loggers, or "bloggers."

Bill Leake, uses hot spots to break away from the distractions of the office of his marketing services company, LC Growth Inc.

"I think it’s more productive to have a change of pace and get out of the cube and go somewhere," he said. "I am looking for a quiet corner to bear down for two hours to work on a report or finish a proposal."

Some have cut the cord altogether.

"We have a few older guys right now who have closed their offices and are running their businesses from a table at Mozart’s," says Jack Ranstrom, manager of the restaurant.

The main users of free wireless include college students, techies and some business professionals. Many are heavy users, spending hours at a time at Mozart’s and other locations.

To charge or not

The number of potential users is enormous. Industry analysts say more than 18 million laptop computers will ship in 2004 with Wi-Fi capability. That number will grow to 32 million in 2005, according to the Forward Concepts consulting firm. But industry analysts say only a small fraction of computer users are active Wi-Fi users.

Although the numbers suggest Wi-Fi is a no-brainer business proposition, it’s more complicated than that.

For coffee shops and restaurants, Wi-Fi so far has been more successful as a means of attracting more customers than a source of additional revenue itself. Starbucks’ experiment in paid access is widely criticized as the wrong approach, while Austin-based Schlotzsky’s Deli has been praised for its free network.

John Wooley, chief executive of the sandwich chain, says surveys show that about 6 percent of all customers come to the restaurants because of Wi-Fi. That translates into an extra 15,000 customers for the chain at its 30 wireless restaurants and an added $100,000 in revenue.

"We are way ahead of the curve, but eventually it will be ubiquitous," says spokeswoman Monica Landers. "People are going to expect to find a wireless signal wherever they go."

The debate over free vs. pay aside, offering wireless access is a bottom-line decision. Ranstrom estimates he has spent $6,000 in setting up wireless-access points, installing more electrical outlets and paying for Internet access since Mozart’s launched its hot spot in the summer of 2002.

"It can be a headache, but we think it’s worth it," Ranstrom says. "We have increased our customer count during the odd day parts, and we have remained competitive. We have given ourselves the kind of buzz we were looking for. Customers want to go where people are, where it is happening and where it is festive. That is coming into play with free wireless."

Ranstrom says he briefly considered, but quickly rejected, the idea of charging for Internet access.

"We sell desserts and coffee," he says. "What we don’t want to have is information technology training for our workers. Having it for free means if customers can’t get on (the access network), we can say, ‘Sorry, it’s free,’ " he said.

But free access is a tricky issue for commercial Internet service providers. SBC Communications Inc. says it treats them like any other business customer as long as their service is free. But Time Warner Cable says its policy is to charge more to business customers that operate free hot spots because they are adding traffic and cost to its broadband network.

Will it last?

Despite the passion of Mac- Kinnon and others, some industry analysts are openly skeptical about the staying power of free hot spots.

"It’s a utopian concept," said analyst Keith Waryas with research firm IDC. Without some form of remuneration, he says, there is no incentive to pay for continued connectivity, service upgrades, security and other features. "It harkens back to the free Internet services of the 1990s, most of which have disappointed."

Austin-based Wayport Inc., which charges for Internet access at airports and hotels, is betting that free and pay access sites will coexist.

Wayport concentrates on places frequented by affluent business travelers, but the company also is collaborating with the giant McDonald’s chain. It rolled out wireless access to 75 McDonald’s locations in the San Francisco area last summer and is expanding its pilot marketing to include restaurants in Boise, Idaho.

Wayport, which connected 235,000 customers to the Internet last month, says use of its paid service is increasing by about 15 percent a month.

Wayport charges its users, said Dan Lowden, vice president of marketing. But it provides more than the typical free wireless site, including a nationwide communications network, security, 24-hour customer support and Business Week magazine online.

"There are going to be different levels of service, support, performance and content between free and paid sites," Lowden said.

[email protected]; 445-3622

http://www.statesman.com/nation/content/auto/epaper/editions/monday/news_f36ab05a92a6502100bc.html

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