From coffee shops to fast-food joints to an exclusive lakeside resort, businesses across the country are building high-speed wireless Internet networks in record numbers to please their current customers and to lure new ones.
However, despite a spike in the number of locations, or hot spots, where people can get Wi-Fi Internet access, these businesses aren’t attracting record numbers of new customers, industry analysts say.
At Starbucks, for example, only “tens of thousands” of customers are paying to use the company’s much-publicized Wi-Fi network, out of 22 million who file through the company’s stores every week, a company representative said.
The network has been up and running since August in 2,100 — or 60 percent — of Starbucks coffee shops in North America.
While the company would not disclose its financial arrangement with T-Mobile to offer the service, wireless industry analysts say that T-Mobile is most likely bearing the brunt of the cost, as its predecessor MobileStar did for Starbucks in 2001 prior to going bankrupt. T-Mobile purchased MobileStar last year.
To power the service, T-Mobile relies on a high-speed T-1 line, which typically costs $1,000 a month per store, several analysts said. In addition, T-Mobile most likely paid a one-time cost of between $500 and $600 at each store to set up the Wi-Fi infrastructure, they said.
Seamus McAteer, an analyst with market research and consulting firm Zelos Group, is skeptical that T-Mobile is breaking even on its investment in the project.
“Generally you want to have between 30 and 100 people per month, consistently throughout the year, to break even,” he said.
T-Mobile would not release any figures, but said it is “pleased” with the number of people who have used the service so far.
“The service hasn’t been promoted yet,” said T-Mobile spokeswoman Kim Thompson.
The company is so confident in the technology that it has expanded its scope to 100 Borders Bookstores and 15 airport gates. The company plans to offer the service in 400 Borders Bookstores by the end of the year, Thompson said.
Starbucks, for its part, said it is satisfied with the service and plans to offer Wi-Fi access in 500 more of its stores by the end of the year.
“It’s still in its early days,” said Lovina McMurchy, director of wireless ventures at Starbucks.
She said the decision to install wireless networks was motivated by requests from customers who wanted to get work done on their laptops while drinking their coffee.
Myriad other businesses suspect their customers want Wi-Fi, too.
This week, DataCentric Broadband of Houston launched a Wi-Fi network at Del Lago — a lakeside resort in Montgomery, Texas, just 45 miles north of Houston. The wireless network was designed so that the resort’s guests could access the Internet throughout the resort, including the golf course.
They can even surf the Net while riding in a boat in the middle of man-made Lake Conroe, which the resort’s owners boast is the largest wireless-enabled recreational area in the country.
“There’s been such a focus in the Wi-Fi industry on airports and coffee shops,” said David Herr, president and CEO of DataCentric. “It’s a matter of time before people identify more niches. There is a need for people to get broadband. At my business we live and die by e-mail.”
However, it appears that the wireless hot spots built by businesses like Herr’s may outstrip consumer demand — at least for now.
Around 3,700 for-pay Wi-Fi hot spots were set up in the United States by the end of last year — 2,600 of them in coffee shops, according to market research firm In-Stat/MDR. That number is expected to explode to 10,000 hot spots by the end of this year.
It’s difficult to pin down the exact number of users since companies like Starbucks don’t release those figures. However, analysts suspect the numbers are disproportionately low compared with the number of available hot spots.
Wi-Fi use “is certainly not growing at the same pace as its footprint,” said In-Stat/MDR analyst Amy Cravens. “We are seeing an increase in locations, but not a significant increase in usage of those locations.”
Companies that are building wireless networks for their customers need to educate the public that the hot spots exist and show people how to use them, Cravens said.
They may also need to convince these same customers to tote their laptops everywhere they go in order to take advantage of the service, she added.
With more companies jumping into the Wi-Fi arena, making that case may get easier.
In December, AT&T, IBM and Intel formed Cometa Networks, which sells Wi-Fi infrastructure to companies that want to offer the service to their customers. The group’s first big project is to provide bandwidth for Wi-Fi access in, of all places, McDonald’s.
Last month, the fast-food chain installed Wi-Fi access points in 10 of its restaurants in Manhattan as part of a pilot program. The company plans to wire 300 more of its restaurants in New York, Chicago and an unspecified city in California by the end of this year.
While it’s too early to tell whether people will pony up the $3-per-hour fee to use the system, McDonald’s sees the technology as a way to coax its customers into staying longer at its restaurants and buying more food.
“It’s all about serving our customers,” said McDonald’s spokeswoman Lisa Howard. “Our people are really pressed for time these days. If they can accomplish a couple of things at once, then that makes more efficient use of their time.”
It could also help boost McDonald’s bottom line, although analysts doubt that will happen.
“McDonald’s is designed for you to go in and out,” McAteer said. “You are talking about uncomfortable chairs, blaringly bright décor — none of these things are designed to keep people comfortably seated for an extended period of time.”
Source:
http://www.wired.com/gadgets/wireless/news/2003/04/58305?currentPage=1
