Roaming for W-LAN revenue: the business case for public access W-LANs will strengthen once roaming becomes available - but it's going to take time to organise - Public Network Strategies

Telecommunications International, June, 2002 by Bob Emmerson

Wireless LAN (W-LAN) systems are fast and getting faster, security concerns have been overplayed in the mainstream press, and systems are affordable. Although it's not yet clear how much money can be made from this business, technological developments are conspiring to make public access W-LAN rollout on a nationwide scale a comparatively cheap and easy-to-install proposition.

PC cards for the IEEE 802.11b interface, for example, are a commodity item and are available with the new notebook computers from Apple, Compaq and Dell -- the latest IBM notebooks actually have the W-LAN PC cards built in. And when you consider that base stations, which aggregate and backhaul W-LAN traffic, cost around US$250 ([euro]285) each then it's clear that getting involved in the W-LAN 'hotspot' business (places where PC users can access a high-speed W-LAN connection) is a piece of cake when compared with 3G.

And it gets a lot easier if the billing issues are ignored. Airports, for example, may offer W-LAN access as a free value-added service to their business class customers in much the same way as they provide free drinks and snacks in lounges. Hotels too could offer this as a value-add to attract more custom, perhaps for hosting conferences when there will be a higher demand for wireless internet access.

But if mobile operators and W-LAN hotspot players are to have any hope of making serious money from this service, they will have to provide mobile professionals with the data equivalent of their 2G voice service -- ie, payment at the end of the month and on the same bill as voice for national and international access. In other words, what the market really wants is W-LAN roaming.

Lots of hotspots in urban environments will be needed to meet this need and they are coming. BT, for example, plans to have 4,000 in the UK by June 2005, a move that is likely to force the UK's Radiocommunications Agency to remove the current ban on the use of this spectrum for public telecommunications services. France is the only other country having a similar limitation.

SIMs and value-added SMS

SIM cards in mobile phones identify users to the network and that tells the billing system where the charge should go. The Nokia solution, which was introduced in July 2001, is based on a combined Wi-Fi/SIM card and is being piloted by more than twenty mobile network operators -- Wi-Fi is the brand name for 802.11b W-LAN certified equipment (ie, interoperable). According to a Nokia press release this solution makes it possible 'to use the card anywhere in the world within the access zones provided by local GSM operators, provided the operators have made on agreement on WLAN roaming'. True, but that will take time, and operators also need to make agreements with the owners of the hotspots.

The same card has a 2.5G interface, which makes it easy to use this complementary service for tasks such as the automatic retrieval of e-mail. Nokia also supplies roaming software, which brings SIM authentication to any Wi-Fi terminal equipped with a cheap external SIM card reader accessory. The main benefit of SIM authentication is ease of use. The user just has to type in the PIN code when starting their PC and after that everything is automatic.

Value-added SMS is a term that comes from Siemens, who in April this year spun off its Wi-Fi activities into a new company called Garderos Software Innovations. The company was formed to focus on marketing Siemens' i250 access gateways, which are basically 'IP Tollbooths'.

After connectivity over the fixed or wireless medium has been achieved, the gateway sends a location-dependent HTML page to the user's notebook. The portal entry page shows a collection of free services (eg, airport information) and billable services (eg, internet access). There is also a phone number to which the user sends a blank SMS in order to enable authentication: hence the 'added-value' prefix. Users can pay via their mobile phone bill, credit card or ISP account.

Unlike SIM authentication, this is a manual process but it is very simple and likely to find favour with hotspot owners since it does not force them into the arms of mobile network operators (MNOs).

Roaming complexity

MNOs have billing mechanisms in place and established business relationships with their subscribers - as such, they are well positioned to serve this market and pick up much-needed revenue streams without having to make significant investment. However, making broadband wireline connections to the internet is something else. This requirement plays into the hands of incumbent and competitive carriers as well as ISPs, which indicates that the optimal roaming model will involve agreements between MNOs, owners of hotspots and wireline service providers -- this will take time.

The complexity of Wi-Fi roaming on the business side can be resolved by brokers, ie independent companies that function as a clearing house, setting up agreements with the relevant parties and splitting the income. Boingo Wireless is a well publicised example of a US broker service, but its geographic reach is limited.