Wi-Fi Business Applications: B2C Scenarios

The momentum behind Wi-Fi, or 802.11b, is amazing. The technology is being billed as an alternative to third-generation mobile phone (3G) technology. It delivers the Internet to properly equipped laptops and handhelds at least ten times faster than standard mobile phones, but only within 100 meters (328 feet) of an access point. Users enjoy connection speeds ranging from 256 kbps to 512 kbps.

The technology may be great but the end-user applications and pricing are equally important. What are the Wi-Fi killer apps? What is the right pricing model (free versus pay)? Let's examine each of these issues in more detail.

Wi-Fi B2C Application Scenarios
What are some possible business-to-consumer (B2C) scenarios for Wi-Fi applications? In recent years, Wi-Fi has been popular with consumers at coffee shops, airports, hotels, and schools.

Gas stations are the latest venues to be revamped as Wi-Fi hotspots. Across the Atlantic, British Telecom signed an agreement to turn 27 motorway service stations run by the privately owned company Welcome Break into hotspots. In the United States, Working Wild of New Mexico has signed an agreement with Toshiba Computer Systems Group to provide wireless Internet service at more than 17,000 Circle K convenience stores and Conoco/Phillips gas stations. Anyone with a properly enabled laptop computer or personal digital assistant (PDA) will be able to e-mail, surf the Internet, or download online media at the connected stores.

Wi-Fi-enabled gas stations could result in some very interesting scenarios. In the not-so-distant-future, your car could pull up to a gas pump and do much more than fuel up. It could download maps for the navigation system, videos for the backseat DVD player, music for the in-dash MP3 player, and even messages from your e-mail server. When the car pulled into the garage, it could connect to the wireless home network and share the media content it downloaded on the road with your home PC, which would neatly store it on a hard drive and then distribute it to the appropriate entertainment devices (e.g., a big-screen TV, DVD player, or stereo system). Delphi Automotive Systems is working with Intel on a prototype of a web-savvy car [1].

Then there is the untethered student. K-12 schools and higher education are among the leaders in Wi-Fi adoption. Lots of techno-savvy students equipped with laptops ready for wireless networking have helped make schools a natural fit for Wi-Fi. Another reason that education has adopted Wi-Fi is structural: Elementary schools and high schools (and to some extent colleges) lack physical obstacles such as elevator shafts and high-rise buildings that can interfere with wireless signals.

Children's learning systems and toys are another logical fit for Wi-Fi. Children are inherently mobile and don't like to stay in any one place for too long. It makes sense to build toys that are untethered, yet connected. We expect to see Multimedia Messaging Service (MMS) capability in many toys soon. MMS technology allows children to send and receive messages with pictures, text, and sound. Imagine a teddy bear that can converse with little children that is remotely controlled from a personal computer.

Wi-Fi B2C Business Models: Free Service versus Paid Service
Free Wi-Fi. Even McDonald's has decided to experiment with free Wi-Fi access in several of its markets - New York City, Chicago, and a major market based in California. In an effort to stem a highly publicized drop in sales, the company is embarking on several new initiatives, Wi-Fi being one of them. According to the company, customers will receive an hour of wireless Internet access on site at the restaurants whenever they purchase a combination meal. After an hour's time, customers can spend more time online by purchasing either an additional hour for $3 or another combination meal [2].

Usage Fee Wi-Fi. In August 2002, Starbucks launched its in-store Wi-Fi service through a revenue-sharing partnership with Deutsche Telecom's T-Mobile USA. Consumers can either pay as they go ($2.99 for 15 minutes) or subscribe to the service and pay monthly ($29.99 to surf at Starbucks only and $49.99 for unlimited access to the nationwide T-Mobile HotSpot service). Fees for Wi-Fi service are charged to a credit card that the user provides when signing up for the service or one that a pay-as-you-go user provides before logging on.

Deciding whether to charge for Wi-Fi service is an interesting strategy problem. If you were a manager, when would you offer access for free and when would you charge for it? The answer is… It depends. Starbucks' initial research has shown heavy usage of its Wi-Fi services during the day by real estate industry professionals who meet with clients to view property listings on the Internet before setting off to view them.

In the case of McDonald's, the objective is to create more value for the consumer and get them to spend more time in the store (an interesting strategy for a company that's pretty much responsible for the term "fast food.") Starbucks, on the other hand, doesn't seem to have a problem enticing its customers to linger. Its customers tend to hang around while they savor their lattes. The company's objective is to use Wi-Fi to further enhance the customer experience.

The bottom line: Whether companies decide to offer Wi-Fi access for free or for a fee, it will not be inexpensive to bring this wireless service offering to market. Companies have to deliver the business and operational support functions including network operations, billing and settlements processing, and help desk support for end users. How do you create a Wi-Fi business model that pays for these infrastructure and support costs? This is the challenge in providing a free service.

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[1] Heather Newman and Mike Wendland, "Coming Soon: A Web Browser on Wheels; Technology May Make the Car an Extension of the Office, Home," Detroit Free Press, January 10, 2002, p. 9A.
[2] Duncan Martell, "Intel and McDonald's Hook Up to Push Wi-Fi," Reuters, March 11, 2003.