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The risks of no-risk hotspots

DataPro has introduced a "risk-free", outsourced option to prospective WiFi hotspot owners. But the real risk to location owners is whether the service will still be there tomorrow.
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Is it the role of the IT press to drum up support for killer technology that somehow isn`t making it yet? I don`t think so - at least not without due diligence.

I recall an incident in which someone with an interest in the take-up of WiFi took it upon himself to enlist my help in fighting the regulatory dragons and greedy incumbents. It sounded nice enough, with decent enough motives, and the man had some valid points.

His concerns were matters of regulatory sloth (unfair and downright irritating), the cost and performance benefits of WiFi (a no-brainer), its simplicity of installation and ease of use. Of course, his rally for support didn`t mention the risks.

Lose the risk

Although ITWeb has reported extensively on the security risks and the risk of getting burned by the regulatory framework (this has been cleared up, so no excuses there), the risk of future financial viability of hotspots has not received much attention.

Following fairly closely on M-Web`s four-shop deal with Mugg & Bean, Telkom`s ambitious announcement of wide-ranging hotspot pilots for ADSL users (mostly invisible, commentators complain) and a rash of lower-scale implementations in metropolitan areas, DataPro has come up with a new twist to the hotspot saga.

It offers a risk-free, outsourced wireless Internet access solution for prospective hotspot owners. "Risk-free" here means the hotspot owner does not have to pay service fees or concern himself with running the hotspot. DataPro does that.

It is an obvious draw-card for customers, the company says, and if that doesn`t get coffee shop owners clamouring, perhaps the 30% share of income offered to them will. Guests purchase access on a per-minute prepaid basis (R1/min).

Those who went before

Mugg & Bean`s own business model is not to charge M-Web subscribers until the 20th hour is up, and franchises do not share any prospective income. This means the DataPro deal, with its 30% cut, will sound particularly juicy to restaurant owners and barkeeps from here to Hennenman. In fact, the Mugg & Bean shops that weren`t included in the pilot are positively baying for WiFi, the company says.

There are no early signs, from my investigations, that hotspot owners are making much money at all.

Carel Alberts, Technology editor, ITWeb

But not so fast, it cautions. Having been there and done that, the company has wisely decided to wait and see whether this really pays off before rolling it out to the rest of the shops.

I cannot agree more. The only thing worse than suddenly over-charging for what used to be a free service, when the costs of running it are too high, is to take it away after adding value to the customer`s experience. For a good backgrounder on cost inhibitors to WiFi, read the article by Intel`s Steve Nossel in his company`s ITWeb press room.

And there are no early signs, from my investigations, that hotspot owners are making much money at all. Mugg & Bean, as stated above, does not get a cut or make any direct revenue from WiFi, and the company is not even sure it is getting much more indirect income from increased customer numbers. It is early days, spokesmen say.

Another sign that WiFi isn`t taking off as quickly as some would like us to believe comes in DataPro`s own strategy. Why does the company find it necessary to offer this service free to location owners? It`s a sign of a lack of confidence in WiFi`s ability to make money at this stage.

M-Web concedes that revenues are low, will remain so for some time, and that this situation is also a feature of the international landscape. The company tellingly says it chooses partners who have a serious long-term view of WiFi, and are going into it with their eyes open. "Sooner or later there will be costs involved, but usage, although still low, is climbing pleasingly," says Russel Dreisenstock, M-Web GM, WiFi.

DataPro has admitted it has a role to play in creating demand for this form of access, and may very well change its tack once its investments in running WiFi operations for customers, at some risk, starts paying off. In the meantime, you can have it for free, and for your trouble (and context provision), 30% of whatever money is made from it is yours.

Related story:
WiFi income shared with hotspot owners

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