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On WiFi pricing, and the cluelessness of large bloated former state sector quasi-monopolies

I have recently got myself a laptop computer with built in 802.11b/g wireless, and I have therefore spent a fair bit of time looking for hotspots in which I can connect to the internet, preferably for free.

There seem to be three business models for public WiFi access points at this point. The first one seems to be provide it for free in your cafe or restaurant and hope it increases custom, or at least ensures that custom does not go elsewhere. The second involves charging extortionate amounts of money, and hoping that enough people who are really rich and/or travelling on expense accounts will pay for it for you to make some money. The third is for people with existing internet infrastructure to plug wireless access points into their infrastructure and figure out how to make it pay later. The obvious candidates to try this third option are owners of existing internet cafes, who have wired ethernets present already, lots of internet capacity already, and for who the total cost of buying an access point and plugging it in is around £40.

All three of these models are present in the UK. The most common is sadly the second. There are lots of wireless access points in Starbucks, other coffee chains, in McDonald’s restaurants and the like that are trying to charge me £6 per hour or similar. Now this pricing is ridiculous. I can use a terminal in an internet cafe for £1 per hour, and the costs of running such a business are vastly more than providing WiFi. (I have my own WiFi hotspot in my home. This cost me £69.99 for the all in one router/DSL modem/wireless access point and the DSL internet access costs me £25 per month. A business would be able to reclaim the VAT on that and get it ever cheaper. This is not something that requires enormous capital investment)

This second, high charging option tends to involve the owner of the cafe outsourcing the WiFi provision to an existing telephone company. T-Mobile are providing WiFi for Starbucks, and BT, Britain’s former public sector monopoly and the largest telephone company in the UK, is providing infrastructure for a variety of establishments. (The problem with this model is that the provider has to make a buck separately from the cafe). BT is a reasonable company at a wholesale level, but they have a legendary cluelessness as a retail business. Although they own most local loop telephone lines in the UK, their ISP is nowhere near being the market leader. I was a customer, but I switched due to poor service and high prices. (Even less impressively, although they had huge incumbency advantages and about ten year’s head start on the third and fourth entrants, their mobile phone business managed to come in fourth out of four in the UK in terms of customers when they eventually spun it off).

I suspect that the owners of such services have discovered that they are not doing much business, and a shakeout is starting soon which will end up with prices more closely reflecting costs. In any event, BT are now providing a variety of free trials, presumably in order to collect information about likely customers, and in the hope that some people will sign up for the pay service after the free trial ends. A 30 day free offer seems to be included with many laptop computers, and this week BT are offering a free trial for anyone who registers. Okay, sensible move on their part. They get my personal details and I can then get some free internet access. Fair trade.

So, this morning I found a BT hotspot in a cafe. I sat down, and got myself a cup of coffee. They asked me to register. I gave them some information about myself, including my e-mail address. After clicking through a couple of pages, I was told that my registration was successful, and that my password would be sent to me by e-mail. However, I was not logged in, and therefore I couldn’t access my e-mail and get the password. To use the free trial I was required to connect to the internet somewhere else, download my e-mail, and then go back to the BT hotspot to log in.

As Douglas Adams once said, ten out of ten for style but minus several million out of ten for good thinking.

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8 comments to On WiFi pricing, and the cluelessness of large bloated former state sector quasi-monopolies

  • Dale Amon

    Another problem for the internet cafe or Starbucks is that they are commercial rather than residential and fall under a whole different pricing mechanism with the telecoms. They are selling bandwidth and the telecoms want a piece of it. I was the Tech Director of one of the first four ISP’s in the UK/Ireland region, and believe me, we did not give connections to Cybercafe’s for free, nor did BT/CW/NTL give us a free ride. In fact, the telecoms got two whacks at it. One for the main leased line into our facility; and once for the leased line out to the customer.

    I do not know how much this has changed in the last 5 years or so, but I very much doubt commercial connectivity rates have gone down by *that* much.

    So that wireless charge really does have to be fairly high if the Starbucks is going to pay the bill for the leased line and internet connection. I expect rates have dropped by at least x10 since I last priced them, but this is still high for a coffee shop unless the
    WiFi usage is bringing in a massive user base over which to amortize the thousands of quid per year telecoms/ISP costs and initial telecoms/ISP/hardware installation fees.

    There is a fourth way, and it is being played with in NYC. A free service in which people with wireless base-stations hand off traffic across the city. It’s another facit of the Open Source Software movement.

    There are of course interesting possibilities in this from a libertarian standpoint. Imagine p2p wireless communications over encrypted tunnels across a random and constantly changing set of privately controlled nodes.

    That’s what I call *taking* your privacy back.

  • Henry Pooter

    Dale:
    As was mentioned in the original article, broadband DSL now available in most urban areas in the UK and much of the rest (although far from all of it) costs around £25 per month on average, £16 per month being the lowest price I’m aware of. The “commercial” tag generally means you’ll be promised a better maximum contention ratio for a premium, but from most providers you’re quite free to go with cheaper “residential” option.

    That’s an awful long way from the £6000 per year the cheapest permanent connectivity (leased line) cost in London as recently as 1996 (it was more expensive outside the M25 too).

    Michael:
    Did you notice the other option in the BT Openzone deal, aimed at businesses: buy the router box from BT, get a DSL connection (from BT or elsewhere) and BT will pay you 5% of the fees generated. That’s right: you provide the on-site capital equipment, the network bandwidth, the location and the customers and BT will provide the payment collection facility. For this they get to keep 95% of the proceeds. Ouch.

  • Vic

    Interesting website on installing just this sort of broadband access in larger areas from shopping malls to smaller hamlets and towns as yet unserved by broadband:

    An off the shelf solution for community broadband access. It involves a plug-and-play box (PC-based), and OpenSource software from here.

    Tired of waiting for the government or big telcos to get you running. Hey, now you can DIY 🙂

    -Vic

  • I don’t know about in the UK, but here in the US all broadband services have a terms of service agreement that prohibits reselling service off of a ‘residential’ link. Some don’t even allow it on a ‘commercial’ connection, wanting you to buy a ‘reseller’ or ISP type of account.

    But it’s not just profiteering that’s motivating them, there are legitimate traffic engineering issues involved. A home user is not going to generate the level of sustained traffic that a pipe being split out over a bunch of other users will, as is the case with WiFi in cafe’s and such.

    IF there aren’t many users at once, of course this doesn’t matter, but a really busy cafe with kids downloading ISO images on a ‘residential’ link will knock their bandwidth provisioning and cost calculations all to hell. The DO have to pay for transit to the rest of the Net, and those low home user prices are based on not needing much average bandwidth per connection.

  • Dan

    A related, though slightly off topic comment:

    I recently went with Verizon’s anywhere wireless. Performance isn’t as good as I’d like, but the access is marvelous.

    BUT, I signed up online. I bought online because I didn’t want the hassle of going to a store. So, what is the first email I get from them? “Please visit your local store with two forms of identification.”

    If anyone else had offered an equivalent service at that time I would have cancelled my Verizon account on the spot.

    Yep, 10 of 10 for their convenience of access, -100000 of 10 for their convenience of doing business. Oh, their customer service rates even worse.

  • Yes, thanks to the fact that they chose Qualcomm’s CDMA, Verizon (and Sprint too, although I am not sure they are yet doing it) are able to provide much better cellular internet services that is possible using other technologies at the moment. Of course, European law dictated that GSM be used for 2G, and there are therefore no networks using that technology in the UK or anywhere in western Europe. UMTS will supposedly get as there someday, and to be fair it almost certainly will, but i am just not quite sure when.

    But it’s a shame their customer service is lacking. Cellular systems do have this problem though: relatively few competitors due to the high barriers to entry. In the case of WiFi this should not be an issue.

  • DrSteve

    You might want to see whether iPass has a reasonable number of hotspots in your area. My understanding is that it’s a low monthly rate with no per-minute charges for wireless access. My firm’s consultants use iPass for local dialup when they travel abroad (we’re US-based), and in addition to many points of dialup access around the world you get wireless and ISDN access in some locations as well. I think Caffe Nero in the UK is an iPass partner, for example…

  • My view is that we will start to see the price of hotspot access fall dramatically in the coming months as more and more independently run services appear. Its still early in the game so be patient guys. Free Internet access is a powerful tool for gaining customers and I think we are going to start seeing the effects of this shortly.

    Bristol Wireless Ltd