Hotspots are Hot says new ARC Group study but Mobile Operators should consider all angles

The public hotspot market for wireless local area networks (WLANs) is attracting considerable interest, particularly from mobile operators. However, operators should be aware that the business case for such hotspots is still unproven, leaving considerable room for experimentation but at the risk of potential pitfalls," says the ARC Group reports author, Tammy Parker.

LONDON,July 2002- The public hotspot market for wireless local area networks (WLANs) is attracting considerable interest, particularly from mobile operators. However, operators should be aware that the business case for such hotspots is still unproven, leaving considerable room for experimentation but at the risk of potential pitfalls," says the ARC Group reports author, Tammy Parker.
The hotspot business is being driven largely by developments in the 802.11 family of standards, taking the industry towards a fortunate sweet spot marked by the intersection of falling equipment costs, ongoing standards enhancements, increased throughput and rapidly rising user awareness. The industry is gearing up to exploit this sweet spot, offering a variety of enticing devices not only to tech-savvy early adopters, but also to mass market end users. WLAN users are expected to reach 147m worldwide by 2007.
Mobile network operators, in particular, are exploring entry into the public hotspot WLAN business by either becoming or entering into partnerships with wireless internet service providers (WISPs). There are many reasons why mobile operators are interested in this market, including:
Public WLANs will give operators a platform to test 3G applications and services, creating demand for these products in advance of their introduction over mobile phone networks.
Heavy indoor data traffic can be moved to a WLAN, relieving potential congestion on a mobile phone network and providing less costly data services to users.
WISP usage could be used to promote lagging GPRS adoption by showcasing relevant applications.
However, even if joint mobile phone/WLAN offerings are technologically feasible, that may not mean they are financially viable. Mobile operators will need to operate WISP businesses in parallel to their mobile phone network because the licensing, equipment and deployment issues are quite different, meaning cost structures are totally unrelated. Integrated with 2.5G and 3G offerings as value-added communications access points rather than actual profit centres, WLAN hotspots could become crucial marketing tools that are key to expanding a mobile operators presence and overall branding.
However, ISPs, mobile network operators and others are likely to be keenly disappointed if their primary objective in entering the WISP business is to dramatically increase their short term revenue streams. WLAN hotspots should be considered as marketing tools rather than profit centres" Parker contends.
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ARC Group (www.arcgroup.com) publishes in-depth strategic reports and provides consultancy on wireless internet, wireless technologies and infrastructure, digital broadcasting, broadband access, telematics and optical communications.