June 2003

Optimizing Wi-Fi Hot Spot Revenues

BY HAAKON BRYHNI

Wireless hot spots have grown to be one of the most popular topics in the communications industry. Research firm IDC predicts wireless-enabled notebooks will grow from 35 percent of all mobile PC sales in 2003 to 96 percent in 2006 and that laptop sales will outpace desktop PC sales by a ratio of 2 to 1 during the next four years. With Wi-Fi becoming a standard feature in nearly every mobile computer and millions of users already discovering the advantages of untethered access, a variety of service providers are looking for ways to capitalize on this rapidly growing market.

According to market research firm In-Stat/MDR, the number of wireless hot spots in the U.S. alone will soar from less than 2,000 locations in 2001 to more than 41,000 in 2006. This estimate may turn out to be conservative in light of the announced plans of Cometa Networks (Intel, IBM, AT&T joint venture) to deploy 20,000 Wi-Fi hot spots by 2004 as well as a Toshiba-Accenture partnership that plans to deploy up to 10,000 by the end of 2003. These will add to thousands of existing sites from providers like T-Mobile, in conjunction with partners such as Starbucks and Borders Bookstores. Wireless carriers can also cost-effectively use public wireless hot spots to complement and supplement the rollout of their 2.5G and 3G networks by targeting areas of high demand.

In addition to these large nationwide footprint approaches, many other companies, such as hotel chains, cafes, airports, convention centers, etc., are looking to capitalize on the Wi-Fi explosion by setting up hot spot offerings where wireless mobile users are likely to congregate. In many cases independent operators collaborate with carriers and/or larger service providers to provide mobile users with a combination of universal access and high-value local services.

As the Wi-Fi public hot spot industry evolves, the ability of carriers, service providers, and local operators to generate revenues and create profitable businesses will depend on the achievement of key objectives, including:

� Leveraging open standards for optimal deployment flexibility and scalability.
� Offering local information and services to add value for visiting users and incremental revenue streams for local operators.
� Integrating standards-based billing mechanisms for efficient revenue capture and seamless interface to existing billing administration infrastructures.
� Providing transparent support for persistent �single sign-on� sessions as users move between different wireless access modes.

The Key Role Of Open Standards
The use of open-standards software is critical for successful deployment of Wi-Fi hot spots that are economical, scalable, and interoperable. Constrained by tight capital expenditure budgets, carriers and service providers cannot afford to create completely new Wi-Fi access infrastructures. Independent operators also need low-cost entry points to quickly get their hot spots up and running, without over investing before their revenue streams begin to develop. Software-based Wi-Fi solutions enable service providers and site operators to leverage standard hardware platforms and to make use of existing infrastructures.

Software-based Wi-Fi access servers must support open communications standards, such as IPSEC VPN, SSL, IEEE 802.1x, CDR, XML, etc., to deliver services and a variety of WAN standards such as T1/E1, ASDL and even ISDN, to provide backbone connections for individual hot spot sites. The server-side Wi-Fi software needs to provide �hot spot in a box� capabilities that can be easily installed on relatively simple hardware platforms, but can also deliver the scalability needed for large distributed network environments. This enables both smaller operators and large service providers to tailor their platforms to meet specific business requirements, while also providing for future growth and migration paths.

On the user side, it�s vital to maintain simplicity without imposing undue restrictions or special requirements on the mobile device. Users must be able to access services and information at any hot spot using standard Web browsers without needing to either install specialized software or change the basic configuration of their devices. The hot spot server software should be able to gracefully handle issues such as log-on, security, different types of terminals, and client side proxy settings, without forcing the mobile user to change configurations. The use of open-standards software can solve these issues at each hot spot and it also lays the groundwork for interoperability between local operators, national service providers, and carriers.

Integrating High-Value Local Add-On Services
For many Wi-Fi operators, such as hotels or convention centers, attainment of business objectives and revenue goals will require integrated delivery of high-value local services in addition to providing Internet connectivity. This means that wireless access server software must provide a robust and adaptable foundation for storing and serving localized information and applications.

One approach that is gaining wide acceptance among many hotel chains is the ability to offer high-quality �hospitality printing� services to authorized hotel guests. Local server software seamlessly checks with the billing system to assure that the user has paid for access to the premium services before allowing the job to be processed by the printer. Additional charges are then automatically posted to the user�s account via the integrated billing system on an incremental basis. Hotels are thus able to provide business travelers with a tangible high-value service, while also creating an easy-to-manage additional revenue stream. This is particularly important for network operators who require tangible local business cases to gain acceptance from site owners. When the site owner sees that availability of Wi-Fi drives customers to their locations, and that they can gain part of the revenue stream by providing local services such as high-quality public printing -- it is easy to win attractive Wi-Fi locations for the operators.

Standards-Based Billing Services
The open systems approach also provides efficient integration of billing and network management within existing infrastructures and methodologies. Support for standard call detail record (CDR) formats enable telephony carriers to offer Wi-Fi access as an integrated value-added feature within their current billing procedures. The billing server automatically captures the subscriber�s ID, time initiated, duration of the session, and the aggregate amount of data transferred, which is then made available to the carrier�s existing system in the exact format required by the call detail billing and rating process. Carriers can include each subscriber�s mobile Wi-Fi usage as a component within a unified monthly bill, thus increasing convenience for the subscriber while enhancing user loyalty and reducing subscriber churn.

Use of industry-standard RADIUS-based AAA services can provide robust access control for every user�s Wi-Fi session and simultaneously collects the specific information needed for billing on a session-by-session basis. Credit card broker interfaces permit access to the Wi-Fi service without prior subscription, to allow access from �ad-hoc� or temporary users that pass by the Wi-Fi hot spot. Again, the detailed usage information can be provided in whatever format is needed by the carriers� or local operators� credit card-billing systems.

Although call detail records and credit card billing provide efficient methods for quickly getting hot spot revenues up and running, operators also will need to accommodate other emerging billing mechanisms. These include billing to wireless SMS message accounts or to scratch-cards, in which the user purchases a pre-set amount of capacity that is then incrementally consumed during each session.


Persistent Connections Equal Persistent Revenues
Another key opportunity for maximizing revenues is the ability to persistently maintain users� sessions as they move from one connection mode to another. Installation of a small-footprint intelligent Mobile IP client on the user�s platform allows all required authentication and permissions to be established via a �single sign-on� that then remains persistent as the user roams between different wireless connection environments.

By associating dynamic local IP locations with a permanent IP address for each user, the client-side software overcomes the fact that IP addresses for user devices are constantly changing when new connections are established via different networks. Using built-in intelligence to monitor WLAN signal strength and network availability, the client-side software can efficiently handle all hand-over functions behind the scenes while the users� focus remains on their applications and the tasks at hand.

Persistent connectivity is very attractive to users because they don�t have to log-on again for each new connection and it also provides significant revenue enhancing benefits for carriers. For example, a carrier can offer a pre-configured version of the client-side software which automatically hands off connections between local Wi-Fi hot spots and the carrier�s GSM, GPRS, UMTS, CMDA, or CDMA-2000 backbone, thereby keeping the customer seamlessly connected without ever leaving the carrier�s overall billing umbrella. Offering transparent continuous connectivity at the best available bandwidth can be a major element for enhancing customer loyalty while simultaneously improving the carrier�s revenue stream by increasing the cellular airtime consumed by the subscriber.

The Bottom Line
Short-term success of public Wi-Fi depends on providing easy wireless Internet access, regardless of users� mobile device hardware and software, and the convenience of a variety of payment alternatives. However, maximizing revenue requires more than just connectivity. Operators must offer attractive value-added services such as local printing and customized local information. Carriers and national service providers need to offer the benefits of consistent, familiar access with easy billing and transparent roaming between environments. Open-standards software can address all of these issues by providing flexible service delivery, content management and billing methods that adapt to the needs of both service providers and mobile users.

In the bigger picture, it�s important to keep in mind that mainstream users will ultimately want Wi-Fi services to be just another seamless part of their overall communications environment. Users will gravitate toward services that can simply and transparently keep them connected to the information that they want and need. While Wi-Fi hot spots are currently receiving a lot of industry �buzz,� users don�t care what underlying connection mode is bringing them the information. Just as mainstream users have now become accustomed to making a wireless phone call from anywhere, without thinking about the underlying roaming relationships and infrastructure issues, wireless data connectivity will need to provide the same level of universal availability.

Ultimately, long-term success will come down to the interoperability of local Wi-Fi solutions within the greater realm of the overall communications infrastructure. The use of open-standards software is helping to lay the foundation for sustainable growth and achievement of business objectives. By investing now in server solutions that provide standards-based management and billing along with client-side software that supports transparent roaming, providers and operators are laying the groundwork for the seamless interoperable wireless access environment that users will demand in the future.

Haakon Bryhni is chief technology officer at Birdstep Technology, a provider of enabling software for companies operating in the embedded and wireless marketplace. Birdstep products are designed to enable customers to develop killer applications for embedded and wireless devices communicating via the Mobile Internet. For more information, please visit www.birdstep.com.

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