Word from Verizon that it plans to decommission the hundreds of free wi-fi hotspots it built in New York two years ago has some observers suggesting that demand for such public wireless services is limited.
"This may be the beginning of the end," says Bob Egan, president of consulting firm Mobile Competency. "It's very much a niche application ... in terms of hot spots as a primary source of revenue, nobody's making money and they're not going to."
Wi-fi service doomsayers acknowledge that hot spots will have their place at certain retail establishments, airports and other venues. After all, the number of hot spots is expected to grow over the next few years. However, they say public wi-fi, which operates in unlicensed radio frequency spectrum, does not appear poised to become a strategic-business, remote-access service.
"Hotspots are more of a social gathering application with low security," says Larry Swasey, a senior analyst at Visant Strategies. EV-DO "brings in more users, and it's a more secure environment."
Cellular data services such as 2Mbit/sec EV-DO and the 14.4Mbit/sec high-speed downlink packet access, although slower than wi-fi, have far wider coverage, enable roaming and operate in licensed spectrum less susceptible to interference.
Verizon is placing its bets on EV-DO. The carrier, which had initially planned to turn up 1,000 wi-fi hotspots in New York by the end of 2003 for its DSL customers, is now steering mobile business customers to its cellular EV-DO BroadbandAccess service, which costs US$80 (NZ$108) per month.
"Wi-fi was a stopgap for them before they could get (EV-DO) out," Egan says.
The business model for wi-fi services — offering speeds up to 54Mbit/sec within a 300-foot radius of an access point — has been elusive for carriers. Potential users have been turned off by the pricing structure for access as well as spotty coverage and limited roaming.
Not that this is stopping Sprint, which recently said it has added 5,000 hotspots to bring its total to 19,000 and has another 6,000 planned by year-end.
For Verizon, hotspot service didn't generate demand — fewer than half of the 380 hotspots it is decommissioning generated more than 80% of the traffic.
"Usage didn't live up to our expectations," a Verizon spokesman says. "Customers didn't take advantage of it."
Also on the horizon is WiMax, which can transfer around 70Mbit/sec over a distance of 48km to thousands of users from one base station. Carriers, including Verizon, are in various stages of trial with WiMax gear and services are expected to debut within the next two years.
"When you come along into an area like WiMax, it may be that the balance is restored because you're going to have licensed spectrum, you're going to have a greater range and carriers will have more control over behaviour and revenue potential," says Thomas Nolle, president of consultancy CIMI.