To Get Cheap Wi-Fi In The UK, You'll Have To Be Part Of The Club
By Mike Masnick, Thu Feb 24 02:30:00 GMT 2005

Wi-Fi pricing in Europe is a topic many complain about. While everyone seems to agree that prices need to come down, no one wants to do it. BT is trying to sneak in price decreases, but only if you buy something else from them.

It's a pretty basic calculation: users times price equals revenue. Marketing people have to do this calculation all the time. While the initial reaction is to increase price, you have to take into account the elasticity of demand for the product. At a high price, with few users, the total revenue might not be very much at all. Lowering the price can drive up the users, and the overall revenue can soar. Considering the cost structure isn't that different based on more users, you would think more providers would experiment with cheaper Wi-Fi.

Not in Europe, it seems. While cheap and free Wi-Fi is becoming quite common elsewhere in the world, most providers in Europe are content to keep the prices super high, to the point of ignoring the revenue equation described above.

BT and its Openzone Wi-Fi offering demonstrate this perfectly. In the past, BT execs have announced that there is no elasticity in demand for Wi-Fi (despite plenty of evidence to the contrary) and that "reducing the price does not increase usage." Even when BT finally backtracked a little and did lower prices, the company was mocked for keeping prices too high.

However, more recently, it looks like BT is looking for ways around this issue. In November, it began an experiment where it would offer nearly free Wi-Fi, but only for three months and only to subscribers of BT DSL. While there's been no official statement on the program, BT is now saying (once again) that it has no intention of dropping Openzone fees, but that it is interested in the idea of bundling Wi-Fi with other offerings.

It's a step in the right direction -- recognizing that cheap Wi-Fi can attract users and reduce churn, but BT is fooling itself if it honestly believes it won't face more stringent competition from free Wi-Fi. As Wi-Fi providers in the US are discovering, Wi-Fi is becoming something of a "must have" for various retail outlets, hotels and other locations -- and places that charge for Wi-Fi are getting ignored. Eventually, customers will wonder why they're paying high prices (even if part of a bundle) for what they can get for free elsewhere.