Wayport Bragging Over The Wrong Issue
By Mike Masnick, Wed Jan 05 03:15:00 GMT 2005

Wayport claims it now operates the largest hotspot network in the US, but that's not nearly as important as the success of its revamped business model.

For years, the battle raged on over whether or not Wi-Fi hotspots were going to be free or paid. As the fee-based failures piled up almost as fast as the free hotspot success stories, it seemed that the answer was obvious. Providers betting on people paying for Wi-Fi access were unlikely to get very far.

The biggest provider in the US, T-Mobile, however, has stuck to its guns, believing that hotspots represent a big enough value that people will pay for access -- even as managers at T-Mobile's main partner Starbucks have been begging for a different business model in order to compete with the coffee shops down the street offering free Wi-Fi.

T-Mobile's biggest competitor in the space, Wayport, took a different path. While Wayport had already done a better job signing up a large number of big name partners who could offer its network, the basic business model was still the same: charge fees for connection time. However, realizing that there was competition from so many free providers, Wayport made a very important realization: the real value in hotspots isn't to the end user, but to the venue or service provider. That is, end users are learning to expect free Wi-Fi. A retail establishment that doesn't offer free Wi-Fi is going to lose some business for being without the service. Thus, it should be the providers who are willing to pay, and then they can figure out how to make it up by selling more hamburgers or tying the Wi-Fi to another service.

This realization resulted in a major business model shift, where Wayport stopped charging on a per connection basis, and started charging venues and providers a flat-rate to offer service. This netted Wayport, among others, McDonald's as its answer to T-Mobile's Starbucks. The deal with McDonald's was expected to spread Wayport's network to over 8,000 hotspots, and other deals with other retail locations would push that number even higher. So, it isn't really that surprising that Wayport is now bragging about its network of 6,300 hotspots. The main point of the announcement is to claim superiority to T-Mobile's network, though the numbers are close enough that it could be called a dead heat at this point.

The growth in hotspots, while expected, is still impressive, and clearly gives Wayport a fair bit of momentum. Still, what would be much more interesting would be a deeper look at how well the new business model is working out. While the company claims 5 million connections in 2004, that's a number without much context. It's also odd that the company focuses on 600,000 connections in October alone. Again, 600,000 may be good or bad depending on what it's being compared to, but bringing up October as the top month seems strange. If you want to show growth, you want to show the latest month. The fact that Wayport is highlighting October suggests that November and December were down months.

All the signs would suggest that Wayport's business model makes much more sense than T-Mobiles (and it wouldn't surprise too many people to find T-Mobile eventually consider changing its business model to make it more like Wayport's). However, getting into a hotspot numbers war with T-Mobile may generate headlines, but doesn't really outline the important aspects of its business -- such as how well the new business model is actually working out.