Wayport Plans New Wi-Fi Business Model
By Carlo Longino, Tue May 25 15:00:00 GMT 2004

The leading Wi-Fi provider recently won a contract to unwire up to 8,000 McDonald's restaurants, and now has a new model that does away with venue revenue-sharing and could ignite big changes in the paid access space.

Under the new model (thanks, Wi-Fi Networking News), McDonald's will pay Wayport to help defray recurring backhaul costs, and Wayport will pay the necessary capital expenditures. But instead of Wayport charging a per-connect fee to the resellers it wholesales access to and sharing that with McDonald's and other venues, it will charge its partners a flat fee per location.

Current arrangements see resellers like iPass, Boingo and Sprint PCS pay Wayport a fixed fee -- believed to be between 25 cents and $1 -- for each daily connection to its network. Wayport then generally passes on half that fee to the venue, or uses it to offset installation or monthly costs depending on their arrangement with the venue.

The new set-up, dubbed Wi-Fi World, sees those resellers pay Wayport $32 per month per location, and their users then have unlimited access to Wayport's hotspots -- a move that seriously changes the dynamics of paid access, allowing large enterprises like cable or telephone companies to purchase access and easily resell it -- or even give it away -- to their customers. Indeed, Wayport's hope is that the new model will allow telecom companies to bundle Wi-Fi with other services for a low flat rate.

It does away with fee settlement across networks and the required billing link-ups, a problematic area in roaming agreements, and lets venues focus on using Wi-Fi to drive gains in their core businesses rather than concern themselves with driving Wi-Fi usage to generate the tiny revenue shares, though venues like McDonald's will still get a share of walk-up fees.

The upshot of this is that it makes Wayport's network much more attractive to resellers. The flat-rate structure provides for predictable fees, as opposed to a reseller waiting until the end of a month to see what their costs will be. It should also lower end-user prices by reducing the barrier to entry for resellers and opening up a lot more competition. It should also help expand the reach of Wayport's network, as individual hotspots won't be so dependent on attracting users to generate revenue and ensure their continued existence since the revenue each hotspot generates is no longer dependent on its traffic, but on being a part of the network and the number of partners Wayport signs up. This should help expand the reach of Wayport's network, since the barrier to profitability decreases immensely -- and because it will be in their tangible financial interest to have more locations.

The plan is designed around retail giants, and is built on the successful user data McDonald's saw in its trials, which fostered a belief in the company that Wi-Fi can attract significant numbers of customers to its restaurants -- echoing earlier sentiment from the Schlotzsky's Deli chain, though that company of course offers free access.