Gartner: Many hotspots may never be profitable in own right

New research says that public hotspots, by and large, are not profitable but they can boost profits in other segments of a retail business.

According to Gartner VP Ken Dulaney, the building of Wi-Fi hotspots cannot be justified through the profits they will generate. However, as an additional customer service, investment in the technology by cafes, pubs, petrol stations, airport lounges and other retail locations could lead to higher profits in other business segments.

The thinking, it would seem, is that a hotspot in a cafe won't be profitable in its own right but it may encourage users to stay longer and buy more coffee.

"Gartner research also shows companies installing WLANs for internal needs and creating virtual LAN segments they then sell off to generate cost offsets," Dulaney added.

Wi-Fi, or 802.11b, is a wireless standard that allows users to hook up properly equipped laptops and PDAs to the internet, over a broadband connection, without the need for wires. The technology has become massively popular in the last two years, with so-called hotspots popping up in public around the world where users can jump on to the net for a fee, or at times, for no charge at all.

Still, Gartner said that despite the massive growth of public WLANS (wireless local area networks), from 1,200 globally in 2001 to 71,000 in 2003, there still aren't enough to generate momentum in the market.

"With just 2.5 million hotspot users in 2002, the vast majority of these (91 per cent) were infrequent users attracted by opportunities to use a service just once or twice, often free of charge," said Ian Keene, VP in Gartner's telecommunications group. "Many more hotspot locations are needed if user numbers are to rise greatly."

The company reckons that by the end of this year there will be 9.3 million hotspot users worldwide. North America will account for 4.7 million users in 2003, followed by Asia/Pacific with 2.7 million users and Europe with 1.7 million WLAN hotspot users.

Gartner also says that between now and 2005 the number of hotspots will continue to grow rapidly but admits that many locations will be failures. This is because they simply won't attract enough customers or because customers who use the hotspots won't spend enough cash on other services.

Still, with more than 50 per cent of professional notebook PCs WLAN-enabled by 2004, there will be serious potential for those running hotspot locations to bring in revenue. This will become even more apparent when, in the next couple of years, billing interoperability is achieved, "an effort clearly in the sights of those committed to the business," Keene added.

In terms of specific locations, by 2005 there should be about 423 airports around the world with hotspots in place, up from 292 at the end of this year. Hotel hotspots will double between 2003 and 2005, with more than 23,500 WLANs in place.

But some of the biggest growth will be in so-called Community Hotspots, which at the end of this year will number just 730 globally but should reach over 30,500 in two years' time. Enterprise Guest Areas and retail outlets should also show impressive growth, reaching 5,000 and 85,500 respectively by 2005.

Matthew Clark writes for ElectricNews.Net