The changing business model of a public Wi-Fi provider.

It’s great to see Wi-Fi back in the news again.

In two separately announced deals this week the UK Wi-Fi market has been turned on it’s head.  Firstly o2 have announced they are to launch their very own Wi-Fi network and hope’s to have more hotspots than BTOpenzone and The Cloud within two years.

O2 said access to the hotspots would be through a simple sign-up process and would be free to both O2 and non-O2 customers.  It remains to be seen how they plan the roll out but for a kick off, they plan to replace ‘The Cloud’ solution in their retail estate with their own giving them a launch figure of 450 locations, not to shabby.

It’s difficult to know how o2 plan to make money from the enterprise, certainly there is benefit in offering complimentary Wi-Fi to o2 mobile users, they do this already through partnership deals with BTOpenzone and The Cloud however to make it free to non o2 users will have to be underpinned by something, perhaps they plan to charge the venue for hosting the service, perhaps it will come under a marketing budget or maybe they will encourage other mobile operators to make use of their new Wi-Fi network for 3g offload directly competing with ‘The Cloud’ and ‘BTOpenzone’

In a second separate but loosely connected announcement BSkyB have announced they are purchasing ‘The Cloud’ for less than 50 million.  I would have thought that o2’s announcement was un-timely given a large amount of ‘The Clouds’ revenue comes form 3g offload and a lot of this is from o2, something o2 by the looks of it won’t be needing after 2013, The removal of 450 ‘cloud’ hotspots from o2 stores will certainly put a dent in ‘The Cloud’s’ site numbers but perhaps the deal had already gone to ink.

I should imagine that once the legal side of the BSkyB ‘Cloud’ acquisition has gone through Sky Broadband customers will start to receive complimentary Wi-Fi when they are out of the house, what BSkyB plan to do with the rest of the EU Cloud estate remains to be seen.

I always thought ‘The Cloud’ would be bought by a mobile operator much in the way AT&T purchased Wayport a couple of years to shore up their failing data network.

The Sky deal is interesting to say the least as it brings with it some conflicts.  Orange mobile customers for example can make use of ‘The Cloud’ hotspots, Orange also have a home broadband business which is direct competition to Sky.

The business model for a Wi-Fi provider is changing, it has changed.  Wi-Fi operators who are not concerning themselves with 3g offload and subscription based roaming plans are dead in the water.  Consumers aren’t demanding ‘Free Wi-Fi’ but rather to ‘Pay one price for data’ whereby you take out for example a home broadband package and it includes access to X amount of Wi-Fi hotspots, pay for a data plan on your phone and you can use it via the cell towers or in X amount of Wi-Fi hotspots.

I was reading our business plan from 2004 last night and oddly enough, the plan was then to build a Wi-Fi network that could be used as a data offload resource for mobile networks, something that is only becoming realised in the last 18 months.

o2 make an interesting point,

“Only 20% of people who have access to free public wi-fi on 02 tariffs actively use it despite the majority of devices being wi-fi enabled,” said O2’s business development director Tim Sefton

That means the growth Wi-Fi operators have seen in the last twelve months (over double the usage on our network) is only just the start of it.  Wi-Fi may have been concepted as a business in 2003 however it seems that this year we’ve finally (as an industry) taken the training wheels off and crafted some great business models for the future.