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Gartner revises WiFi forecasts up

A lot of people are still going around, quoting Gartner research which "predicted" approximately 10,000 hotspots or public access Wireless Internet sites, by the end of 2003. Gartner, presumably embarrassed, has changed the number to 71,000. But it's not enough!

The report is, probably, the first mainstream IT analysis of the growth of hotspots, which doesn't suggest that business users won't use free sites. Indeed, it focuses heavily on free hotspots as the biggest market growth.

Where it may just fall down, is in predicting the number of hotspots that mobile phone network providers are likely to put in over the next 24 months.

"The hot-spot market presents new challenges to network service providers (NSPs) because the NSPs do not control the WLAN airwaves or the locations. The equipment is also simple and inexpensive to install," says the summary. But the same applies to phone companies; they can cover new areas for very low cost, and their subscribers will want them, if the price is right.

The new official survey says: "The number of public wireless LAN (WLAN) hot spots has risen from just over 1,200 in 2001 to more than 71,000 in 2003," - but there are still not enough hot spot locations to meet user needs, says Gartner.

Those 71,000 sites will serve nearly ten million users. "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 hot spot users," says a new report.

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

There will be a rapid increase in retail hot spots in 2003 and 2004, peaking in 2005, he said. "However, some of these hot spots will not succeed because they fail to attract enough customers, or because customers use the service for long periods without spending enough money on goods and services," Keene added.

And his awareness of the role of the phone providers is also much better focused than in previous surveys: "Critical mass could come sooner if billing interoperability is achieved, an effort clearly in the sights of those committed to the business," he said.

Retail outlets such as coffee shops, gas stations and restaurants, were the leading locations for public WLAN hot spots in 2002 and it will continue to lead the industry through Gartner's forecast period. Retail outlets are projected to account for more than 70 percent of all hot spots in 2003.

"These deployments are justified not by profit but through a vision of greater customer services. Network and installation costs are often offset by profits in other business segments," said Ken Dulaney, vice president at Gartner. "Viewed singularly, these hot spots do not generate profit, but as part of the overall business model they do. Gartner research also shows companies installing WLANs for internal needs and creating virtual LAN segments they then sell off to generate cost offsets."

All segments will see an increase of hot spots the next few years. The largest, most attractive airport and hotel locations will have hot spots by 2005. "As with retail locations, many airline lounges and hotels will use hot spots to attract customers to their core business, rather than as a stand-alone revenue stream," said Keene. "Despite alternative connectivity schemes, hot spots will offer the most bandwidth within these environments unmatched by alternatives such as CDMA or UMTS."

Gartner analysts said NSPs that want to compete in this market must have an attractive business proposition for location owners or partnerships with other hot-spot service providers.

"NSPs need to figure out how to generate revenue directly from hot-spot users, as opposed to relying on revenue from supplying backhaul broadband lines," Keene said. "To do this, they should consider adding hot-spot access to their existing services, rather than positioning it as a stand-alone source of revenue."

Additional information is available in the Gartner Dataquest Market Trends report "Public Wireless LAN Hot Spots: Worldwide, 2002-2008." This report examines the current state of hot spots on a worldwide basis, and it provides analysis on what will drive the market through 2008. This report can be purchased on Gartner's Web site.