European Wi-Fi growing faster than in America

The growth of Wi-Fi in Europe is growing more rapidly than in North America, although there are some unsolved technical issues, according to two separate studies released this week. Frost & Sullivan, in its report, says the European WLAN public access hotspots market is starting to look like a hype bubble. Despite widespread failure to address the technical and business challenges that need to be overcome before the market can truly flourish, many players are viewing WLAN hotspots as an exciting business opportunity, with wide-ranging business models being debated.

Insight Research's analysis of the WiFi industry, WiFi in North America and Europe: Telecommunications' Future 2003-2008, suggests that wireless LAN technology -- increasingly popping up in public spaces such as airports and cafes, in private residences, and in businesses -- will grow faster in Europe than North America. Worldwide WiFi revenues are expected to grow from $7 billion in 2003 to over $44 billion by 2008, at a compounded annual rate of 44 percent.

At present, the market is highly fragmented with many different players each staking their claim to be a major force in the market, says the Frost & Sullivan report. It is clear that not all of these market participants can survive in the long run, but many players feel that even a short-term gain renders market entry attractive. Frost & Sullivan believes that the consolidation has already begun and that the number of service providers in this market will decline as they are absorbed by larger organisations with more resources.

Significant revenue

But, it is also clear that a limited investment can yield significant revenue generation opportunities in the European WLAN hotspots market, according to Frost & Sullivan.  However, this can only be achieved by selecting the most appropriate business models. The limited success of commercial services in North America has already demonstrated that the right mix of customer segmentation, location, pricing and service offering needs to be found.

The enterprise market, with its high penetration of notebook PCs and growing demand for flexible access to network services, is of pivotal importance to the WLAN industry. However, WLAN is also growing in popularity in vertical markets such as transportation, distribution, medical, public access networks and home environments.

Frost & Sullivan expects total subscription revenues in the European WLAN hotspots market to rise from around EUR 18 million in 2002 to in excess of EUR 1 billion by the end of 2006.

The rollout will be largely driven by the weight of force placed behind the market by the incumbent fixed and wireless operators, as it is these players who have the resources to drive large-scale implementations.

Independent service providers are investing great efforts into driving the early market and forcing larger players to make their moves, but few of them have the resources or skills base to create large scale networks or initiate the inter-network roaming initiatives that will be crucial to the key business clients.

Scandinavia leads

The adoption of Wireless LAN services in Europe is being led by the Scandinavia region, first and foremost spearheaded by SoneraTelia's Telia HomeRun and Sonera wGate services. Other pioneering companies in this marketplace include BT Openzone, T-Mobile (Deutsche Telekom), and Swisscom.

Maximising footprint by signing up as many locations as possible, as well as selecting the most appropriate locations for hotspots (most importantly locations frequented by business travellers, the market's most lucrative target audience), is highlighted by Frost & Sullivan's study as a critical success factor for operators looking to develop commercial services.

On the subject of GSM roaming on all enabled hotspots worldwide, Frost & Sullivan notes that it is of important for service providers to be able to provide seamless coverage. The relative power and positioning of the different operators will determine the nature of the roaming agreements and the revenue sharing agreements that they have in place.

One of the biggest issues for hotspot operators is maintaining a decent level of service. Where hotspot services are free of charge, the user cannot expect particularly high levels of reliability. However, if an end-user is paying for a service they will expect to be able to use the service for the duration they are being charged for. This is a major challenge for the service provider, given that there are still doubts surrounding the reliability of most WLAN equipment.

The big beneficiaries

According to the new market research study from Insight Research Corporation, established wireline and wireless network providers will be among the big beneficiaries of the $163 billion to be spent worldwide over the next five years on WiFi services and equipment,  WiFi is a technology that combines Ethernet and wireless communications, making it possible for computers and other electronic gear to send and receive high-speed data in a local area network without a wired connection.

"Some analysts believe that broadband access is driving the adoption of WiFi, while others contend that WiFi is driving broadband," said Robert Rosenberg, Insight Research President. "Our analysis suggests that they drive each other in a complementary way -- creating greater demand for broadband services across the board. We expect growth of European WiFi services to surpass North American service revenue well before the end of our forecast period," Rosenberg said.

The report examines the factors driving adoption of WiFi, equipment revenues, and service-related revenues. This industry research report forecasts revenues for North America and Europe by core network equipment, antennas, end-user devices, wireless Internet service providers (WISPs), traditional ISPs, fixed operators, and mobile operators. The growth of worldwide WiFi hotspots locations is also projected over the five-year forecast period.