Companies Lining Up to Provide Free Wi-Fi

Published December 16, 2009

The case for taxpayer-funded municipal “free” wi-fi plans continues to get weaker as more companies line up to sponsor Internet access for the public at no charge.

Among the latest developments is an arrangement between Microsoft’s Bing and San Francisco-based wi-fi provider JiWire allowing free access to hotspots across the country in exchange for the user making one Web search on the new, rival engine to Google.

Supported by JiWire’s mobile advertising network, which reaches about 20 million unique consumers monthly, Bing’s nationwide campaign runs in wi-fi hotspots in airports and hotels.

Good Deal for All
The campaign aims to make more people aware of Bing and encourage them to try the search engine.

“We’re all creatures of habit, so giving away free Internet access in exchange for one search on Bing is a great way to change user behavior,” said David Blumenfeld, senior vice president of strategy and business development at JiWire, in a statement announcing the deal.

The campaign launched in September at thousands of locations. It quickly resulted in between 30 percent and 40 percent of consumers at those hot spots taking advantage of the deal and using Microsoft’s search engine, according to Blumenfeld.

More Free Wi-Fi
In addition to the Microsoft/JiWire venture, several other private-sector free wi-fi projects launched in late 2009:

•    Yahoo provided free wi-fi in Times Square—just months after the city abandoned taxpayer-supported free wi-fi in Central Park.

•    Google sponsored free wi-fi on every Virgin America flight and in 47 airports during the holiday season.

•    Lexus teamed up with American Airlines to give passengers free wi-fi on flights during the holidays, with tentative plans to extend the service into the new year.

•    Toyota created free wi-fi hotspots in San Francisco to promote its Prius brand.

Muni Wi-Fi ‘Empire Builders’
Rudain Arafeh, CEO of the San Jose, California-based telecom consulting firm Configure, Inc., said most cities that try to provide wi-fi to their residents as a public service see themselves as “empire builders.”

“They prefer to buy and build their own rather than let an advertiser provide the same service for free,” Arafeh said. “It is time for a change in thinking: Let potential providers compete for access to [consumers], and let consumers decide if free access to wi-fi is worth seeing an extra ad.”

Christian Gunning, director of corporate communications for Boingo Wireless Inc. in Los Angeles, said the costs of providing muni wi-fi service “grossly outweigh what sponsors would be willing to pay to provide sponsored access to a less targeted demographic.”

“One of the reasons sponsors will pay a premium for many of these campaigns is because of the high value of the users they get to interact with,” Gunning said.

Trend Likely to Continue
The trend toward targeted, market-sponsored wi-fi is likely to continue, Gunning says.

“The challenge is that providing high-quality networks is expensive, so these sponsored access campaigns aren’t cheap for the advertisers,” Gunning said. “Running them on an extended basis becomes very costly, which is why they’re typically isolated to a handful of locations at any given time.

“They also tend to be isolated to very high-value locations—airports with high proliferation of business travelers, premium hotel chains, etc. Very few sponsors want to directly pay for third-tier demographics,” he added.

Market Steps Up
“Conventional wisdom dictated that the provider of such free wi-fi pays for it,” Arafeh said. “However, recent experiences and market trends show that advertisers are willing and able to provide free wi-fi in exchange for access to end users.”

“This trend is here to stay, evidenced by recent agreements between public transportation companies and airlines with advertisers,” he added. “This type of advertising is usually low-cost and highly targetable. Both qualities are highly desirable by advertisers.”

Gunning agrees and expects the advertiser-based free wi-fi model will continue to be tweaked.

“Good ideas like [the Microsoft-JiWire and other free wi-fi offerings] will be explored from several angles until someone finds a natural equilibrium that works for all parties— being cost-effective for the sponsor, profitable for the service provider, and free to the end user,” Gunning said. “In the meantime I would expect to see different types of trials in a random smattering of locations.”

Market-Based Model
Gunning says the value sponsors, as opposed to governments, can derive from targeted ventures makes them better prospects for supporting free wi-fi, Gunning added.

“Think of it in terms of the cost of advertising on the local cable access channel versus one of the major networks,” he said. “Because of the relative value of the audience, the revenue potential for muni—the equivalent of local cable access—won’t cover all the costs of the network but might provide some [subsidy relief] to the city or other operator.

“However, the network has to have a real model for revenue or funding absent potential revenue from sponsors,” Gunning said.

Phil Britt ([email protected]) writes from South Holland, Illinois.