16th Bled eCommerce Conference
eTransformation
Bled, Slovenia, June 9 - 11, 2003
Exploring the WISP Industry - Swiss Case Study
Giovanni Camponovo
The University of Lausanne, Switzerland
Giovanni.Camponovo@hec.unil.ch
Mark Heitmann, Katarina Stanoevska-Slabeva
The University of St. Gallen, Switzerland
Mark.Heitmann@Unisg.ch, Katarina.Stanoevksa@Unisg.ch
Yves Pigneur
The University of Lausanne, Switzerland
Yves.Pigneur@hec.unil.ch
Abstract
Wireless Local Area Networks (WLAN) are receiving considerable attention in the
industry and are perceived as a possible disruptive technology, capable of posing a
credible threat to the dominance of mobile network operators and their 3G networks. In
spite of this, the business aspects of public WLANs have been neglected by the research
community. The objective of this paper is thus to investigate the use of WLAN to offer
wireless services from a business point of view. The study is based on the example of
current supply of WLAN services in Switzerland. By investigating different kinds of
WLAN service providers and analyzing their business models through mini case studies,
the paper provides a deeper insight into business aspects of public WLANs.
1.
Introduction
Public Wireless Local Area Network (WLANs) are receiving considerable attention in the
industry. Hotspots offering wireless Internet access are emerging with high speed
worldwide at many public places with a high frequency of people as airports, hotels, and
cafes. As a result and due to the unexpected difficulties and delays of providing 3G
networks, public WLANs got considerable attention as a possible thread to 3G networks
in the press and literature (Zweig 2001), (Lehr and McKnight 2002). Since both
technologies provide broadband data communication services, a significant share of 3G
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Exploring the WISP Industry - Swiss Case Study
revenues may be displaced from mobile operators towards WLAN providers (Laurent,
Geraci et al. 2002).
Contrary to 3G, WLAN providers do not require a license to operate and can deploy their
network with much smaller investment. Consequently, a plethora of different Wireless
Internet Service Providers (WISPs) is currently trying to take advantage of this
opportunity to enter the wireless market. These players include incumbent firms from the
telecommunications industry (i.e. mobile network operators, wireline network operators,
Internet Service Providers) as well as new players such as start-ups, technology enablers,
venues and communities. This diversity is likely to result in fundamentally different
strategic approaches and high competition.
In spite of the growing importance of WLANs, the business aspects of WLANs have been
neglected by the research community. The main objective of this paper is to conduct an
exploratory study of emerging WLAN business models on the example of the Swiss
WLAN market, in order to identify the different types of WISPs, analyze their strategies
and determine their key success factors (Herslow, Navarro et al. 2002). Based on this
analysis, a classification framework for WLANs is proposed and a well-grounded insight
into emerging WLAN business models and the future of WLAN networks will be
presented.
The remainder of the paper is structured as follows. The next section describes our
research methodology. Then section three provides an overview of the actual historical
and technological context. Section four proposes a classification framework for WISPs,
which are then illustrated in section five through case studies of selected Swiss
organizations. Finally, section six exposes the principal results of the study and suggests
further research directions.
2.
Research Methodology
The research methodology used in this study follows a two steps process:
In the first theoretical research and preparatory step, secondary research material was
gathered trough a literature review. Based on it, a new classification framework of the
various types of WISPs is proposed in section 4. The classification framework provides
an overview of the different strategic approaches used to offer WISP services and guided
the subsequent selection of relevant WISPs for the empirical analysis. The major issues
relevant to WLAN deployment are also identified in the first step and used as a base for
structuring the interviews with these companies.
In order to illustrate the different emerging WISP strategies in the second research step,
an empirical study was conducted based on the example of the Swiss WISP market by
applying the case study research method. Foremost relevant companies for empirical
research were chosen. In order to ensure the representativeness of the study, for each of
the previously identified WISP types of the classification framework, a number of
representative enterprises were chosen out of the active players on the Swiss WISP
market. Then, primary research material was collected through interviews with
representatives from these enterprises. The main results are presented through mini case
studies in section 5. Finally, a cross-case analysis provides a snapshot of the current
market situation and forms the base for extracting common and differing elements of the
applied business models, giving insights into possible future WLAN developments.
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Giovanni Camponovo, Mark Heitmann, Katarina Stanoevska-Slabeva, Yves Pigneur
3.
Underlying Technology and Its Development
3.1
Historical Background
WLANs are flexible communication systems transmitting data over electromagnetic
waves, usually implemented as an extension to a wired LAN (Malladi and Agrawal
2002). Their origins go back to 1990 to the efforts of the IEEE 802.11 Working Group
aiming at establishing a standard for wireless connectivity within a local area. Yet,
consumer demand was stagnating, as adoption was actually hindered for the major
reasons of high equipment prices, range limitations, performance problems, security and
lack of interoperability (Ruber 1999).
Subsequent research led to the creation of the 802.11 standard in 1997 (providing 2Mbps
in the 2.4GHz band), which unified an otherwise fragmented market that had previously
relied on proprietary solutions. Growth in WLANs can actually be traced to the issue of
the 802.11b standard in 1999 (providing 11Mbps in the 2.4GHz band), and to the
interoperability certification service offered by the Wireless Ethernet Compatibility
Alliance (Rao and Parikh 2002). Driven by an increasing use of portable devices to access
network applications and thanks to improved performance, interoperable products and
rapidly decreasing prices, WLANs rapidly started to be adopted by enterprises and
residential consumers as an extension to or as a replacement of traditional LANs.
The widening diffusion of WLAN-enabled devices created an opportunity for WISPs to
offer commercial WLAN access to nomad users in public locations. Recently, certain
players expect to exploit this technology in order to create large-scale wireless broadband
networks federating many WLAN hotspots in a common network. Two principal models
are currently being used: a top-down approach, which requires a centralized entity who
builds a network in a traditional way by planning, deploying and operating the network,
and a bottom-up approach, which relies on a loose federation of enthusiasts willing to
share their hotspots with each other (Rao and Parikh 2002). The former allows for
guaranteed quality of service, support and scalability, but implies considerable initial
investments. The latter benefits from organic growth and investment sharing among
multiple participants, but is prone to scalability, quality of service, support and abusive
use problems. As illustrated in section 4, both approaches are currently being pursued by
different enterprises, some of which even try to pursue hybrid business models combining
elements from the two approaches.
3.2
Technology Background - Competing Technologies
So far, we restricted our discussion to 802.11. Yet there are many competing WLAN
technologies (see table 1 below). An early competitor to 802.11 is HomeRF, which
offered similar technical specifications, but has been overshadowed in the marketplace by
802.11b, probably because the latter came first in the market and because of more
aggressive marketing (ISP Planet 2002). Nowadays, 802.11b is by far the most commonly
adopted standard, accounting for 71 percent of all wireless nodes shipped in 2001
(Griffith 2002). In the future, 802.11b might be overtaken by a new breed of standards
such as 802.11a, 802.11g and HiperLan/2. Owing to this diversity, multimode chips
supporting different technologies might become necessary.
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Exploring the WISP Industry - Swiss Case Study
802.11
HomeRF
1.0
802.11b
HomeRF
2.0
802.11g
802.11a
HiperLAN
2
Release date
1997
1999
1999
2001
Future
1999
Future
Frequency of
operation
2.4 GHz
2.4 GHz
2.4 GHz
2.4 GHz
2.4 GHz
5 GHz
5 GHz
Theoretical
max. data rates
2 Mbps
1.6 Mbps
11 Mbps
10 Mbps
54 Mbps
54 Mbps
54 Mbps
Hybrid
CSMATDMA
CSMA/CA
Hybrid
CSMATDMA
FHSS
DSSS
FHSS
Medium Access
CSMA/CA
Layer
Physical Layer
(modulation)
FHSS or
DSSS or
Infrared
CSMA/CA CSMA/CA
OFDM
OFDM
TDMA
OFDM
Table 1: Comparison of different WLAN technologies (Bakom 2002)
In addition to WLAN technologies, there are several other partially overlapping wireless
technologies like Bluetooth, cellular networks (i.e. GSM, GPRS and UMTS) and different
emerging technologies (Varshney and Vetter 2000). While all these technologies seek to
satisfy telecommunication needs of mobile users, they differ in the scope of coverage,
bandwidth and quality of service (see table 2 below). Bluetooth basically seeks to
simplify connectivity in the PANs (Personal Area Networks), whereas cellular networks
are built to provide ubiquitous coverage over a wide area.
Bluetooth
WLAN
GSM
UMTS
Coverage
Personal area
Local Area
Wide Area
Wide Area
Frequency
band
Unlicensed ISM
2.4GHz band
Unlicensed ISM
2.4GHz
Licensed GSM
900/1800/1900
Licensed IMT2000
1900/2100
Typical Range
10 m
100 m
up to 35 km
up to 8 km
1 Mbps
54 Mbps
14.4 kbps
2Mbps
721 kbps
30 Mbps
9.6 kbps
384 kbps
Data / (Voice)
Data / (Voice)
Voice / (Data)
Voice / Data
Theoretical
Max data rates
Typical
data rates
Applications
Table 2: Comparison of different wireless technologies
Though it is generally agreed that WLAN will have an impact on these technologies,
there are many different opinions as to their competing or complementary nature (Laine
2002; Laurent, Geraci et al. 2002; Lehr and McKnight 2002). Compared to 3G, WLAN
provides higher data rates with a much cheaper equipment and does not require licenses
to operate. However, disadvantages of WLANs lie primarily 1) in missing components to
the standard, which lacks proven security concepts, neglects quality of service, roaming
and billing protocols; and 2) in the use of the unregulated 2.4GHz band, which makes
WLAN networks susceptible to serious interferences (from ISM, Bluetooth and WLAN
devices) and does not permit to avoid them trough centralized planning (i.e. by making
neighboring base stations transmit on different channels or synchronizing emitters)
(Dornan 2002; Redman 2002). Finally, WLANs are not suited to mobile use, owing to
limited and discontinuous coverage, lack of handover between hotspots and lack of truly
portable devices (Thorngren 2002).
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Giovanni Camponovo, Mark Heitmann, Katarina Stanoevska-Slabeva, Yves Pigneur
4.
A WISP Classification Framework
The business aspects of the WISP industry have already been investigated by a small
number of authors trying to identify the different types of actors and their strategic
approaches. Herslow, Navarro et al. (2002) suggest that WISPs can be distinguished by
using pricing and coverage criteria, identifying Hot Spot WISPs, Facility Owners WISPs,
Wide Area WISPs and Network Community WISPs. In addition they recognize other
important players such as enablers (providers of technical solutions) and closed networks
(private WLANs). Alvén and Farhang. (2002) focus on commercial WISPs, which are
distinguished by their core business and the location covered. They identify single point
WISPs, mobile carrier WISPs, ISP WISPs, plain WISPs, location specific WISPs,
operator neutral WISPs, franchising WISPs and virtual WISPs. Sputnik (2002) claims
that the future of 802.11 networks will take three directions: private networks, free public
access networks (communities) and paid subscriber networks. Verma, Beckman et al.
(2002) examine what strategic approaches may be employed by WISPs, differentiating
between primary business models (which extend traditional ISP models offering WISP
services paid for by monthly subscription fees), emerging business models (offering the
occasional usage of WISP services using micro payments) and neighborhood area
networks (NAN). NAN are non profit networks of end users who share their WLAN
hotspots, either organized to cover an extensive area or a single location (Pozar 2001).
We propose to distinguish between the different classes of WISPs using two criteria:
whether the service is a commercial offer (i.e. the aim is to gain a profit) and whether the
coverage is extensive (i.e. if coverage targets a wide area or is restricted to a particular
location). The former has profound implications on the technical requirements of quality
of service, customer support, authentication systems and billing systems. The latter
involves important technical concerns such as handover between hotspots and network
planning. Constructing a matrix of these two criteria, we obtain four groups of players
(see table 3 below):
Selected locations coverage
Extensive coverage
Non commercial offer
Private WLAN
Community WISP
Commercial offer
Hotspot WISP
Wide Area WISP
Table 3: WISP classification
Private WLANs are closed membership, corporate or residential networks owned and
operated by companies, institutions and households to provide network connectivity to
their own members. The main reason for deploying private WLANs in business and
institutions is to support user mobility within the company, thus benefiting from
productivity, convenience and network flexibility advantages (Oake, Broxton et al. 1999;
Herslow, Navarro et al. 2002). WLANs are especially expected to be successful in
vertical sectors such as government, education, healthcare and hospitality (Lucero 2002).
Residential wireless networks principally aim to support sharing of broadband Internet
connections among multiple devices.
Community WISPs are free wide area networks created by clustering members' hotspots
to provide public access together. They are mostly composed and operated by technology
enthusiasts who get together in loose federations, motivated by an open source mentality
and aiming at offering Internet access to the whole community (Herslow, Navarro et al.
2002). Nevertheless, commercial attempts trying to foster the community building
process are appearing (e.g. providing a basic free service while earning money on a
secure corporate version (Sputnik 2002)). Community networks usually provide the most
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Exploring the WISP Industry - Swiss Case Study
elementary service and do not treat issues beyond basic equipment and hotspots' location
communication, such as security, billing or metering (Verma, Beckman et al. 2002), and
are therefore particularly exposed to abusive Internet usage.
Hotspot WISPs are paid subscriber networks deployed inside specific public facilities
such as airports, hotels, cafes, etc. to provide network access to their customers in their
location. Venue owners might offer WLAN services themselves or in collaboration with
specialized WISPs or technology enablers (Thorngren 2002). WLAN services are usually
seen as a complementary offering intending to achieve a competitive edge over rival
companies. Hotspot WISPs are expected to offer limited quality of service and run weak
Authentication, Authorization and Accounting (AAA) systems (Alvén and Farhang
2002). To enable occasional usage micro-payment models are predicted (Verma,
Beckman et al. 2002).
Wide Area WISPs are paid subscriber networks providing network access to customers in
a wide area, such as a city or a country, offering coverage both inside and outside
buildings (Herslow, Navarro et al. 2002). They usually offer guaranteed quality of
service, technical support, operate strong AAA systems and other value-added services
that free public networks cannot provide. Wide Area WLANs can be provided by
incumbent firms such as traditional ISPs and MNOs extending their services towards
WLAN, as well as start-ups, who may follow less integrated strategies such as
franchising, virtual operator, operator neutral, location specific and roaming broker
models (Alvén and Farhang 2002; Verma, Beckman et al. 2002).
As can be seen in table 4, the proposed classification can easily be compared with those
mentioned above.
Herslow, Navarro
et al. 2002
Sputnik
2002
Private
WLAN
Closed Networks
(influencing actor)
Private networks
Community
WISP
Network community
WISP
Public access
networks
Hotspot WISP
Hot Spot WISP
Facility owners WISP
Paid subscriber
networks
Wide Area
WISP
Wide Area WISP
Alvén and Farhang
2002
Verma, Beckman
et al. 2002
NAN
Single point WISP
Mobile carrier WISP
ISP WISP
Plain WISP
Location specific WISP
Operator neutral WISP
Franchising WISP
Virtual WISP
Emerging Model
Primary Model
Table 4: Comparison of different WISP classifications
5.
Case Studies
In this section the different emerging WLAN strategies are illustrated through case
studies of Swiss WISPs. To motivate the selection of the analyzed companies first a short
overview of the Swiss WISP market is provided.
5.1
Swiss WISP Market Overview
The provision of public WLAN services in Switzerland is a very recent phenomenon. In
fact, the Swiss WISP pioneer firm Monzoon started its commercial service in August
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Giovanni Camponovo, Mark Heitmann, Katarina Stanoevska-Slabeva, Yves Pigneur
2001. Since than numerous players entered the market. In April 2003, all together they
operated more than 250 hotspots in Switzerland and plan additional 150 hotspots. An
overview of the different types of hotspots is given in table 5 below1.
Active in May 2003
%
Planned in 2003
Hotels
133
53%
284
Public venues
45
18%
69
Residential Area
29
12%
31
Schools
8
3%
13
Airports + Railway stations
10
4%
12
Others
27
11%
33
Total
252
442
Table 5: Hotspot survey (April 2003)
%
64%
16%
7%
3%
3%
7%
For the subsequent case study, the most representative WISPs of the active players on the
Swiss market were chosen for each category of WISPs identified in the classification
framework. Thereby the following criteria were applied: their position on the market,
their existing experiences and the originality of their strategic approach. Below the
reasoning behind the choices is explained in more detail:
The Private WLAN category currently includes a variety of organizations using WLAN
to support their operations such as hospitals, universities and other private companies.
The CHUV hospital case has been chosen because it deploys WLAN for strategic
purposes and has the potential to open it to its patients in the future.
The Hotspot WISP category currently includes principally hotels, airports and cafés. The
Zurich Airport case has been selected because it is one of the first WLAN-equipped
venue and certainly has the greatest potential among venues.
The Wide Area WISP category currently includes MNOs and start-ups. These category
presents the most variety of approaches, therefore the two leading network operators,
Swisscom and Sunrise, and the leading start-ups have been selected – the WISP pioneer
Monzoon and Netair.
Finally, WLAN communities are arising in numerous areas of Switzerland, including
Lausanne (Myotis), Geneve (SFNet) and Bern (LuftNetz). The Myotis case has been
selected because it has more experience and practical achievements than the others.
In order to illustrate the business models of the different actors in a consistent way, we
base ourselves on the ontology for e-business models developed by (Osterwalder and
Pigneur 2002), which is composed of four main elements: 1) the product innovation, that
consists in the value proposition the firm delivers to its customers; 2) the customer
relationship, defining the target customers, the distribution channels and the relationship
strategy; 3) the infrastructure, containing the resources, the activities and the partnership
network that are required to offer the value proposition; 4) the financial aspects, which
ultimately determine the profitability of the organization. In addition, we illustrate the
current experiences that enterprises are having in delivering WLAN services.
1
This table has been compiled in April 2003 using WISPs web sites (www.air2web.ch, www.monzoon.ch,
www.swisscom-mobile.ch, wlan.thenet.ch, www.myotis.ch) and hotspot directories (e.g. www.hotspotlocations.com, www.swisshotspots.ch and www.802-11b.ch).
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Exploring the WISP Industry - Swiss Case Study
5.2
Private WLAN
Case study: CHUV (University Hospital Centre of the state of Vaud)2
The CHUV is a university hospital employing 5'000 people, serving 40'000 patients with
a yearly budget of 400 millions €. In May 2002, they started a project of installing a
WLAN covering the whole hospital during the next five years.
Value proposition. The WLAN offers access to a single strategic application allowing
hospital's employees to consult and update all patient-related information stored in a
central computerized file from anywhere in the hospital. The principal benefits sought are
to increase the quality of medical treatment, patient's progress tracking, and productivity.
Customer relationship. Doctors use the system to access up-to-date patient information
when prescribing medical acts, check the compatibility of different drugs and monitor
patients' progress. Nurses retrieve doctors' prescriptions and update patients' files with the
actual treatments dispensed. Moreover, this data can then be analyzed by pharmacy and
administrative staff for various purposes. Currently CHUV does not plan to offer WLAN
Internet access to patients.
Infrastructure management. The CHUV plans to extend its LAN (6000 nodes) with
about 50 WLAN access points covering patient and staff rooms. Employees are given
mobile internet devices (tablet PCs) to access the patient application. All activities related
to infrastructure management as network planning, deployment, operation, maintenance,
user education and support are performed in-house.
Financial model. The WLAN project involves a substantial investment, principally in
personnel training, application development, equipment and service operation. There are
no revenues, nevertheless, some cost reductions are expected in terms of productivity
gains and a decrease in unnecessary drug administration and treatments.
Current experiences. Education of personnel is an important issue, as it takes time for
the new technology to be accepted and to manage change. Security and privacy is also an
important concern: communication is secured by using encryption technologies and
hardware authentication mechanism (security cards), and devices do not store any
information.
5.3
Hotspot WISP
Case Study: Zurich International Airport 3
Zurich Airport operates a private WLAN since 1999 for airport operations (e.g. baggage
tracing) and deploys a public WLAN service since mid 2002. Today, five access points
have been installed mainly in lounges.
Value Proposition. Zurich Airport provides a public 802.11b WLAN service. Airport
related information, e.g. timetables, is freely available, but internet access requires timebased subscriptions. Customers benefit from productive use of otherwise idle time and
shortened perceived waiting times. Affiliate WISPs are offered access to a customer base
of mainly business customers who stay an average of 1,5 hours at the airport.
Customer Relationship. Target customers are business travellers in the early adopter
segment who possess and are familiar with WLAN equipment. Zurich Airport is not
2
Interview with Philippe Noth, person in charge for medical applications,www.chuv.ch
3
Interview with Mathias Berger, currently responsible for WLAN at Zurich Airport
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Giovanni Camponovo, Mark Heitmann, Katarina Stanoevska-Slabeva, Yves Pigneur
aiming at controlling the customer relationship itself but rather intends to offer customers
a choice of WLAN service providers.
Infrastructure Management. Zurich Airport communicates individual access points,
controls service providers and manages wired infrastructure. Today, service is only
provided by Monzoon, but in the future Zurich Airport intends to manage the whole
access point infrastructure and split traffic between multiple providers. Customer care,
AAA and security services will be left to service providers or a relation managing
company.
Financial Aspects. Zurich Airport gains revenue from service providers who in turn
charge for user subscriptions: provider revenues are shared with the airport and in future
providers may be additionally charged an initial fee to offer their services in the airport.
Current Experiences. Zurich Airport found that communication of individual access
points and advertisements of the service are crucial for attracting users: business
customers, using mostly email, currently prefer using their mobile phones' data
transmission capabilities (existing billing relation) as a substitute to WLAN access. The
split of responsibility between service providers and the venue slows down service
adoption. Few problems with interferences or restrictions of hot spot positions were noted
even in the airport environment. Skilled partners for WLAN service customer support
were hard to find.
5.4
Wide Area WISP
Case Study: Swisscom Mobile4
Swisscom Mobile is Switzerland’s major MNO with a market share of 66%. It has been
doing research in the field of WLAN since 1999 and launched its service commercially in
2002. Nowadays, its network consists of 107 hotspots and is rapidly growing. WLAN
services are positioned to complement cellular based services. Swisscom Mobile ascribes
WLAN a massive importance for their future data services and has therefore invested
substantially.
Value Proposition. Swisscom Mobile aims at achieving a competitive edge by providing
high quality, innovative 802.11b WLAN services within a broad data and voice service
portfolio. Venues are offered free set up and operation of WLAN at their sites and
varying revenue sharing models. In addition, staff training, material and consulting for
communication of hotspots are provided.
Customer Relationship. Swisscom targets business customers who need nomadic e-mail
and corporate network access. Existing cellular customers can register for the service
through SMS to receive access information, whereas others need to buy prepaid scratch
cards. Furthermore, the former benefit from minute pricing and flat fee pricing schemas,
while the latter are only offered an uninterrupted 2/24 hour pricing scheme. Existing
infrastructure for customer support (hotline, Internet, branches) is also used for WLAN
services. In order to develop the market Swisscom engages in broad marketing activities
by providing WLAN coverage for international events such as the World Economic
Forum in Davos.
Infrastructure Management. In order to achieve quality leadership, Swisscom provides
an exclusive end-to-end solution, which includes network set up and operation, AAA and
security services, customer care, on-site staff training, end-user education, service
4
Interview with Thomas Kern, Head of Product Management “Business”
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Exploring the WISP Industry - Swiss Case Study
marketing and communication of access points. Network integration and sale of prepaid
cards is carried out together with partner companies.
Financial Aspects. WLAN is expected to be a profitable business on its own. Revenues
are achieved by pre-paid and post-paid user subscriptions. A variety of revenue sharing
models are proposed to venues depending on the location importance, but generally
upfront investments must be covered to a specified extent before sharing revenues with
venues. Venues also participate by selling prepaid cards.
Current Experiences. Business customers perceive public WLAN as a natural extension
of cellular services. Services are mainly used to increase productivity and shorten waiting
times. Although usage of installed hotspots is lower than expected, some usage picks
could be observed in certain locations during specific periods of time (e.g. winter tourist
centres hotspots during the winter holidays). On the other hand, site acquisition has
proven easier for WLAN hotspots than for UMTS and little problems regarding
interferences were experienced. Training of the venues’ personnel, support in marketing
of the service and special training of call centre personnel were crucial to assure high
quality and adequate customer support.
Case Study: Sunrise, TDC Switzerland5
TDC is Switzerland’s second largest MNO (18% market share) marketing cellular
services under the brand Sunrise. WLAN services are not yet operational but planned for
2003. WLAN is seen as an important competitive weapon, penalizing operators without a
WLAN service offering. Therefore, WLAN is planned to extend the existing business and
increase customer loyalty.
Value Proposition. The service, based on 802.11b technology, will be provided as part of
a comprehensive wireless service bundle. It will be initially restricted to wireless Internet
access without value added or security services aside from recommendations. TDC will
offer venues to enhance their attractiveness to end users through their brand and single
point of contact for wide area WLAN access.
Customer Relationship. The service will be targeted at existing business customers and
offered under the Sunrise brand. Customers will therefore have a single point of contact
with the enterprise: WLAN services will be communicated using direct channels,
customer support will use present Sunrise infrastructure and WLAN will be billed
together with cellular services. In this context reliability of the service and its bandwidth
as well as short reaction times will be a priority. In cases of exclusive hotspot coverage,
prepaid and roaming services could also be offered.
Infrastructure Management. The customer relationships activities such as billing and
customer care will be performed internally, whereas other activities like hotspot set up
and operation may be performed by partners depending on the type of hotspot. TDC
intends to make use of their experience in wholesaling to offer relationship management
also for multi provider models to venues. A flexible business model without the
restriction to end-to-end solutions is planned. The coverage of their service is to be
selective based on the communication needs of existing customers.
Financial Aspects. Revenues are to be primarily achieved by postpaid subscriptions of
existing Sunrise customers and shared with venues. Besides revenues from non Sunrise
customers, no further revenue streams are expected in the initial stage.
5
Interview with Ezra Stein, Marketing of Broadband Services Sunrise Mobile
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Giovanni Camponovo, Mark Heitmann, Katarina Stanoevska-Slabeva, Yves Pigneur
Case Study: Monzoon6
Monzoon is a neutral "greenfield" start-up company founded in the fall 2000, offering
WLAN broadband Internet access and services. At present Monzoon operates about 25
hotspots in Switzerland. In the future Monzoon plans to provide additional value-adding
services such as printing or location based services.
Value proposition. Monzoon’s core offerings are the installation and operation of
802.11b-based WLANs at venues of corporate customers. Based on its innovative
software solution, Monzoon is able to offer AAA services, facilitating commercial
deployment of public WLANs and roaming with other WISPs. Monzoon also offers
training to venues’ staff and support for service marketing activities. A free encryption
solution enabling secure data transmission is offered through Monzoon’s web-site for
download to end customers.
Customer Relationship. The main target customers are business customers, who are
interested in providing WLAN services to their end customers. Monzoon has abandoned
the idea to directly target end customers as this market segment is already occupied
mainly by MNOs. However, Monzoon has organised several broad marketing events with
the aim to develop the market (e.g Surf-am-See in summer 2001 and “Surftrophy” in
summer 2002, where WLAN services were freely offered in the major cafes around the
Zurich lake).
Infrastructure Management. The network is composed of autonomous hotspots
connected to ISPs. Installation and operation of hotspots is performed in co-operation
with a broad network of business partners. Technical partners are CISCO, IBM, and
TOGEWAnet. Customer support is outsourced to professional call centres. Of strategic
importance are roaming partners operating different kind of networks or providing
enterprise-grade remote access services. Currently Monzoon has roaming agreements
with five WLAN operators and with iPass, one of the leading provider of worldwide
enterprise-grade remote access services. Further strategic partners are mobility providers
like airlines.
Financial aspects. Revenues are achieved by prepaid scratchcards, postpaid subscriptions
and yearly flat-fee subscription. The offered prices vary with respect to partners (e.g.
customers of the partner Swiss airline receive special discounts). Revenues are currently
shared with venues and in future it is planned to share them with content providers as
well.
Current experiences. According to the experiences of Monzoon end customers use
WLAN basically for e-mail and access to corporate VPN. The traffic volume varies at
different hotspots. In average there are about 50 accesses per months, but most frequented
hot spots achieve more than 100 accesses. Postpaid subscriptions are considered more
convenient compared to scratchcards.
Case study: Netair7
NetAir is a very small start-up enterprise, currently in its creation stage, planning to offer
WISP services on the Swiss Leman basin region. It tested its service during late 2002 in
two hotspots and will make it commercially available in 2003.
6
Interview with Matthias Koch, CEO Monzoon Networks AG
7
Interview with Patrick Winkler, founder of NetAir
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Exploring the WISP Industry - Swiss Case Study
Value proposition. NetAir provides a bare broadband wireless internet connection
through the 802.11b technology. The basic service allows users to connect to a single
hotspot and is positioned as a low-cost alternative to ADSL/cable connections. The
premium version allows users to connect to the whole NetAir network. On the other hand
there is limited support and quality of service guarantees except a 128 kbps minimal data
rate and a maximum 24h interruption of service.
Customer relationship. NetAir targets the mainstream consumer market, with a
particular attention towards early and late majority users, who are typically attracted by
convenience and low prices (Moore 1999). In particular, the basic offering is directed to
residential customers wanting a low cost Internet connection at home, while the premium
service is directed to mobile users equipped with a WLAN enabled laptop.
Infrastructure management. The NetAir network is composed by autonomous hotspots,
connected to the Internet by independent connections, sharing only the authentication and
security software. The network covers different types of residential and public locations.
Basically, the network is created using a hybrid approach: NetAir takes care of network
planning, deployment, operation, maintenance, promotion and contract management,
while involving users with an existing broadband connection in becoming part of the
network, by sharing their existing broadband connections and hosting wireless equipment
on their properties in exchange of revenue sharing possibilities. NetAir would also like to
sign roaming agreements with other WISPs and roaming brokers in order to increase
coverage and customer base. Other business partners are resellers (who promote the
service for a commission), ISPs (who rent ADSL lines to connect the hotspots to the
Internet) and equipment vendors.
Financial aspects. NetAir expects to gain revenue from monthly flat rate user
subscriptions. Part of this revenue is shared with affiliate users depending on hotspot
utilization. NetAir expects a two years payback period.
5.5
Community WISP
Case study: Myotis
8
Myotis is a non profit association created in November 2002 aiming at creating an
autonomous community WLAN covering Lausanne. The association already has a dozen
members and operates a couple of hotspots, but hopes to reach fifty members and an
adequate number of access points within 2003.
Value proposition. Myotis basically contributes to create a metropolitan community
wireless network in Lausanne by helping members to deploy hotspots, federating them in
a common network, coordinating their deployment (e.g. for avoiding interference) and
collaborating with similar networks. Moreover, the association offers knowledge sharing
and formation courses on different WLAN topics and allows experimenting with new
wireless technologies and applications.
Customer Relationship. Myotis adopts a tiered customer relationship model. Members
have full and unrestricted access to the community network and its services, while non
members are offered restricted services (i.e. low bandwidth Web access). Commercial
sale of its bandwidth might be considered to raise additional funding.
Infrastructure management. Initially, the network will be composed by autonomous
hotspots set up by the association's members, linked to the Internet through independent
8
Interview with Jean-Christophe Heger, founder of the Myotis association
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Giovanni Camponovo, Mark Heitmann, Katarina Stanoevska-Slabeva, Yves Pigneur
residential connections and sharing a common authentication system. Afterwards, a
backbone network (copper lines and point-to-point wireless links) might connect the
different hotspots, providing redundancy, load balancing and eventually sharing a
common high speed Internet connection. Hotspots will be set up and maintained by single
members, who are assisted by Myotis to select, install and configure the necessary
equipment. The association also manages the authentication service and promotes the
network.
Financial model. Members of the community are required to pay an initial and annual
fees, which shall be used to extend the network and provide formation courses. They can
also contribute on a voluntary basis with equipment, knowledge and work. Connection
fees are, at least initally supported by single members providing access to their
connections.
Current experiences. Currently, the major concerns are attracting new members and
fostering their involvement. Additionally, Myotis is concerned in protecting itself against
abusive usage of the community network.
6.
Discussion
In this section the basic findings of the cross-case study will be discussed from two
perspectives: 1) From the different aspects of business models following the previous
structure and 2) from the point of view of the business models identified in the WISP
classification framework.
Value proposition. Today, available WLAN technology is standardized and provides
little opportunities for service differentiation based on bandwidth or quality of service.
WLAN providers offer best effort with a maximum of 2 mbps. As a result providers have
to seek differentiation opportunities in other spheres. Based on the interviews we can
identify four differentiation opportunities: 1) Through leveraging strong existing
customer relationships; 2) through fast establishment of partnerships and co-branding
with companies having strong relationships to end customers; 3) through fast
establishment of exclusive partnerships with attractive locations with a high frequency of
end-customers in the early adopter business segment, e.g. airports, and 4) through the
quality of added AAA services (for example is metered payment possible or not). Valueadding services as location-based or printing services might become an additional
differentiation sphere in the future.
Players are not equally suited for taking advantage of these opportunities, due to their
differing core competencies and resources. MNOs can leverage existing customer
relationships and customer support infrastructure, and can offer integrated solutions with
their cellular networks (e.g. see Laine 2002). In combination with fast occupation of
locations, these core competencies provide the basis for a strong market position.
Start-ups targeting the business market as Monzoon, seek to balance out their lack of
direct relationships to end-customers by early occupying attractive venues, by rapidly
attracting early adopters, by establishing early relationships to potential multiplicators of
their services as for example airlines, and by early roaming agreements. Another
differentiation opportunity for start-ups in the future are development of competencies for
offering value-adding services as for example printing services.
Alternatively, start-ups targeting the end-consumer market as NetAir, try to occupy
particular market niches, e.g. by focusing on particular locations or geographical regions
or by targeting particular customer segments (cf. Netair and Myotis). Venues and
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Exploring the WISP Industry - Swiss Case Study
companies also have an opportunity to enter the market by leveraging their location (cf.
Zurich Airport and CHUV).
Customer relations.
The way that customer relationship are handled differs widely between the identified
WISP categories. MNOs can leverage their existing customer care infrastructure,
customer information, experience and billing systems to provide a more effective and
efficient customer support. They can also rely on a well established brand and customer
base to communicate and promote the service. As venues are not primarily interested in
handling the customer relation regarding WLAN, clearly MNOs are positioned best
taking care of customer relations. But, this holds only for domestic customers. Incoming
foreign potential customers can only be addressed through co-branding and partnerships
with international players as well as customer and brand owners. While WISPs targeting
the business segment must provide impeccable customer support, other players
deliberately rely on a minimal support to allow inexpensive offerings (cf. NetAir) or
prefer outsourcing the customer relationship to other firms (cf. Zurich Airport).
In general, all interviewed parties highlighted the underdeveloped market for WLAN.
This is due to several reasons: 1) Currently most companies do not have a strategy how to
handle end-devices and WLAN usage; 2) customers are generally not aware of WLAN
services and hotspot location, 3) WLAN-enabled end-devices are just starting to appear,
4) coverage is still limited and roaming agreements between WISP are not in place, and
5) security concerns are a serious burden for developing trust in WLAN services. In order
to develop the market all players have to engage in broad marketing activities targeting
end customers.
Infrastructure management.
All players relay on a broad network of partners to provide their services. But, one major
difference is that MNOs generally have an established network and start-ups have to
establish and develop it. To provide a reliable service, support and communication
activities especially for business customers, the centralized top-down approach of
building networks seems to prevail. First experiences show that initial investments in the
installation of access points are low compared to costs for providing AAA and support
infrastructure.
A crucial partner for all commercial WISPs are venues. Venues are ultimately interested
at satisfying their customers but lack competencies in the area of WLAN. Therefore,
training of the venue’s personnel as well as support with marketing of the service is a key
success factor for the service. However, the motivation of the venue to market the service
will depend on the revenue-sharing model. Venues that are not offered a share of
revenues resulting from usage of the installed WLAN are not interested in marketing the
service.
Financial model.
Most commercial players use subscription models, basically using different variations of
flat rate pricing schemes. Slight variations are also found in the payment means accepted,
including prepaid cards, postpaid subscriptions paid by credit card or through an existing
billing relationship. Here again MNOs have an advantage as they can leverage existing
billing relationships. Metered payment has proven to be expensive to implement and only
Swisscom Mobile aims at such a services. Volume based models are considered not
feasible as users are not able to estimate transferred volumes of data. In the future,
attractive revenue-sharing models will be necessary for the development of relationships
to venues, content providers and providers of value-adding-services.
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Giovanni Camponovo, Mark Heitmann, Katarina Stanoevska-Slabeva, Yves Pigneur
Experiences.
So far, interference with other networks related to installation or operation of access
points has not shown to be a problem for any of the players. However, the actual usage of
WLAN by customers has been below the expectations. Today in Switzerland, services are
mainly used by business customers for e-mail and corporate access, even though with a
lower intensity as expected. The mass market is largely unaware and uninterested in
WLAN services. Although all players offer prepaid cards, they are perceived to be highly
inconvenient, due to the fact that users can not simply start using a service when they
detect it.
Based on the findings described above the following conclusions can be drawn for the
business models of the different type of WISP described in the classification framework:
Private WISPs in many cases, have opportunities to leveraging their infrastructure by
offering WISP services to customers. Entities like hospitals, universities, and households,
might therefore evolve towards becoming hotspot WISPs or join a community WISPs.
These entities might require to partner with a commercial WISP or technology enabler
(e.g. a middleware software provider) to enhance the internal WLAN with AAA services
and market the service.
The results of the survey show that Hotspot WISPs can further be classified in different
subtypes. Venues basically differ in their attractiveness and potential to offer WISP
services, due to the type of customers they normally have and the time and need that these
may have to access network services. WISPs also differ in the competencies to operate a
WLAN by themselves and to manage the customer relationship. These factors may
strengthen the position of the venues in their negotiations with WLAN operators. For
example venues which are attractive and have adequate network operation and customer
relationship management such as the Zurich airport can obtain very favorable conditions
and may host several WLAN providers. Such multi-operator hotspots are very much
likely for similar venues and open the opportunity for new services enabling roaming and
AAA services in a multi-operator environment.
Wide Area WISPs can also be divided in subcategories depending on the competencies
and core business of the firm. While MNOs targeting quality leadership try to operate
their own end-to-end solutions, others try to build on flexible business models offering
start-ups the potential to sell to MNOs and ISPs as their wholesale customers. Wide Area
WISPs have the potential to become the dominant WISP business model, but face the
greatest risk and competitive pressure. At the current stage of the market development the
most important race is for the attractive venues and roaming agreements with
multiplicators. In the future the battle might be transferred in the area of value added
services.
Community WISP is the most endangered type of WISPs. Obstacles to community
WISPs might appear from different sides. Prevailing ISPs try to legally prevent a
community usage of existing Internet connections: clauses prohibiting sharing of the
connection have already been included in the contracts. In addition, communities may
suffer from abusive usage problems, security concerns, scalability of self-organized
solutions and the ability to create awareness and attract new members.
7.
Conclusion
This paper investigated the current situation of the Swiss WISP market. In order to ensure
that the whole range of the current strategic approaches are investigated, a general
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Exploring the WISP Industry - Swiss Case Study
classification framework is proposed and used as a base for selecting the enterprises to
interview. The case studies showed that the WLAN market is an emerging and highly
dynamic market. From a business angle, WLAN seems to follow a complementary path
to existing wireless and wired infrastructure based networks. But, at this point of time it is
still open which business models will survive and further developments will very much
depend on the speed of adoption of the technology by end customers.
In future, further research will be needed to verify the first results with a quantitative
study and by comparing the results with surveys of other countries. As WLAN usage will
pick up beyond the early adopter business segments, research on the application of
diffusion models, disruptive technology or competitive strategy theories will lead to
additional insights.
Acknowledgement
The work presented in this paper was supported by the National Competence Center in
Research on Mobile Information and Communication Systems (NCCR-MICS), a center
supported by the Swiss National Science Foundation under grant number 5005-67322.
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