Wi-Fi falls short of expectations

By Ellen Simon
Associated Press

Liesbeth den Toom and Reinier Evers of Trendwatching.com from Amsterdam, Netherlands, use the free Wi-Fi connection in New York's Bryant Park to work on their laptops. Many large cities and companies offer free hotspots to lure visitors and customers. Associated Press

Small companies, some publicly traded, are burning cash trying to turn Wi-Fi into viable business. Some already have shut down.

Faster than you can say "industry bubble," skeptics are asking whether wireless Internet connections will become similar to the wired Internet of the late 1990s — hot but rarely profitable.

"Anyone trying to build a stand-alone business on Wi-Fi access should be worried," said analyst John Yunker of Byte Level Research. "It's not a stand-alone business, it's an add-on to other communications businesses, the cable bill or the DSL bill."

Wi-Fi, short for wireless fidelity, appeals most to people with laptops and personal digital assistants. It radiates an Internet connection to users within 300 feet — a zone known as a "hotspot."

Wi-Fi gear is shrinking in both size and price, to the point where Wi-Fi connections eventually could be built into power strips. The fact that Wi-Fi uses unlicensed bands of the radio spectrum makes it even cheaper to deploy.

Of course, the low costs can be a huge plus for companies trying to turn the technology into a profitable business.

David Hagan, president of Boingo Wireless Inc., an aggregator that sells for $21.95 a month access to 6,000 hot spots deployed by other companies, said the 3-year-old company's main cost is its 70 employees. He expects Boingo to become profitable by 2006.

But the talk of the industry is whether Wi-Fi service will eventually be free — with the technology's low cost frequently borne by stores that hope wireless Internet access will encourage customers to linger.

Cities such as San Jose, Calif., Spokane, Wash. and Austin, Texas, have set up free hotspots. Companies including Best Western International Inc. hotels and Panera Bread Co. give away Wi-Fi access to lure customers.

After being launched in 2002 with an ambitious plan for a national chain of hot spots, Cometa Networks Inc., whose investors included AT&T Corp., Intel Corp. and IBM Corp., shut down in May, saying it had run out of money.

Other Wi-Fi companies have had to alter their business models. Wayport Inc., which hastened Cometa's end when it got the contract to set up Wi-Fi in 6,000 McDonald's Corp. restaurants, began by selling access to consumers but announced plans in May to adopt a wholesale model.

Yunker of Byte Level Research suggested that investors be careful with Wi-Fi stocks.

Siricomm Inc., whose shares trades over the counter, is trying to build a private Wi-Fi network in truck stops and weigh stations. The company hopes to offer the service for $49.99 a month starting in September. It has a deal to install hot spots in 255 Pilot Travel Centers and it's in talks with states about the weigh stations.

From its inception in 2000 through its most recent quarterly report, the company has had no revenue and total losses of $5.1 million.

Still, chief financial officer Richard Iler believes Siricomm will find success in turning some of the nation's 4 million truckers into "knowledge workers."