Verizon and Wi-Fi

There’s been much dis­cus­sion over the past year related to the via­bil­ity of new wire­less oper­a­tors try­ing to imple­ment national net­works for Wi-Fi. The issue is one of cost and return on invest­ment. As we learned dur­ing the dot­com boom, it is easy to build new infra­struc­tures but it is much harder to build new infra­struc­tures that are not only scal­able but also prof­itable. With the intro­duc­tion of free Wi-Fi to exist­ing broad­band cus­tomers, Ver­i­zon is chang­ing the model again.

On one side, you have smaller oper­a­tors like Boingo that are try­ing to make a go of it with­out any­thing else. My bet is that the future of such oper­a­tors lies in being acquired, either by a tele­phone com­pany (in that par­tic­u­lar case, I would bet on Sprint acquir­ing them since Boingo already has a rela­tion­ship with their PCS division).

On another side are exist­ing large mobile oper­a­tors like T-mobile who are try­ing to cre­ate a bun­dle that includes mobile phone ser­vice and data ser­vice all in one pack­age. Those will prob­a­bly con­tinue to move suc­cess­fully but will be forced to lower prices as time goes on.

Now, with the Ver­i­zon offer, I expect to see not only DSL oper­a­tors (a mar­ket which has gone through a lot of con­sol­i­da­tion, leav­ing mostly the incum­bent tel­cos in charge) but also cable com­pa­nies look­ing into bundling this type of solu­tion. As a result, Wi-Fi may actu­ally become a loss leader in a bat­tle that includes a much wider range of ser­vices. What this will mean for new busi­ness bet­ting the future on a Wi-Fi only rev­enue strat­egy will need to change their mes­sage if they hope to survive.