Wi-Fi Industry
Bets 'Roaming'
Will Lure Users

The business of selling Wi-Fi Internet connections has become increasingly cutthroat and profitless. But now providers think they have found a strategy for success: cooperation.

Over the next few months, many of the nation's largest Wi-Fi providers are expected to begin signing "roaming" agreements that will give their customers access to other providers' "hot spots," much like the alliances that connect far-flung groups of automated teller machines and traditional mobile-phone networks.

Wi-Fi, short for wireless fidelity, allows laptops and other mobile devices to connect to the Internet wirelessly from areas that are typically within 200 feet or so of special equipment that transmits a high-speed signal. Over the past few years, Wi-Fi providers in the U.S. have set up 12,000 such hot spots in airports, cafés and other public places, and the total is expected to nearly triple by 2005, according to Allied Business Intelligence, a research firm.

The hot spots are used by business travelers, students and people who just want to work outside in their local park on a nice day. Users can usually pay for the service by the hour, the day or the month.

But it's tough for Wi-Fi users who subscribe to a particular provider's service to get an Internet signal in another provider's hot spot. Some people subscribe to several services -- at prices ranging from $20 to $40 a month each -- to be reasonably sure of finding enough places to connect. Richard Ginsburg, the president of security firm Protection One, pays for two Wi-Fi subscriptions to get widespread access. "It's not the ideal situation," he says, "but you learn to adapt."

The Wi-Fi hot-spot industry's growth thus far is in part a result of roaming agreements among a patchwork of smaller providers. Subscribers to Boingo Wireless Inc., for instance, receive Wi-Fi access in nearly 2,000 locations from a network that includes dozens of small providers.

T-Mobile USA Inc., a unit of Germany's Deutsche Telekom AG that maintains 3,200 hot spots, mostly in Starbucks cafés, says it expects to sign a roaming agreement by year end, though it declines to disclose details. Sprint Corp. says it plans to sign agreements this month, more than doubling its Wi-Fi hot spots to about 2,100 by early 2004. In Europe, Scandinavian phone carrier TeliaSonera AB has already signed pacts throughout the Continent, including in Italy, Britain and Germany, creating a shared network of 1,700 hot spots.

Meanwhile, several big telecom providers, including Sprint, AT&T Wireless Services Inc., Verizon Communications Inc.'s wireless unit and SBC Communications Inc., have announced agreements with Wayport Inc., a closely held company based in Austin, Texas, to allow their customers to get access in Wayport's roughly 800 locations, most of which are in hotel lobbies. But T-Mobile and Wayport, the two biggest operators of Wi-Fi hot spots in the U.S., haven't struck an agreement for roaming on each other's networks. Wayport CEO Dave Vucina says his company has had talks with T-Mobile about such an agreement. "I don't know that they necessarily believe there's a significant advantage of roaming into our footprint," he says.

In any case, the large-scale Wi-Fi providers say they can't turn a profit without reaching agreements with other companies building similar infrastructure. "No carrier can deploy a wireless local area network on any scale, sell to just their own customers, and generate a return that anyone would be excited about," says Wes Dittmer, director of business development for Sprint.

If roaming agreements are adopted more widely, all the billing and technical nitty-gritty will be handled in the background, much the way cellular networks work. It still isn't clear how much more consumers will have to pay for roaming. Several companies, including microchip maker Intel Corp., are leading a push to finalize standards and the procedures for authenticating and billing customers. "It's the next step of getting out into the world," says Abel Weinrib, director of Intel's communications technology lab. "Right now it's a sort of random experience. We're not yet at that point where it is intuitive and easy."

Roaming agreements were one of the keys to the growth of the U.S. mobile-phone business in the mid-1990s, because they allowed customers more opportunities to use their phones while traveling far from home.

Will the same magic work for Wi-Fi? Use of the technology to connect computers at home is surging, but it remains unclear how many consumers want to buy hot-spot subscriptions. Some people think hot spots may be wireless versions of Internet cafés, a remnant of the 1990s tech boom that never really took off. Wi-Fi service providers have disclosed little about how much money they make from their services, and some Wi-Fi providers have already gone bankrupt.

Other technologies could also cut into the market for hot-spots service. Cellphone carriers insist that Wi-Fi is merely complementary to the so-called 3G services they offer -- wide-area coverage over their cellular networks, using a card or cellphone. But others argue that the continuing deployment of Wi-Fi services, and their much faster speeds, will take customers away from cellular networks. Wi-Fi may not be everywhere, they say, but it's in the kinds of places where many people want to use their laptops.

A middle ground is also developing: New software enables laptops and other Wi-Fi-enabled mobile devices like PDAs to switch seamlessly between cellular networks and Wi-Fi hot spots. Maureen Govern, chief technology officer for the telecom-billing company Convergys Corp., says Wi-Fi roaming will grow more popular when Wi-Fi networks can support voice calling. That would enable a user stymied by poor mobile-phone coverage deep inside an office building to maintain a quality connection via a Wi-Fi network.

Write to Dennis K. Berman at dennis.berman@wsj.com and Jesse Drucker at jesse.drucker@wsj.com

Updated November 6, 2003