Franz Büllingen, Christin-Isabel Gries, Peter Stamm
Der Markt für Public Wireless LAN in Deutschland
Nr. 252 / Mai 2004
Summary
During the last two years start ups, mobile network providers, ISPs and owners of highly frequented public locations have started to offer WLAN services in order to provide high speed internet access to the public. Since the related standard 802.11 has been implemented, hardware components are inexpensive and broadly deployed and the use of the frequency spectrum is not submitted to licensing, the market penetration of PWLAN is growing dynamically. At the beginning of the year 2004 more than 13,000 hotspots exist in the US, nearly 3,500 in the UK, 1,200 in Japan and about 2,300 in Germany. On behalf of this situation some market studies predict further growth rates while others point out, that PWLAN service supplies only meet the needs of small customer groups and that there will be low or no return of investment for the majority of hotspots. Therefore consolidation processes have to be expected within the next few years.
Bearing this background in mind our study analyses, whether PWLAN is to be seen as an addition or as a substitution regarding other mobile communication services like UMTS. Furthermore it shall be examined, which business models are economically sustainable in the German market in the long run, which drivers and barriers influence penetration and adoption processes and what factors will be crucial for the further development of this market segment.
PWLAN has to be regarded as an extension of fixed network services in separate locations. In addition, it generally provides more bandwidth at lower costs and makes different services available. UMTS however offers a certain quality of service for customers and provides ubiquity and mobility. Therefore the existence of competition between the two transmission platforms PWLAN and UMTS, whether on the supply side whether on the demand side, has to be denied.
Regarding the players and their market strategies four business models can be differentiated. The first group of suppliers, mainly consisting of mobile network providers is already in possession of a large pool of customers and covers all segments of the value chain including roaming and billing services. This group owns most of the hotspots in Germany and will, in the long run, merge PWLAN and UMTS/GSM while aiming at a bundled offer of "seamless mobile services" to their customers. Therefore the SIM-card technology will be introduced to PWLAN in order to solve the existing problems related to authentification, authorisation, accounting and international roaming.
The second group comprises enablers and resellers pursuing complementary business models. They will presumably only be successful at those hotspots, which will be profitable due to strong demand. The third group consists of location owners like hotel chains, cafés etc., which will offer PWLAN services for free or at low prices as add on to their core business activities. Most players of the forth group, the start up enterprises, will quit this market because the problems of billing, roaming and IT-security are severe and solutions pursued are linked with high transaction costs. [Only German language version available.]
Diskussion Paper is available for download.