A Substitution Effect
The problem that Europe faces with Wi-Fi, along with 3G and other mobile data services, is that it is a complex patchwork of user behavior, both business and personal, that occurs within a geographically fragmented area. Penetration rates of data-ready mobile devices, availability of comprehensive suites of application services for businesses, and business practices that accommodate widespread usage of both, vary widely from country to country. Europe lacks the sort of sizeable entrepreneurial small-business class that in the U.S. equips and seeks out solutions itself, the kind of mobile professionals who are propping up T-Mobiles relationship with Starbucks in the US, for example. Instead, the market is comprised of small tribes of creatives or professionals in urban centers that may not have the disposable income to afford wireless laptops and iPaqs, along with an equally small and fragmented number of DIY road warriorsestimated at 6 percent of the market by one data house. Most of the potential market for "pay" Wi-Fi has been anchored to the increasingly capable, data-enabled mobile phones on offer across Europe.This may be about to change. The magic bullet? At the top of the market, it will take time for business Wi-Fi usage to spread, as companies wait for some stabilization of the market and where the networks of hotspots materialize. Hotspots arent ubiquitous enough yet to give the kind of predictability needed to encourage the investment in access and hardware for many companies.However, interesting things are happening at the level of "free-to-user" public Wi-Fi. In the same way the advent of the free dial-up access model jolted the industry into growth here in the late 1990s, free public Wi-Fi, combined with innovative usage models and locally packaged services, could stand to give the industry a similar kick start. Despite the harrumphing coming from the fixed-line incumbents and large mobile operators, the free-to-user model for Wi-Fi in Europe is sustainable enough for the foreseeable future, say small operators and retailers who are currently partnering to offer it in limited rollouts. In addition, making broadband so easily available in public places as an amenity should spread the value of the technology, much as satellite TV in pubs and bars did for that sector. It has the potential to educate the public about the benefits of broadband, fill geographical gaps where it is still not available, and put it closer to the millions of potential users who still cant get broadband to the home in parts of Europe. Two U.K. players are pushing versions of the free-to-user model in the U.K. at the moment, and they are taking aim at market segments that dont want to pay $50 to $80 a month for access. Wialess.com, based outside London in St. Albans, is building its business around wiring pubs and bars. In central London, an area dense with young, mobile professionals, café chain Benugo has partnered with service provider Broadscape to offer competition to the nearby branches of coffee houses Costa Coffee and Starbucks that offer pay models. Around Europe, similar businesses are popping up to wire the innumerable public gathering spots where professionals and students gather.