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Who's Paying For the Free Airport Wi-Fi?

Jan 22 2014, 12:50pm CST | by

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Who's Paying For the Free Airport Wi-Fi?

With banks of blinking slot machines situated just past the security check, McCarran International Airport in Las Vegas will never be a “normal” airport. But the tourism and convention money that comes from serving as the gateway to the Strip means that McCarran can also afford to be an early adopter of traveler-friendly technology.

Ten years ago McCarran was one of the first big U.S. airports to give away Wi-Fi. Today the airport is in the process of deploying one of the first systems to beam Wi-Fi outside the terminal to fliers stuck on board arriving and departing aircraft. “The experience where a customer feels forced to pay at a location is not a happy experience,” says Samuel Ingalls, McCarran’s longtime IT chief. “I can’t overstate what kind of positive reaction we’ve gotten over the years.”

The rest of the country is finally catching up, with more than 90% of the biggest 150 U.S. airports offering a free or “freemium” Internet connection last year, according to research by wireless software company Devicescape. Last year three of the biggest holdouts–the New York-area airports John F. Kennedy, LaGuardia and Newark–offered free Wi-Fi almost half of the time.

Airports aren’t offering Wi-Fi because it’s suddenly cheap–it’s expensive and often a headache to deploy. “We’ve got almost 3 million square feet to cover. It’s not like running to Best Buy,” says Scott Wintner of Detroit Metro Airport.

But customers want free Wi-Fi, and at some point in the last year or so the failure to offer a free, consistent connection has become a competitive disadvantage. The number of major hubs that charge for Wi-Fi is now ten. The nation’s busiest airport, Atlanta’s Hartsfield-Jackson, is the one most often singled out. It lowered its fees to $4.95 in 2012 and delayed a planned switch to free in the fall. Minneapolis-St. Paul International shifted to freemium, charging only for intensive use such as video streaming or connections that last for more than 45 minutes.

The shift to free has led to changes in who pays for airport Wi-Fi. Four years ago Google popularized the concept of underwriting an entire airport’s Wi-Fi during a holiday promotion. Startups such as JiWire and Cloud Nine Media began offering ad deals directly to airports to defray some costs with 30-second video spots, rich media and banner ads.

As ad-supported Wi-Fi has taken off, the biggest partner to airports has remained Boingo Wireless, which has traditionally paid for the equipment and installation and split its monthly and daily access fee revenue with the airports in multiyear contracts. Buying up its rivals, Boingo at the time of its 2011 IPO claimed to reach 42% of all North American passengers in 271 airports (plus contracts in restaurants, malls and hotels).

The emerging appetite for free Wi-Fi has forced Boingo to look for more varied revenue sources. It bought into the ad-supported trend by acquiring Cloud Nine in August 2012 and a fast-growing competitor, Advanced Wireless Group, which had contracts with LAX and Miami, in October. That brought back airports such as Minneapolis-St. Paul, which AWG snatched from Boingo in an ad-supported deal that made the airport twice as much money ($400,000 last year).

Even with the acquisitions Boingo’s revenue grew just 3% last year, and its shares are off 50% from their highs in 2012. Analysts are more bullish about its move into military bases through its February 2013 acquisition of a firm called Endeka. “There is always competition to keep us on our feet,” says Boingo President Nick Hulse. “I think we are caught up to this new market trend.”

As long as advertisers are footing the bill, airports no longer care which infrastructure vendor gets the deal. Throwing open a contract to new players brings the extra benefit of higher-speed networking gear. By switching to AT&T, Dallas/Fort Worth is getting one of the best high-speed free Wi-Fi systems in the U.S. (see table, p. 46) . Houston’s two airports will forgo the $300,000 they make per year in a 35% revenue share with Boingo and choose a new ad partner to help cover the cost of new gear. “It’s unlikely we will continue with Boingo,” says chief commercial officer Ian Wadsworth.

Boingo still has tricks up its sleeve. At Chicago’s bustling O’Hare International Boingo is testing a new Hotspot 2.0 that lets authenticated smartphone users hop onto Wi-Fi securely at no cost. Who would likely foot the bill? AT&T and Verizon.

Follow me on ForbesTwitter and Facebook for more tech coverage in startups, ad tech, enterprise software and venture capital.

Source: Forbes

 

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