In Search of a Business Model for Hotspot
MANUELA APARICIO (**), CARLOS J. COSTA (*) J. PAULO COSTA (**)
(*) Information Science and Technology Department, ISCTE, Lisboa, PORTUGAL
(**)Lusocredito, Lisboa, PORTUGAL
Abstract: We analyze the literature in order to clarify the concept of business model and to identify hotspots business models. Based in those models an in a set of interviews we produced a hot spot business infrastructure model. Then, we analyzed the information of the main public hotspot in order to improve this model.
Key words: Business Model, Hotspot, Wi-Fi,
1. Introduction
The last years have seen a strong expansion of Wireless LAN hotspots around the world. As with all new and upcoming businesses, the enabling business models are evolving in parallel with the application of new technology by current or new players.
Hotspot uses as support technology WiFi - Wireless Fidelity ([6],[3]). Related to this technology it is important to identify some organizations (e.g. Wi-Fi Alliance) as well as some standards (e.g. IEEE 802.11).
The Wi-Fi Alliance, formerly known as the Wireless Ethernet Compatibility Alliance (WECA), was established in 1999 to certify interoperability of Wi-Fi (IEEE 802.11) products and to promote Wi-Fi as the global wireless LAN standard across all market segments ( 802.11b, which evolved from 802.11, is a standard that implements data rates of 11 Mbps in the 2.4 GHz ISM (industrial, scientific, and medical) band. IEEE 802.11b is a technical specification issued by the Institute of Electrical and Electronic Engineers (IEEE) that defines the operation of 2.4 GHz, 11 Mbps, Direct Sequence Spread Spectrum (DSSS) Wireless Local Area Networks.
802.11a, is a standard that implements data rates of 54 Mbps in the 5 GHz U-NII (Unified National Information Infrastructure) band.
Hotspots provide high-speed wireless Internet access in public locations such as airports, airline clubs and select Starbucks coffeehouses. Using either a laptop or PDA that is Wi-Fi 802.11b wirelessly-enabled, customers can surf the Internet or check email. So one should not confuse hotspots with wireless LANs. Hotspots use WLANs for a public service, tipically offering for a monthly fee. Analysts have questioned business model and economics of public hotspots, but a detailed analysed must be performed.
In the following section, we present a literature review. Based in this literature review we developed a hot-spot infrastructure model. This model may be decomposed in a set of areas: Network Infrastructure, Agents, Location, Users and Security. Each one of those areas was analysed in detail. In order to understand each one of those areas we analysed data from the main Portuguese hot spots. We started by creating a database with data collected. In order to collect data we started by collecting information about Portugal and Portuguese hotspots in the most important advertisement sites of hotspots ( and This information was then treated and complemented with documental data, mainly obtained from the sites of the WISP (Wireless Internet Service Provider) and news from main newspapers.
2. Business Model
As exposed by Linder & Cantrell [2], most people speak about business models when they really only mean parts of a business model. According to Osterwalder & Pigneur [4], the existing business model literature essentially attacks one, two or all of the following three elements, which make up a Business Model: Revenue and product aspects, business actor and network aspects and finally, marketing specific aspects.
Timmers [8] defines a business model as “an architecture for the product, service and information flows, including a description of the various business actors and their roles; and a description of the potential benefits for the various actors; and description of the sources of revenues”.
Tapscott and colleagues [7]defined the concept of ‘business webs (b-webs)’, which are “inventing new value propositions, transforming the rules of competition, and mobilizing people and resources to unprecedented levels of performance. A b-web is a distinct system of suppliers, distributors, commerce service providers, and customers that use the Internet for their primary business communications and transactions”.
According to Osterwalder & Pigneur [4] “a business model is nothing else than a description of the value a company offers to one or several segments of customers and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenues streams.” More specifically, they consider a business model as the “conceptual and architectural implementation (blueprint) of a business strategy and represents the foundation for the implementation of business processes and information systems”.
Summarizing, some researchers identify the “Business Model” as a pure business concept that explains the logic of making business for a firm, while some others consider it as a link between strategy, business processes and information systems. While in the first interpretation the three concepts of Strategy, Business Processes and Information Systems are included in the description of Business Model, the second interpretation considers them as inter-linked components set in different levels of a pyramid. In this case, a business model is considered as the conceptual and architectural implementation (blueprint) of a business strategy and represents the foundation for the implementation of business processes and information systems.
Also in the context of WLAN hotspots, several business models may be proposed.
It is in this context that several researchers ([10], [9], [5]) proposed a generic business model for WLAN hotspots that comprises a role, resource and revenue model of a value network.
They distinguish roles like customer, hotspot provider, hotspot owner, device owner, device provider, location owner, portal providers (e.g. internet service providers, corporate network providers), enabling service providers (e.g. authentication and authorization), network management and maintenance providers, and mobile and data network providers.
Their approach may be integrated in the second perspective of business model. But, those models are not exactly business models, as long as it is only a structural elements shared by several business models. In fact, to be a business model it is also important identifying business rules and other items sufficiently specific to be related to a specific way of “doing business”.
3. Hot-Spot Infrastructure Model
As mentioned, several reserchers ([10], [9], [5]) proposed a structural model shared by several business models, what may be more adequately called a structural model. Based in this perspective, the figure 1 shows what we called a hotpot infrastructure model that identifies the main resources (access points, places, endpoints, Internet service, security service) as well as main roles (user, AP manager, AP engineer, AP Owner and Place Owner). This model may accommodate several business model associated with hot spot management.
Those components, that were based in [10], [9], [5] and complemented with interviews to experts involved in the business, were then re-arranged in the following components:
-Infrastructures Network, including Endpoint Devices and Access Point;
-Location, including Place and Place Owner;
-Agents, including Access Point Managers, Owners and Engineers as well as Internet Service Providers
-Users, including Users but also de Access;
-Security, including the Security Service.
In order to better understand this reality, we started by collecting information about Portugal and Portuguese hotspots in the most important advertisement sites of hotspots, as well as in the sites of some of the most important Wireless Internet Service Providers (WISP): supplemented with the news.
3.1. Infrastructure Network
An infrastructure network is made of a group of stations and an access point.
An access point (AP) serves both as a central point for relaying communications between the stations within its range and connection to wired network, if any.
A station is the component connecting to the wireless medium. A station may be referred to as a wireless network adapter or a wireless network interface card (NIC).
3.2. Locations
One of the most important aspects is the place and its owner. This dimension is strictly connected to the business model and business strategy. In order to have detailed information about those items, we analyzed distribution of public hotspots across the Portuguese territory and we also identified the types of places.
In Portugal, there are 18 districts and 2 autonomous regions (Azores and Madeira). As may be seen in the fallowing table, the public hotspots are centralized in Porto (Oporto), Lisboa (Lisbon) and Algarve (that corresponds to the district of Faro).
Num. HS / Distribution / Pop/HS / Km/HSAçores / 3 / 3% / 80 873 / 777
Aveiro / 1 / 1% / 673 320 / 2 802
Beja / 0%
Braga / 0%
Bragança / 0%
Castelo Branco / 0%
Coimbra / 0%
Évora / 1 / 1% / 168 920 / 7 393
Faro / 8 / 9% / 43 264 / 624
Guarda / 0%
Leiria / 1 / 1% / 431 130 / 3 513
Lisboa / 55 / 61% / 37 285 / 50
Madeira / 0%
Portalegre / 0%
Porto / 14 / 16% / 120 122 / 167
Santarém / 1 / 1% / 439 480 / 6 690
Setúbal / 5 / 6% / 146 408 / 1 012
Viana do Castelo / 0%
Vila Real / 0%
Viseu / 1 / 1% / 398 710 / 5 012
Table 1 – Distribution of Hotspots by district
The most common type of places where hotspots are installed is the hotel.
Type of place /Percentage
Hotels / 41 %Cafes Restaurants / 30 %
Shopping’s / 11 %
Congress centres / 9 %
Malls / 3 %
Airports / 2 %
Golf’s / 1 %
Schools / 1 %
Cultural centres / 1 %
Table 2 – Distribution of Hotspots according to type of places
As may be seen in the map, there is a concentration of the number of hotspots in the seashore.
Figure 2 – Map of Portugal
3.2.1. The e-U (ElectronicUniversity) project
The e-U (ElectronicUniversity) project, virtual campus, was designed for the creation of university services online, the production and sharing of academic contents and the setting up of university communities.
Students will have access to classes, R&D articles, student papers, grades, bookshops and academic administrative services online, as well as access to the Internet through a broadband wireless LAN.
This project has as purpose to be one of the most innovative university initiatives in Europe.
U/P (*) / G/P (**)Universidade Porto
(Faculdade de Engenharia) / U / G
Instituto Politécnico de Portalegre / P / G
Universidade Técnica de Lisboa
(Instituto Superior Técnico) / U / G
Universidade Católica (Lisboa) / U / P
Universidade de Aveiro / U / G
Universidade de Coimbra / U / G
Universidade de Trás os Montes e Alto Douro / U / G
Universidade do Minho / U / G
(*) U/P University or Polytechnic
(**) G/P Government or Private Owned
Table 3 – Organizations involved in pilot projects
The e-U will provide all university students the access to a broad range of services, such as document requests, class papers, grades online, the payment of tuition fees, information exchange platforms, online bookshops and job or internship search facilities. With this system, everything is available 24 hours a day, 7 days a week from any point within the university campus or from any other point through the Internet.
While some universities are involved in pilot projects (Table 3), other Universities and Polytechnic Institutes are also involved but most of them in projects that did not started yet (Table 4).
U/P / G/PInstituto Politécnico da Guarda / P / G
Instituto Politécnico de Beja / P / G
Instituto Politécnico de Bragança / P / G
Instituto Politécnico de Coimbra / P / G
Instituto Politécnico de Leira / P / G
Instituto Politécnico de Lisboa / P / G
Instituto Superior de Ciências do Trabalho e da Empresa / U / G
Universidade Autónoma de Lisboa / U / P
Universidade da Beira Interior / U / G
Universidade de Évora / U / G
Universidade do Algarve / U / G
Universidade Lusíada / U / P
(*) U/P University or Polytechnic
(**) G/P Government or Private Owned
Table 4 – Organizations involved in the projects
Other universities and institutes have also presented their submission.
3.2.2. The Wireless@Expo network
The Wireless@Expo network is the biggest Wi-Fi network in Portugal. It covers the Parque das Nações, an area in Lisbon that has been reconverted for the 1998 World's Fair (Expo 98). The area includes the Oceanarium, a sports pavilion, the Portugal pavilion, the international exhibition center and a vast public space with gardens and a waterfront sidewalk. The ParqueExpo is the administrative office of the Expo area that owns and manages the infrastructure.
The wireless network in Parque das Nações provides broadband connections of up to 10Mbps via a mesh network consisting of over 100 access Points. The project is unique in Portugal, not only because of its coverage (100 hectares or approximately 250 acres) but also because of the way it operates.
In the first phase (a test period lasting up to 6 months), users get free access. Thereafter, the network will be opened to any wireless ISP. The WISP will be responsible for its backhaul connection and client relationships (billing and support). Each WISP will have its own SSID and VLAN. This solution allows different kinds of customers to be served by a variety of ISPs.
The project forms part of the National Broadband Initiative, recently approved by the council of ministers. UMIC (the government's Innovation and Knowledge Society organization) provided technical support and planning for the network. The government's goal in helping to deploy this wireless hot-zone is to promote the use of broadband services and to create a competitive market in the supply of new Internet access technologies. They also hope that with such a large wireless hot-zone "live", other cities and towns in Portugal will deploy public access wireless networks that are open to multiple ISPs.
3.3. Agents
Several agents may be involved in the hotspot businesses. Here we identified AP managers, Owners and Engineers. As long as the main purpose of the hotpots is to provide Internet Service, it is also important identifying this service.
All or at least an important part of those roles may be played by a WISP (Wireless Internet Service Provider).
But it is important that an owner of a place identify what to do, it is more adequate to contract a WISP or if it is more adequate to do all the investment and have a better control over the service.
WISP /Percentage
PtWireless (Portugal Telecom) / 53 %Vodafone / 21%
QuickAccess / 8%
Hotspot Portugal / 6%
Boingo / 4%
Wayport / 1%
iPass / 1%
AT&T Wireless Wi-Fi Service / 1%
Independent Providers / 4%
Table 5 – Distribution of Hotpots according to WISP
As may be seen in Table 5, the most important WISPs are also the most important communication firms. In fact Portugal Telecom is the most important telecommunication group (including TMN one of the GSM mobile operator), while Vodafone is one of the three GSM mobile operators. The third GSM mobile operator (Optimus) does not get involved directly in the Wi.Fi market, but is a sponsor of the “e-U Project”.
On the other hand, it is also possible finding international WISP, like Boingo and Wayport.,
Boingo ( was founded by Steve Dayton. He earlier started Earthlink, and used a similar formula to provide wireless broadband access (in Boingo) as he did with Earthlink. Boasting the largest network of locations in the US so far (over 650 locations) established in less than a year, Boingo offers free software downloads to operate its system and competitive rates for its services. In the USA, they focus on highly traveled areas (e.g. hotels in New York); in other areas (e.g. convention arenas in Dayton), they use a simple “franchising” model. Individuals purchase the hardware from Boingo and capture a revenue stream from anyone who uses their “Hot-spot”. In the USA, Boingo has seen great success in capturing major airports (e.g. Seattle/Tacoma, Dallas/Fort Worth, San Jose, BWI, Chicago Midway, Washington Dulles, Atlanta and Boston), but also secured agreements with top-tier hotels (e.g. Four Seasons, Hilton, Marriott and Wyndham hotels) that allow access to Boingo wireless in hundreds of locations. In Portugal, Boingo also has agreement with some hotels.
Founded in 1996, Wayport ( has been serving the wireless broadband community longer than anybody else. Based in Austin, Texas, Wayport has focused on locations where corporate travelers need it the most – hotels and airports. In the USA, its list of locations closely matches Boingo’s, enjoying a presence in 8 major airports and over 80 cities. On several airport projects, Wayport has joined forces with Boingo to equip the airport with wireless access. Wayport charges a monthly rate or single use rates, as well as offering prepaid services available anywhere on their network. To date, Wayport has enjoyed funding from venture capital and private equity funds such as Invesco and Lucent Venture Funds. As of August of 2002, Wayport boasted a customer base of over 1 million members.
In Portugal, Wayport still has a small diffusion in the hotspot market.
3.4. Users
As an example we may see how user may access to service providede by PtWireless. In order to use the Internet, the user must ask for an access card in one of PT Wi-Fi Zones. In the access card he/she will find a username and password that will allow him to use the service. Then, public zones where users can access Wireless Internet are clearly identified with PT Wi-Fi logo. There, the users PC or PDA with wireless card (WLAN 802.11b) will automatically detected the PT Wi-Fi wireless Internet connection.
Then, the users need to open up his browser and type the address: Here, he/she may type the username and password printed in his Access Card. Now, he can browse freely.
Government is an important agent that may influence the use (or not) of those technologies. In Portugal there are a organization, the UMIC (Unidade de Missão, Inovação e Conhecimento) that is responsible for the promotion of Information Society and Innovation in Portugal. It is integrated in the structure of the Portuguese Presidency of Council of Ministers, reporting directly to the Minister Assistant to the Prime Minister on this issue. UMIC is also responsible for the “e-U project” that will provide Wi-Fi connectivity in all universities in Portugal.
3.5. Security
When IEEE 802.11b was first defined, its security depended on two basic security mechanisms: the SSID (Service Set ID) and WEP (Wired Equivalent Protocol). Some manufactures have added MAC (Media Access Control) address filtering to their products [4]
In the following lines we will mention: SSID (Service Set ID), MAC Address Filtering, WEP (Wired Equivalent Protocol), VPN (Virtual Private Network) and WPA (Wi-Fi Protected Access)
The Service Set Identifier (SSID) is an alphanumerical 32-character which is a unique identifier that is attached to the header of the packets sent over a WLAN and acts as a password when a mobile device tries to connect. The SSID differentiates one WLAN from another; so all access points and all devices attempting to connect to a specific WLAN must use the same SSID. A device will not be permitted to join the BSS unless it can provide the unique SSID. The clients must be configured with the same values as the hot spot. An SSID is also referred to as a network name because essentially it is a name that identifies a wireless network.
Because an SSID can be sniffed in plain text from a packet it does not supply an extremely measure of security to the network.
The Media Access Control (MAC) is a non encripted fixed identifier attributed o the hardware Most 802.11 access points allow the network administrator to enter a list of MAC addresses that are allowed to communicate on the network. This measure of security combines the MAC Address of each endpoint, to the existent list of MAC’s that is managed by the hot spot. If an inexistent Mac tries to reach the service, the hot spot, which is the server, blocks the entry; it acts like a filter to the entrance.