The popularity of some new Wi-Fi enabled portable devices such as the iPhone or the iPodTouch have triggered more discussion around public Wi-Fi business models that do not just focus on providing access to business travelers.

Indeed there is an increasing group of nomadic users - I mentioned them in recent blogs – that seek broadband connectivity in their hometown, inside and outside of their home. They access public Wi-Fi daily or weekly, for leisure and work, and many of them (though less than half) are very young, compared to less frequent public Wi-Fi users. They are generally more willing to subscribe to services than less frequent users, however the majority still prefer free access… so innovative business models are important.

Occasional public Wi-Fi users are a great target group. They have less need for Internet access outside of the home, and are less willing to pay for services. When we asked them what would motivate them to pay, discounted access in a broadband bundle was a popular response, more so than with nomadic users that are more likely to be persuaded to get a standalone service. The option of free public Wi-Fi to those occasional users would not only be attractive for their access needs, it could drive more Internet use outside the home. Clients should contact me with any questions about public Wi-Fi users, or they can learn more here.

The most important factor however is BSP differentiation in this very competitive space of bundles and multi-play. I would consider switching my BSP if I could get a free public Wi-Fi with my new plan. Looking at the demographics of nomadic users in particular, it certainly makes sense to include free public Wi-Fi in the lower-price plans. And given the large number of college students in the nomadic group, AT&T could attract loyal customers and upsell them to higher-speed plans in the future.

So what does it mean to get free access to AT&T’s network? It is certainly not ubiquitous, but provides ample opportunity for access. The company has more than 10,000 US locations, very professionally operated by Wayport. Public Wi-Fi locations include coffee shops/bookstores like Barnes&Noble, many McDonalds locations, several airports, and a variety of other locations.

Clients can find updated data on the behavior of public Wi-Fi users here. We are planning to introduce a forecast on the size of the advertisement opportunity on public Wi-Fi networks this year.

Considering an increasing number of Wi-Fi enabled portable devices, Skyhook’s model is interesting. Mapping is just the beginning – there will be other location-based services, ads, and communications in the future. Consumers are interested in these services. The most popular activity at public Wi-Fi hotspots (beside checking e-mail, which is number one) is searching for local information.

Certainly, rollout would be expensive. Sprint initially estimated $5 billion by 2010. The business case for a national network is however in question. We recently published the following piece on the topic, which gives some detail on our current research.

Will Starbucks introduce free Wi-Fi within a year? Maybe or maybe not, depending on their plans to leverage the Wi-Fi network. In my opinion, the fee-based model is not outdated, and will not disappear soon.

Business travelers and professionals for example have been a strong target group for T-Mobile Hotspot. Business travelers are likely to check e-mail and access the corporate network from laptops, and they are also likely to pay for a quality high-speed connection (though many use combinations with free Wi-Fi). There is also an emerging nomadic consumer segment, which accesses Wi-Fi frequently (daily or weekly) at public hotspots and shows high willingness to pay (subscriptions). This consumer segment will be very important for public Wi-Fi providers going forward.

That said, the majority of public Wi-Fi users still prefer free access. Consumers would certainly welcome a free service at Starbucks. There have been some visible initiatives regarding consumer focused free Wi-Fi access in the recent past (like free Wi-Fi for iTunes access, Wi-Fi landing page with Starbucks merchandise, T-Mobile partnership with Sony for PSP users). Starbucks would have to weigh the benefits of providing free Wi-Fi against paying T-Mobile Hotspot for infrastructure and service.

What about the proliferation of Wi-Fi enabled non-laptop devices? Well, mobile professionals (the breakfast commuter crowd) already use Blackberries and smartphones to handle e-mail – no free Wi-Fi needed. Mobile Internet devices and other small Wi-Fi devices will increasingly hit the market in the next years, but major consumer adoption is still sometime off. Wouldn’t the use of these devices be even more interesting outdoors – on the road (e.g., searching for local information, GPS)? Definitely, Starbucks is on the right track with tying access for these devices to incentives and free applications.

We will hear more about such Fixed Mobile Convergence offerings and Femtocells in 2008. Although the majority of consumers use a combination of cell phones and landlines, the popularity of cell phones is increasing – in particular young users are more likely to want to use cell phones exclusively. Cellular coverage outside of the home is still most important, but pricing and in-home coverage follow close behind as two top priorities for cell phone users choosing a wireless provider today. This is what FMC services such as Sprint’s Airave and T-Mobile Hotspot at Home are aiming at. Forty-one percent of online users report less than optimal cellular coverage in their home.

Wireless carriers can position these services as an improvement for current customers in order to increase loyalty. If Sprint’s Femtocell works well (there are still issues with Femtocells, such as possible interference, etc.), this should be easier than T-Mobile’s offering - which requires consumers have home Wi-Fi (ideally purchase one of the voice-optimized pre-configured 802.11g routers offered by T-Mobile) and purchase a dual-mode phone, of which there is not a great variety in the short term.

Speaking of FMC, the Pivot Wireless partnerships with cable companies is also an FMC play.

Wi-Fi enabled iPods are great news for public Wi-Fi – they are the long awaited devices that go beyond Wi-Fi enabled laptops. So far, there had been a few announcements about free gaming at fee based hotspots (Sony/T-Mobile - Starbucks, Nintendo/Wayport – McDonalds). This is a niche application that nevertheless met interest by young consumers (for example, 29 percent of 18 to 24 year olds tried it in the last year). However, ipod and music applications will likely take this to a mainstream market – in particular among young consumers, who are a major target group for public Wi-Fi providers at city locations anyways. As public Wi-Fi users in general, they check e-mail and search for local information, but they are also very social and interested in downloading content. Clients can learn more here.

Yesterday we had a briefing with the WiMAX Forum, in which we talked about all the other projects. It is clear that Sprint’s plans in the US are a unique case that will not indicate success or failure of WiMAX worldwide. There are more than 275 operator trials in more than 65 countries. Many countries are looking into WiMAX as a broadband technology for economic development and competitiveness. It reminds of municipal Wi-Fi, in particular in less urban areas. Then there are examples of countries with already mature broadband infrastructure but a lot of interest in mobile connectivity and applications (e.g., M-Taiwan). WiMAX is definitely a very exciting technology with great potential in the future.

EarthLink and other citywide providers (like MetroFi, a free ad-supported WISP) are now in the position to evaluate profitability of such networks, based on early experience of the last couple of years. Anchor tenantship, meaning significant long-term commitments by city government to purchase services, has emerged as a critical requirement given high capital and operational expenditures of muni networks. It makes sense, we looked at more than 300 current and planned initiatives –cities look at citywide Wi-Fi mainly for economic development and efficiency. We have seen a variety of high-profile large cities that issued RFPs with unrealistic expectations. But there are also many – in fact more – medium and smaller cities that want to be anchor tenants. There are many applications – automated meter reading, building inspection, traffic coordination, access for remote workers, public safety, access in libraries and schools, agricultural applications in rural areas, etc. WISPs and cities have to negotiate for feasible models on both sides.

Our data on demand for mobile and residential access show that city anchor tenants are crucial for providers. Clients can learn more in our municipal wireless research.

Aircell won the exclusive air-to-ground spectrum rights and will expand their footprint of cell sites, while providing a Wi-Fi network in the airplane. Airlines have been hesitant towards inflight services because of installation cost, downtime, and equipment weight. Aircell stated 100 pounds, $100,000, and overnight installation, and herewith seems to have an advantage towards other companies trying to establish services.

High-speed Internet is a great differentiator for airlines. While opinions on in-flight calling differ, business travelers in our surveys show a lot of interest in laptop (e-mail access) on airplanes – the majority had stated that they would use access, not only on international flight. Domestic travel enables access for a much wider group of business travelers. Public Wi-Fi users logged on to airport Wi-Fi in the last year, driven by business travel. Public Wi-Fi providers note that airport access is higher during business days. Clients can learn more about business travelers and airport Wi-Fi use in general in our published research and in our upcoming Vision Report. While consumers - in particular on long distance flights – will surely appreciate the Internet as well, issues of laptop battery life (no power outlets in Economy class) and pricing will make this service most feasible for business travelers. However, networks will also provide opportunities to push free travel related content/advertisement in walled gardens and IP based entertainment services in the future.

Muni networks are ramping up slowly – Portland has more than 13,000 monthly users now – and present an opportunity to advertisers in the coming years. That is assuming networks deliver sufficient speed to be appealing to users, and advertisements will not be too frequent. MetroFi for example uses a landing page, a browser-independent ad-bar, and interstitials.

We are skeptical about the capability of advertisement to support citywide network cost in the short term. It is great to leverage these networks as test beds for consumer behavior on mobile broadband networks, to test location-specific advertisement and applications, and to draw users to web portals and sites. However, there are not enough frequent users yet, and they are most interested in local content (there is low inventory).

The good news for national advertisers (in particular those with a local presence) is, there is an emerging segment of nomadic public Wi-Fi consumers who use access daily. They are more likely to go beyond basic applications (like e-mail, search for local information and online news) during their longer session times. They are also more willing to to purchase products and services, provide personal information and click on ads.

WiMAX promises an eventually nationwide high-speed Internet experience from portable devices (Sprint does not focus on a cellular model). Consumer interest in citywide mobile access is high, in fact the number two motivator to pay for public Wi-Fi among nomadic (daily and weekly) and less frequent users. Citywide, not nationwide access will be most interesting for daily users, which already own Wi-Fi equipment. Municipal Wi-Fi networks will likely compete on price as a tradeoff for network speed, assuming sufficient quality. Ad-supported citywide networks will be an alternative in some cities. Google is also active in this space, however privacy concerns and politics can slow down deployments (see upcoming San Francisco Google/Earthlink network). That said, 21 percent of public Wi-Fi users would rather use ad-supported networks than pay for public access.

Clients can learn more about consumer behavior at public access locations in “Location-Based Applications: Leveraging Public Wi-Fi for New Consumer Services” and in our upcoming Public Wi-Fi Consumer Survey Vision Report.

High-speed customers would not save that much money for dropping the fee, but it is a differentiator and part of an overall strategy to increase switching cost (see also free wireless gateways). Fixed-Mobile Convergence and the digital home – discussed in an upcoming JupiterResearch report - are interesting key words as well when looking at AT&T. Often Wi-Fi is used as the foundation of a business model, but consumer responses in our surveys suggest that companies can effectively use it in broader strategies.