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Cutting the cord with WiFi's help

Wireless firms are quickly making big Internet connections as more locations are jumping to provide access.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

Charlene Mattson, hockey mom to 13-year-old Jessica, taps away on a laptop computer in the Ashburn Ice House pizza parlor amid the sounds of scraping ice and referees' whistles as she waits for practice to wrap up.

For access to the Internet she can thank another hockey mom, Ann McLean, president of Network Nation Inc., which also provides wireless Internet access to a rink in Laurel. Then there is Alan S. Kobran's LinkSpot Networks Inc., which is using the same wireless technology to sell Internet access to thousands of nomads in RV parks around the country.

Mom-and-pop companies such as these are sprouting in Washington and across the nation to sell WiFi, or wireless fidelity, as this technology is called. The big companies in this business include T-Mobile USA Inc., which has nearly 4,000 hot spots; Wayport Inc., which has 800 in hotels, airports and McDonald's restaurants; and Surf and Sip Inc., which operates about 450 hot spots in cafes. And there are local companies such as Wise Technologies Inc. that have cornered all the obvious locations: cafes, airports, hotels. So the little guys stake out the places that remain, like a high-tech version of homesteading. So far, none has turned a profit, and some experts doubt many will.

It is easy to see companies are chasing it. Providing wireless Internet access probably generated no more than $100 million nationally last year. But in a few years every laptop and handheld computer will have a chip capable of receiving wireless Internet. By the end of last year, 1.2 million users were already accessing the Internet from home using a wireless connection, double the year before, according to the research firm In-Stat/MDR.

Just selling the equipment and software was a $1 billion business last year and will likely reach $2.5 billion next year, even though prices of WiFi equipment are falling, says Forrester Research Inc.

The downside
But there are pitfalls: MobileStar Network Corp. filed for bankruptcy (and was later acquired by T-Mobile) because it could not sign up enough customers to cover the cost of building its wireless network. And there are technological shortcomings: Coverage is not as universal as with cell phone networks — a normal transmitter carries a connection only up to 300 feet — and the connections are vulnerable to hackers. With dozens of companies in every city chasing the same market, few people have been willing to pay for the service, which costs about $30 a month. Want to go from one carrier's hockey rink to another's hotel lobby? That'll be another $30 a month, please.

"Right now it doesn't really look like there are many carriers that are going to be making money," said Albert Lin, an analyst with market researcher American Technology Research Inc., who said carriers are also undercut by free service from McDonald's and governments such as the city of New York.

On the other hand, the business appeals to small companies because it is cheap and easy to set up — a few thousand dollars or less. And like many brand-new technology businesses, some of these companies will be squatters that camp out, hoping to control niches in the market and then sell the business when the inevitable consolidation occurs.

Bigger companies predicted to takeover
Eventually, as more cell phones offer Internet access, e-mail and the like, the big cell phone companies like T-Mobile and Verizon Wireless will take over the WiFi business, experts say. The small, independent players face an uncertain fate; they might form partnerships and share networks with bigger companies; they could get bought; or they might simply disappear.

Meanwhile, small companies like Network Nation and LinkSpot insist there is still a niche for them, despite the skepticism of some experts, who say the scale of many of these businesses is too small to ever generate much revenue.

"The question is: Ultimately, how much growth can you really have?" said Stan Schatt, an analyst with Forrester Research.

Kobran, president and chief executive of Reston-based LinkSpot, said a friend, Mark Kaplan, approached him in 2001 with a proposal to provide WiFi to RV parks. Kobran, 49, had quit his job at MindQ Publishing Inc., a Reston online publishing company he had founded, then sold.

Kobran is an electrical engineer and a computer scientist with a soft spot for new businesses — he worked at three start-ups before LinkSpot — and he did not shy away from the idea of another. In mid-2001, he and Kaplan met with 20 RV park owners from around the country to pitch the idea.

He asked, "How many of you would be interested in this in the next three years?" All 20 raised their hands.

The first year, the company set up networks in Cherry Hill Park, College Park, Hagerstown, Md., and Luray, Va. Now they have 60 parks hooked up.

"Basically, there are very few options for RVers out there," Kobran said.

Methods to make money
The company makes money by charging the parks monthly fees for setting up the network, then charges on a sliding scale from $2.95 an hour to $35 for a month for the 3,000 occasional users it gets each month. WiFi costs 10 percent of what it would cost to install conventional cable or telephone Internet hookups in the average RV park, Kobran said. "WiFi turns out to be a wonderful solution," he said.

And LinkSpot, he said, has a long-term strategy that does not hinge on WiFi alone. The company wants to sell other technical services — communications, security systems, automation — that RV parks can use to monitor their operations. Instead of driving around a 100-acre park late at night to check on the residents, for example, RV park owners would be able to check in remotely using cameras attached to the communication system.

LinkSpot, which is private, declined to discuss revenue and is not yet profitable. Within five years, the company plans to be in 2,000 parks around the country and "very profitable," Kobran said. So far the RV market is limited to a handful of smaller companies, but with 16,000 RV parks in the country it is big enough for several competitors, he said.

Entrepreneur Forrest C. "Woody" Wheat decided there might be money in offering WiFi along coastal waters to sailors on fishing trawlers, cruise ships and other boats who cannot wait to reach land to buy stock, send e-mail, track shipments or transfer financial information.

"I haven't seen any competition on the water yet," said Wheat, whose company, Reston-based Wheat Wireless Services Inc., got on the water first by setting up networks around the Chesapeake Bay; along the North Carolina and South Carolina coasts, New York's Long Island Sound, Seattle's Puget Sound and the coast near Los Angeles; and in the Florida Keys and Hawaii.

After investing $5 million, the company has about 25 ships as customers and is trying to sell the service to the Navy. The company is "about a year away from profitability," Wheat said, with customers paying between $129 to $500 a month per ship.

Big and small companies
Wheat International Communications Corp., Wheat Wireless's parent, is based in Reston and is funding the business with some family money, Wheat said. Wheat International, founded in 1987, is a subcontractor for AT&T Corp. for telecommunications projects in Hawaii and with Electronic Data Systems Corp. on the Navy and Marine Corps' intranet project.

His technology, he said, is faster than what delivers Internet access to ships now. By using repeaters that extend the signal, augmented by satellite, his network can reach 30 miles out to sea.

Then there are the really small operators like McLean in her two hockey rinks.

A former sales and marketing person for Regardie's, a defunct local business magazine, McLean calls herself a "calculated-risk taker" and is a relative newcomer to technology. In November she set up the two WiFi networks in ice-skating rinks — one of the few locations not claimed by a larger competitor, she said.

"There's a real challenge in finding the right mix of venue and the right people with disposable income and time to log on," McLean said. "It's a real land grab."

In the end, she figured $2,500 to set up wireless networks in the ice-skating rinks qualified as a good bet. It was a natural extension for Network Nation, her two-year-old information-technology services firm that helps clients set up internal communications systems, she said.

And she knew the market. "I'm a former hockey mom, and I spent inordinate amounts of time waiting for my son," she said.

She has set up a booth to market the service during practice, and slowly, people are signing on at $35 a month for unlimited usage.

McLean projects the business will break even by midyear and hopes to install another 15 to 20 networks this year in more ice rinks, baseball parks and other venues where "parents sit and wait," she said.

She realizes the amount of money she makes from WiFi may never amount to much and understands she may eventually have to sell her network to a larger competitor or simply get killed by the competition.

"There's a need for networks outside the home," she said. "But I may be wrong."