Airport Wi-Fi: Free or Fee

Greg Gerber
Published in: 

Internet access is a hot-button topic for travelers who are increasingly dependent on smart phones and other web-enabled gadgets to stay connected. Who should pay to provide it is entirely another matter. Some airport officials insist they can't afford to offer free wireless, while other contend they can't afford not to.

Scott Holmes

Internet access is one of the top complaints at airports today, reports Scott Holmes, executive vice president of Airport Marketing Income. If it's not free, passengers think it should be. If it is free, they expect it to be as fast as their connection at home or work.

When USA Today surveyed 1,300 road warriors in April, wireless was fliers' favorite airport freebie by an overwhelming margin.

"We recognized the trend toward free passenger Wi-Fi service in late 2007," said Holmes. "We made it one of our major initiatives to figure out how to help airports get to the point they can offer the service for free and still earn revenue."

There is, however, no such thing as free Internet service. Someone somewhere is picking up the tab to provide it, whether it is taxpayers, vendors, advertisers or the users themselves.

"The message that gets lost sometimes is that Internet service bears a substantial cost," says Dave Hagan, president and CEO of Boingo, an Internet service provider with revenue sharing agreements at 58 airports. "The real question people don't want to address is: Who should be paying for that service."

Airports that don't address the question can become locked into a spiral of rapidly increasing costs that morph into rapidly decreasing customer satisfaction rates.

If the airport pays for the service, Hagan explains, free usage attracts more users, which leads to more connections. High usage reduces bandwidth and requires more equipment to increase the speed, which leads to more users, and the cycle continues.

Providing Internet service has quickly become a major cost center for airports, he warns.

"Of course, the costs vary with the size and scope of the airport," Hagan notes. "A smaller airport will require hundreds of thousands of dollars in capital to wire the facility; but once installed, it could yield hundreds of thousands of dollars in revenue as well. A larger facility will require millions of dollars in capital investment, but it also has the potential to generate millions of dollars in revenue."

"When an airport pays for 'free' wireless," he adds, "they incur millions in cost, but not necessarily millions in profit. Rather than becoming a revenue producer, wireless service becomes an ever-expanding cost center that airports must budget for year after year."

Milwaukee Brews up Connection Fees

When Mitchell International Airport in Milwaukee developed a wireless plan, airport staff knew from the beginning that its service would be offered on a fee-based system. Not only did the airport lack the budget to develop and maintain a network, it also wanted to create a hassle-free revenue source.

Barry Bateman

"There was some initial pushback from customers as to why we charged for Internet service, but after we explained the costs and our rationale, many people understood and were willing to pay a small fee to access the network," reports airport director Barry Bateman.

"We knew it would be attractive to passengers to offer wireless service, but we simply didn't have the capital or information technology services to do it ourselves," he explains. "We had to go a more traditional route."

Mitchell offers service for $4.95 per hour or $7.95 for 24 hours. Users who purchase access at the Milwaukee airport can also use it at most of the major hubs it services. That makes the investment a little more palatable, notes Bateman.

Boingo, which provides service at Mitchell, also offers a subscription for $9.95 that allows customers to connect at dozens of airports and 130,000 other locations worldwide.

Under the terms of its contract with Boingo, the airport collects 25% of gross fee revenue for allowing the company to sell access to its passengers. The airport is guaranteed a minimum of $40,000 per year, but it collected $64,000 last year, up from $58,000 in 2008 and $55,000 in 2007.

"Airports across the country are scrambling for revenue," says Batemen. "Here, they have an opportunity to generate a decent return for little, if any, work; and some airports are just giving it up."

When cell phones replaced pay phones, Bateman notes, airports gave up a major revenue source. He finds it interesting that people never hesitated dropping quarters into a phone to make a call, but they demand free Internet access.

Every month, a half-dozen people ask for free Wi-Fi service via the airport's suggestion boxes. Thousands of others, however, are willing to pay for the service as evidenced by the revenues it produces, Bateman says.

"Providing Internet service is a cost of doing business, and most people realize that and understand why we need to charge them," he explains. "The only reason it is a problem for some is due to the Starbucks effect."

But, even that service is tightening up as some coffee shops have begun placing limits on the amount of time users can access their "free" service.

Las Vegas Bets on Free Service

McCarran International Airport, the gateway to Las Vegas, has offered free wireless connections for more than five years. Determining an implementation strategy, however, required a " fairly painful evaluation process," recalls Samuel Ingalls, assistant director of aviation for information systems.

"We sorted through a dizzying array of proposals from different Internet providers," Ingalls explains. "But, we determined that the revenue projections being presented were overrated. Most other airports had missed their budgets and weren't bringing in nearly the revenue they anticipated."

Because the airport already had an active advertising program in place, Ingalls and the management team suggested an advertising-supported Internet service. The airport director liked the customer-service aspects of free wireless, and the program was launched in January 2005. Seconds after the first transmitter broadcasted a signal, airport visitors started signing on.

"We had great feedback from customers," reports Ingalls. "We couldn't write some of those e-mails and letters in a more complimentary fashion if we had done it ourselves."

When customers have 30 to 60 minutes before a flight, they don't like having to find their account number, username and password, or register for a new account just to check e-mail, weather, stocks or sports scores before their flights, he explains.

"As a frequent flyer myself, I am used to getting to the airport and clearing security with nothing to do for 45 minutes," relates Ingalls. "I found that with an Internet connection, I could be very productive in an airport environment. To find a free service at an airport left me relieved and happy."

Implementation Costs

Customers accustomed to free wireless service at coffee shops often wonder why bigger operations like airports can't afford to do the same.

Samuel Ingalls

What they don't realize is bringing wireless service to an airport terminal can be very expensive. Airport managers can't simply pick up a wireless router at Best Buy for $50. Costs can be substantial to simultaneously connect hundreds of travelers in an environment where signals are blocked by walls, counters and electronic interference.

It also costs to accommodate the wide variety of web devices travelers use - commuters, iPods, Bluetooth phones, electronic books and even cameras that automatically look for Internet connections wherever they go.

"Airports must develop, maintain and support systems that will allow all those different devices to connect," Hagan notes. "The challenge is figuring out how to do that when running a free network without engineers writing code to keep up with changes in technology and make connections possible. We optimize our network to work on nearly every device."

Officials in Milwaukee faced the challenge of creating a network that would span 47 gates over three concourses. That required a much larger infrastructure than a few routers and few thousand feet of cable, says Bateman.

Most airports, however, already have an extensive wired network in place to support the terminal environment. Expanding that network to allow passengers to access the Internet usually requires an incremental investment.

A few years ago, it cost McCarran $80,000 to install enough equipment to provide more than 1 million square feet of wireless connectivity. Today, the facility spends about $30,000 per year to maintain the equipment, Ingalls reports.

"We now have 100% common use, with service to every gate and ticket counter," he details. "When we have an issue with coverage, it's easy to add another wireless access point."

McCarran's system features built-in security and management subsystems. If a wireless router goes down, a system alerts the maintenance department, which dispatches staff to the area to fix the problem or reset the system.

"When you look at it from a broad airport systems perspective, it was one of the cheaper things we have done in the last couple of decades," reflects Ingalls. "Our only additional costs were expanding the pipeline to improve bandwidth."

When Mitchell developed its wireless network, the airport didn't have an infrastructure budget for routers and access points. So, officials solicited proposals from vendors to not only develop the infrastructure, but to provide back-of-house support at no cost to the airport.

"It would have cost us $450,000 to develop the network," explains Bateman. "We contracted with Sprint on a five-year contract with an option to extend another five. They recover their investment over time, and we generate an annual revenue source going forward."

Installation costs aren't the only potential budget-breakers; ongoing maintenance can also cause nightmares for airport managers.

"The technology industry is dynamic," emphasizes Bateman. "Equipment is upgrading all the time. Every time a firm releases an upgrade, people expect us to keep up with it as well."

"Many years ago, airports tried to cut costs by installing their own telephone system only to find out that the maintenance and upgrade costs were prohibitively expensive," he adds. "Wireless technology is the same way. It always requires new updates and new software and new devices. I'd rather turn that problem over to the industry that knows the product inside and out."

Tech Support

Providing help to users who need help accessing the system comes at a cost as well.

Boingo's call center fields multitudes of calls from customers trying to connect different devices to different platforms, Hagan reports. "On a free network, the airport bears responsibility for doing all that," he says. "Not providing customer support is not an option. Airports can't afford to ignore that aspect."

McCarran uses the airport's own technical support team to help the occasional user who can't access the wireless network. When the system was rolled out five years ago, the staff grappled with the issue of whether to provide tech support. They simply didn't know what the volume of service calls would be, but they definitely didn't want staff spending most of the day helping people connect to a free service.

"With a little trepidation, we put our service desk phone number on cards at information booths throughout the airport," recalls Ingalls. "Fortunately, we have never had more than five service-related calls per week, and we currently receive only a couple per month."

Some help desk calls are easier to deal with in person than over the phone. "Not only did we turn it into a positive customer experience by getting them up and running, we discovered problems we didn't know we had," reports Ingalls. "Correcting them allowed us to improve the service for everyone."

And then there's Twitter. Nothing can create a PR problem faster than snowballing gripes on social networking sites, warns Hagan.

"When someone is unhappy with a company's service, many will tweet their opinion immediately," he explains. "When people offer a service for free, they don't generally hear complaints about poor service, but the affected customers are all over Twitter."

Boingo personnel constantly monitor sites like Facebook and Twitter to respond immediately to any posts that cast a shadow on the service received at a facility Boingo serves. That's a compelling reason to allow a third party to maintain an airport's wireless connections, even if it must charge a fee for the service, says Hagan.

"No-cost Internet service is often politically driven," he explains. "Someone from the mayor's office thinks free sounds great and they push it through. But, in my experience, nobody has figured out an economical way to make free service work."

Seeking Sponsors

McCarran would disagree. To cover its wireless costs, staff sells Internet sponsorships to entertainment venues, hotels and restaurants that cater to travelers. After a customer accepts the terms of wireless service, they are directed to a landing page that includes a paid ad. From there, users can go to websites of their own choosing.

McCarran's system can even determine where a user is logging in - from arrivals or departures - and deliver ad messages accordingly. A trade show exhibitor, for instance, can purchase a message on the landing page that welcomes travelers as they arrive and invites them to its convention booth. As passengers leave, messages are displayed thanking them for visiting the show and offering one final chance to view the products or service that were displayed at the show.

Stations with electrical outlets for charging computers and mobile devices provide another prime piece of real estate for revenue-generating ads. Many airports are converting the long banks that used to hold pay phones into sought-after mini offices that relieve travelers from sitting on a hallway floor to charge their computer.

"When I walk by the charging stations, they are always filled with folks working on laptops, which creates value for sponsorships," notes Ingalls. "Relative to what we are seeing in projections, we make much more by providing complimentary wireless service than we would have if we had adopted a fee-per-user system."

Selecting a System

Airports that hire an Internet company to install and maintain their networks need to make sure they create a sound economic model that not only works today, but is also sustainable in the future, advises Hagan.

"If a system sounds too good to be true, it probably is," he warns. "You want a good quality network that offers service at the highest standards. You also want to be part of a larger network, so you're providing even more value to customers."

The more convenient the system, the easier it is for customers to pay for wireless access.

Hagan also recommends selecting a partner that clearly understands the direction the tech industry is headed and is making plans now to adapt to future changes.

"The bottom line is that customers demand quality service, and airports seek ways to reduce costs," he concludes. "If airports can connect travelers to a wireless service at a reasonable price without having to do the work themselves, they will keep customers happy and productive without breaking their budgets."

Embracing the Future

An important emerging issue, asserts Holmes, is the multitude of passenger services that will migrate into the digital environment.

Holmes' company, AMI, has developed a turnkey way for airports to manage their wireless networks through a portal that pays for itself through sponsorships and advertising. Sponsorships and enhanced passenger services over wireless networks are exactly where the market is headed, he insists. Holmes is so passionate about the concept, he considers himself a "Wi-Fi evangelist."

Holmes asks airport managers to think of all the services that can be delivered electronically to customers via laptops and, more importantly, handheld devices. Flight status, wayfinding tips, gate change updates, baggage delivery information, ground transportation details and information about local destinations are just a few of the services travelers will soon expect to receive wirelessly, he notes.

"Sponsorships that allow a corporate client to influence content within that portal will change the dynamic of the entire wireless system," Holmes predicts. "Interactive airport advertising draws a premium rate because of the users' demographics. They tend to be higher income business travelers who have 60 minutes of dwell time post-security."

Google Gets It

Over the holidays, AMI engaged scores of airports to participate in a program with Google. The search engine giant paid for Internet service at the airports in hopes of attracting customers to its new offerings, including a Chrome web browser, street maps functionality and cloud applications.

Airports that offered free service received a "handsome" rebate for providing Google with online access to its travelers. Those that offer fee-based services had their costs covered; so regardless of which model was in place, customers enjoyed free wireless access.

"Our sponsorship contract with Google was valued at many times our annual cost to provide free wireless service," comments Ingalls.

Giving travelers the opportunity to check out Google's new services for free was immediately successful, Holmes reports. The company delivered more than 150 million minutes of free Wi-Fi and created enough awareness to generate more than 700 news articles on launch day alone.

"That promotion validated the idea of free wireless as a marketing opportunity," Holmes relates. "AMI saw an opportunity to engage passengers in other solutions as well. Our job is to create, manage and run the portal for the airport and offer enhanced passenger services while providing sponsorship and advertising revenue for the airport and recruit corporate clients to tap into the audience.

"Wireless services set passengers free from the gate," he adds. "Once free, what would the airport want them to do next? Usually, shop, dine, drink or simply spend money in their facility."

Endless Opportunities

Imagine passenger John Smith waiting for his flight. After connecting to the wireless network, the system sends him a message: "I see you are at Gate B4. Are you on the flight to Chicago?"

If Smith clicks "Yes," a clock appears on his device counting down the minutes until his boarding time. The system asks if he'd like to get something to eat, then recommends restaurants or bars within walking distance and downloads coupons to his iPhone. As he walks through the terminal, he gets a message from the airline telling him he's been upgraded on his next flight.

The system then asks if he needs a hotel or rental car while in Chicago, and reserves it for him. Is he looking for sightseeing opportunities or a chance to take in a show? Perhaps he would like to order a nice gift basket for the client he is visiting. Maybe he needs a charging station so he can do some work. The wireless system shows him the nearest location and offers to have a sandwich delivered to his booth.

All that and more can happen through an airport portal, notes Holmes. And the airport can collect a fee on each transaction.

Holmes predicts that airport systems will become so integrated that passengers will be able to pick up their connections once airborne by tapping into the airline's system that offers different services on a different portal.

Back on the ground, wireless Internet access is already helping airline and airport workers do their jobs.

Pilots use the Internet to get weather updates and interact with the Federal Aviation Administration. Flightcases full of paperwork can now be downloaded and stored electronically on pilots' laptops.

Baggage handlers use handheld, wireless scanners to track luggage. Flight attendants tap into wireless networks to update the aircraft's onboard entertainment offerings.

"For us, wireless Internet supports general and commercial aviation by improving safety and offering a convenient access to critical operations by pilots," says Ingalls. "As time goes on, operational wireless for air carriers and other tenants is going to be critical. We are building a wireless bubble that will extend to the tail of each aircraft."

As airlines debate the pros and cons of offering free Internet access to passengers, one thing remains certain: The opportunities for airports to interact wirelessly with customers will grow exponentially in the next decade. The question of who pays for the service will evolve into a discussion of who buys what is being offered on the network.


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