Wireless Win-Win-Win: New Hybrid Wi-Fi Services Appeal to Airports, Passengers & Wireless Providers

Greg Gerber
Published in: 

Two years ago, Airport Improvement explored the debate about whether airports should offer guests free Wi-Fi service or charge fees for access. Today, travelers often feel entitled to some level of free wireless services, and that trend is forcing some airport managers to rethink their wireless strategies.

"There is an expectation today that if a Wi-Fi signal is available, it must be offered free of charge," says Dennis Whiteside, vice president of sales and marketing for AT&T Wi-Fi Services. Airline passengers are especially prone to the mindset, with many hotels. convention centers and other travel mainstays offering complimentary connections.

By no stretch of the imagination, however, does "free" mean it comes without cost - especially for airports that must pay for hefty infrastructure improvements to provide it. And the price tag is growing as airports work to accommodate passengers traveling with multiple wireless devices - all seeking their share of bandwidth and access points.

To cover their costs and meet customer expectations, some airports are embracing hybrid Internet services that provide limited complimentary Wi-Fi access subsidized by paid advertising or the opportunity to survey users for consumer data. Commercials are typically sponsored by concessionaires or national companies seeking to connect with the airline passenger demographic. At some airports, guests who use up their time are offered the chance to view another commercial to "earn" another access session.

Other airports are adopting a super-hybrid approach that provides basic service for free, but also gives travelers the option to pay for faster premium connections.

AT&T is one of the companies pioneering the hybrid model at airports around the country. It currently provides managed Wi-Fi service to Dulles International, Reagan National, San Jose International and Philadelphia International. In September, it is scheduled to take over Wi-Fi service at Dallas/Fort Worth International (DFW) and add new infrastructure and ongoing capabilities.

DFW will receive a portion of the revenues generated by the hybrid service. "It was very important that we collaborated on revenue, because the airport was moving away from a business model that generated income for the facility," explains Whiteside.

"DFW is the first airport we've partnered with to roll out this new business model for Internet access," explains Whiteside. "We think it is a good solution that meets the objectives of everyone involved. Airports need a way to cover the cost of providing the service, and customers get what they expect."

AT&T installs the equipment, then operates and manages the Wi-Fi network for a contracted timeframe. Eventually, the airport assumes complete ownership of the equipment.

According to Whiteside, the only downfall to the system is that devices without a browser, like gaming consoles, will not be able to connect to the Wi-Fi network because users won't be able to accept the terms of service required for complimentary access.

"Implementing this type of hybrid service requires a lot of work over time to replace or upgrade the infrastructure to add more capacity and better coverage," says Whiteside. With the new system at DFW, AT&T will deliver Wi-Fi coverage to areas such as baggage claim and parking that were previously not capable of receiving wireless signals.

Because more people are expected to access the complimentary Wi-Fi service, Whiteside is confident that the increased size of an airport's "captive audience" will be attractive to advertisers - and of enough marketing value - that the airport should earn as much, if not more, in revenue.

"Traveler behavior can't be guaranteed, of course," notes Whiteside. "But, we will do our best to make it work in the airport's best interests."

DFW is up to the challenge of switching from paid service to a hybrid model, says Michael Baldwin, the airport's assistant vice president of concessions.

"We won't offer any restrictions on service," Baldwin explains. "Viewers will get the same level of high-speed service they have enjoyed for the past several years, except they won't have to pay for it. They'll just have to watch a 30-second video to get a 40-minute connection."

The new system's "extremely robust, high-density connection" will provide even better service for airport customers, he adds.

With 50 million megabytes - or 5 terabytes - of data moving through DFW's system annually, technicians are constantly tweaking and adjusting the system to maintain service levels.

Boingo Bounces In

Colby Goff, senior vice president of strategy and business development for Boingo Wireless, says the issue of providing Internet service is something every airport is currently struggling with.

"Some want it entirely free and the facility has the cash flow to support that expensive amenity, while other airports want entirely for-pay service because it drives a fair amount of revenue to the bottom line," Goff explains. "But, we are seeing a trend with airports embracing a hybrid model that offers free access to casual users with the opportunity to upgrade to a paid premium service."

Casual users who require Internet connection to check e-mail, book a hotel or rental car, or catch up on the news are usually delighted with complimentary service that may have throttled back speed to allow as many users as possible, he explains. However, users who have mission-critical work to complete before they board the plane can't afford to be crowded out of their virtual private network connection or Skype conference by kids playing Nintendo games or streaming movies.

Boingo currently serves more than 60 airports worldwide, including London Heathrow, O'Hare International, John F. Kennedy International and Rome's Leonardo da Vinci Fiumicino. As more airports adopt the hybrid service, Goff predicts that advertising revenues will improve to completely cover all the costs associated with providing complimentary service, but that change may take many years to evolve.

San Francisco International Airport (SFO) used a fee-based Wi-Fi model until August 2010, when the airport implemented a hybrid model similar to DFW's. Chief Information Officer Mike Dearman says customers were nudging the airport to explore other options in hopes of getting free wireless service.

To tap into complimentary service at SFO, users arrive at a "splash page" where they either watch a commercial or complete a five-question survey to enjoy free access. Advance Wireless Group provides the hybrid service to the airport, while commercial partners like Boingo provide faster premium service.

"With up to 15,000 unique users every day, customer feedback has run the gamut between people who love the ability to get free Wi-Fi to those who question why they must watch a commercial," says Charles Schuler, associate deputy airport director. "But, people certainly appreciate the convenience of connecting to the Internet without a charge."

DIA Uses Super-hybrid Model

Denver International Airport (DIA) also offers customers two levels of Internet service: sponsored complimentary and paid premium.

"With more and more passengers traveling with laptops and handheld devices such as smartphones and tablets, it was important that the airport address the growing demand for Wi-Fi," explains Leah Older, director of business innovation for the airport.

When the previous Wi-Fi provider's contract neared expiration, the airport issued a required request for proposal to provide new service.

"Through this process, we realized that passengers have different needs and expectations when it comes to Wi-Fi," Older explains. "Some casual users want to update Facebook and check e-mail while waiting at the gate, while other power users need much more bandwidth to upload business files or download movies. We prefer the a la carte program because it allows our customers to pick the service that best fits their needs."

Watching a 15- to 30-second commercial every 30 minutes earns a customer free Internet access devoid of banner ads and pop-ups. But, visitors willing to pay $7.95 per day or $9.95 per month enjoy higher-speed service and unlimited access at the airport and anywhere else Boingo has a connection.

DIA's three-year agreement, which started in June, is expected to yield nearly $1.6 million in shared advertising and Internet access revenue, reports Older. When the contract expires, she expects it will be time to re-evaluate the strategy based on new technology.

The airport has invested heavily in creating a wireless infrastructure since the service was first launched in 1997, notes Robert Kastelitz, DIA's chief information officer.

To accommodate the expected influx of users attracted by the new connection options, DIA has already increased its bandwidth significantly. Kastelitz will closely monitor peak usage and install additional access points where needed to keep pace with customer demand.

When the new system went live, the airport had enough bandwidth and access points to serve 12,000 users per day, with a peak of 1,400 concurrent connections. At DIA, peak connections occur during early midweek mornings.

"It is a constant game of managing sufficient bandwidth to meet peak demand," says Kastelitz.

Something for Everyone

According to Goff, hybrid models were developed to satisfy all parties with a stake in Internet service:

• Casual users who need to do something quickly, like check e-mail

• Power users who send large documents, conduct live video conferences or connect to a virtual private network

• Airports that have to install expensive wireless equipment and maintain it amid rapid technology advances

"The hybrid model keeps everyone happy while allowing airports to employ a profitable system that will help derive additional revenue," he explains. "The paradigm is shifting in that direction, but each airport will be motivated by a different goal."

Among the various options, Goff considers Boingo "agnostic."

He maintains that it is important for airports to offer some type of high-speed premium service, because power users are more than willing to pay a fee for dedicated bandwidth and speed. Power users who like connecting at blazing speeds have no problem paying the $8 to $10 per day many airports charge for high-speed connection, he notes. Many can write it off or submit the fee as a business expense; others have monthly subscriptions that make Wi-Fi inexpensive on a per contract basis, he adds.

Some airports, however, are still reluctant to give up revenue and incur additional costs to offer complimentary service.

Limited Hybrid at MIA

Miami International Airport (MIA) has always been a proponent of fee-based Internet service, but Maurice Jenkins, the airport's director of Information Systems, wants to make sure the airport is not found guilty in the court of public opinion because of it. So, in April, the airport implemented a different type of hybrid model.

"The public expects Internet service to be complimentary, but the more an airport offers that type of service without a cost, the higher the demand will be, which further increases costs," Jenkins explains. "It's a vicious circle."

This spring, the airport began offering passengers complimentary basic access to visit certain travel-related websites, rebook flights, make reservations at local hotels and check out websites of local venues like Zoo Miami or the Seaquarium. Anything beyond such use requires a fee.

MIA is, however, looking for sponsors and advertisers to help it provide more complimentary access to travelers. "Wherever we can possibly leverage our audience to offer complimentary service, we will transfer that value back to our customers," says Jenkins.

"Our hybrid service will allow users to do certain things at a certain speed without watching a commercial or seeing various pop-ups on their screen," he explains. "But, for $7.95, they can jump in the Ferrari and travel the information superhighway at blazing speeds. The challenge is getting travelers to realize that even if they are navigating the Internet in a subcompact green vehicle going 30 mph, that service still comes at a cost.

"People may think their ticket pays for Internet service, but the airline, not the airport, gets that money," he adds. "As a business, we value what our customers think of us and our service, which is why we wanted to offer the hybrid model. There is no true panacea to make everyone happy."

According to Jenkins, airports should restrict the level of complimentary service they provide to passengers because of the expensive overhead it requires. When customers do pay for access, they find it more palatable to pay for 24 hours of service so they can tap in multiple times, he notes.

"If I came to the airport and knew I had complimentary service during a four-hour delay, I could download all the movies I wanted or watch streaming video. All of that is hugely expensive to provide," he says. "Now, if all 38 million people who came to our airport started doing that, then people would complain about the bandwidth. Pay service comes with an expectation (for) a higher level of service, faster speeds and the ability to download a movie."

According to his research, when MIA charges for connections, it has 20 to 30 people using the same access point at the same time. But when a company sponsors service and MIA opens up high-speed access to everyone, 50 to 110 people simultaneously tap into the same access point.

"That leads to performance issues and, to keep customers happy, airports have to deploy more equipment and incur greater costs," Jenkins explains. "I also have to look at how much revenue I will give up in return for spending more on additional equipment. Because if the revenue I bring in through advertising or sponsorship to provide complimentary services can't pay for the expenses, I have to find a secondary source to make up the difference."

By Jenkins' calculations, MIA would lose nearly $1 million annually if it were to offer completely complimentary Internet service. "I have to determine what it costs me to balance customer service concerns with the costs to provide high-speed Internet while reducing revenue to do so," he explains.

It Takes MoreThan Bandwidth

The consideration of how much Wi-Fi access to offer is now just as important as the question of what type of Wi-Fi service to provide. Just a few years ago, business travelers sat at the gate responding to e-mail on their laptops or Blackberries. Today, many travel with two or three wireless devices. And the list of options keeps growing: laptops, smartphones, game consoles, video players, e-readers, cameras, iPads, etc.

"While it has always been relatively expensive to run a good wireless network, it is becoming even more expensive as the access points are inundated with connections from multiple devices," says Goff. "Five years ago, there may have been one or two people connected to the wireless network at each gate. Today there is at least 30."

The key, he notes, is to focus not only on increasing bandwidth, but also on installing access points with the most advanced technology at more locations around the concourse. If wireless signals were like water, bandwidth would be the pipe delivering the water, Goff explains. If there are ten faucets connected to the pipe and they are fully open, water will pour out at the same rate whether it is delivered to the area by 3-inch or 24-inch pipes. More water, however, could be delivered more quickly if the pipe size was increased and additional faucets were installed.

"Many venues operating 802.11 bg networks now think their systems are slow and immediately think they need to increase bandwidth," he continues. "So they double the bandwidth, but only get performance increases of 10 to 20 percent because the bottleneck is at the access point. They need to invest equipment that can deliver signals to many more devices as well."

Hang On, It's Changing Again

The rapid evolution of technology is simultaneously frustrating and full of promise for airports. As hardware changes, software is developed to take advantage of the new power. This, in turn, puts more demand on the hardware and eventually renders it obsolete. The same thing happens with wireless connectivity.

Many wireless interfaces deployed four or five years ago transmit signals through an 802.11b or 802.11g base station. The "b" service provides 11 Mbps transmission, while the "g" service delivers 54 Mbps over short distances.

Two years ago, the industry embraced an 802.11n interface that uses multiple transmitter and receiver antennas to deliver speeds up to 100 to 250 Mbps.

"The 802.11n interface is an expensive upgrade for airports, and it will be pretty much a requirement within the next year just to keep up with data demand from Wi-Fi devices," Goff predicts. "On the horizon, we'll see 802.11ac systems being installed within 18 months."

The ac interfaces can deliver speeds up to 1 Gbps. The Institute of Electrical and Electronic Engineers, which regulates the technology, estimates there will be 1 billion 802.11ac systems in place by 2015.

And here's the rub: Hardware and software will quickly evolve to take advantage of the new wireless speeds. That means airports running 802.11 bg networks will deliver relatively poor service travelers, Goff explains.

"Airports should be planning for hardware evolution every 36 months," he advises. "Otherwise, the difference between those that do evolve and those that don't will be obvious."

The bottom line is that airports must constantly adjust four components to ensure an enjoyable experience for travelers, says Goff. They are:

• Bandwidth - It's easy to add. As consumption increases, bandwidth should increase.

• Access Point Density - With more than 80% of travelers carrying a Wi-Fi enabled smartphone, the need for more access points is growing, especially when additional high-tech devices are added to the mix.

• Access Point Innovations - Airports must keep up with the rapid evolution of technology as wireless systems move from 802.11 b to g to n to ac.

• User experience - Today's travelers expect free wireless access to airport maps, flight information, concession locations and information about local attractions. Airports need to constantly evolve new features to engage and satisfy passengers.

The good news is that airports can monetize their systems to cover the costs of satisfying casual users while collecting revenue from high-end users. In addition, terminal-wide wireless also benefits airport management, airlines, concession operators and airport employees.

With advantages for passengers, airports and service providers, hybrid airport Wi-Fi may be a wireless win-win-win.


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