Free Wi-Fi, but Not for All

The battle between free and paid wireless Internet access is starting to look like a draw. Or more accurately, a third variation is winning — a combination of the two.

Travelers want to log on everywhere at no charge, while hotels, airports and coffee shops are looking for a way to pay for their Wi-Fi networks as visitors increasingly use greater amounts of bandwidth.

The compromise that is emerging is to offer both free and paid options, with the free services increasingly requiring something in return, like viewing an advertisement or signing up for a loyalty program.

“Our position is, give the user a choice,” said David Blumenfeld, a senior vice president with JiWire, which publishes an online directory of free hotspots but also sells ads displayed on public Wi-Fi networks. “It’s not an argument about free versus paid,” he said. “It’s free and paid.”

Photo: Daniel Feldt

Starbucks is probably the biggest example of that model. In February, the company announced plans to switch to AT&T from T-Mobile as the Internet provider in its 7,000 stores.

When AT&T takes over, customers who use their Starbucks card once a month will get two hours of free Wi-Fi access each day. Otherwise, that same time period will cost $3.99, or $19.99 for a monthly unlimited access plan.

Sanja Gould, a Starbucks spokeswoman, said the Wi-Fi users there typically spend an hour logged on. So, she said, the company views two hours of free access as a “meaningful benefit” for customers who buy a Starbucks card.

In other words, loyalty has its benefits — and these days, free Internet access is one of them.

Omni Hotels, which used to offer free Wi-Fi, switched to a dual pricing model about 18 months ago. Now, guests can get free in-room wireless access by signing up for Omni’s Select Guest program, an option that appears on screen when guests try to log on.

The alternative is to go to the hotel’s lobby, where wireless access is free, or pay $9.99 for 24 hours of in-room use.

Richard Tudgay, the company’s vice president for technology, cited increased Internet use as the main reason for the change. “We’ve gone from 12 percent of our guests using it in the beginning of 2003 to 46 percent in the beginning of 2008,” he said, which has required upgrading each hotel’s network.

Now, two-thirds of Omni’s Internet users decide to become members of the Select Guest program, while the other third pay for access.

Omni is a smaller hotel chain, so it is not clear whether this model will spread to larger chains. Companies like Marriott typically offer free Wi-Fi at brands that have lower room rates and fewer rooms, like its Courtyard, Residence Inn and Fairfield Inn hotels, but charge for Internet access at the larger, more expensive brands.

“When you’re talking about a 1,000- or 1,500-room hotel, there are many more complications involved,” said John Wolf, a Marriott spokesman. “The infrastructure is more expensive to install and more expensive to maintain.”

Hotels also have greater costs associated with guests spending more time online. The typical Internet session is much shorter at cafes and airports, where free or ad-supported Wi-Fi is gaining more traction.

Denver International Airport switched from a paid to an ad-supported model last November, and has already seen use increase from 600 connections a day to more than 5,000.

Passengers who use the Wi-Fi are shown a 30-second ad when they log on. Other ads are displayed at the side of the screen throughout the session.

That ad revenue slightly exceeds what the airport used to earn from its share of user fees ($7.95 for 24 hours of access), according to Jim Winston, the airport’s director for telecommunications.

Another caveat with Denver’s free service is that the airport uses filtering software that blocks pornography, nudity, sexual content and Web sites that enable anonymous browsing. “We just felt that we didn’t want little Johnny sitting there looking over someone’s shoulder and who knows what he might see,” Mr. Winston said.

Denver airport works with FreeFi Networks to offer ad-supported Internet access, and also plans to subsidize its technology costs with movie downloads.

FreeFi Networks has a deal with the Walt Disney Company to offer passengers downloadable movie rentals, but is waiting for a network upgrade before introducing that service in Denver. Richard Bogen, FreeFi’s president, said he expected the cost would be as much as $7.99 for a 48-hour movie rental.

“We want this to be a 15- to 20-minute download,” Mr. Bogen said, adding that he believed movie or game rentals would be crucial to make free Wi-Fi profitable for airports.

McCarran International Airport in Las Vegas, on the other hand, seems to have found other ways to subsidize the cost of its wireless network, which has been free since it was installed in early 2005. Samuel Ingalls, the airport’s assistant director for information systems, said that the revenue the airport could earn from user fees was not significant enough to justify charging and that the payment process itself dissuades time-pressed passengers from going online.

“It’s not just that it costs money,” he said. “It’s also the hassle factor of having to sign on.”

McCarran subsidizes its Wi-Fi costs with revenue from sponsored battery-charging stations and plans to display more advertising during Web sessions this year. Mr. Ingalls said he expected more airports to follow suit once their contracts with fee-based network providers expire.

“One by one, I’ve been seeing many airports changing over to complimentary Wi-Fi service,” he said. “And just sitting here off the top of my head, I can’t think of one that’s gone in the other direction.”