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Boingo Jumps In

Boingo Jumps In

Just before the clock ran out on a disastrous year for wireless Internet investments, a $15-million wager was placed on the near-term wireless future - in the name of Santa Monica, CA startup Boingo Wireless.

By this time next year many of you will be Boingo subscribers, accessing the Internet at multimegabit speeds from your laptops, from thousands of hot spot locations in airports, coffee shops, and public gathering places all across the country. The alternate reality is that Boingo will become just the latest addition to the broadband scrap heap, but I'm betting on the former scenario. This company has what it takes to kick-start the Wi-Fi service industry, and to carve out a leadership position for themselves in the process.

In my last column (WBT, v.1, n.9) I presented a collection of industry opinions in an attempt to find consensus among the internal flaws and external factors that contributed to the 2001 demise of Metricom. The rise of the IEEE standard (802.11b) for wireless Ethernet, also known as Wi-Fi, and increasing hot spot network buildouts were cited as factors that would rob Ricochet of their nomadic demographic.

Unlike Metricom's proprietary microcellular technology, the 802.11b standard has led dozens of manufacturers to the edge of a newborn industry, driving equipment costs ever downward. Wireless hot spot networks are being deployed by businesses, neighborhood cooperatives, and even individuals for less money than a year's worth of coffee at Starbucks. Of course there's also the case of Metricom apples versus Wi-Fi oranges in this debate, as 802.11 networks can deliver T1 speeds in common areas for essentially the same cost to the subscriber.

Sky Dayton, Boingo's founder and CEO, identified this market as many others have - while assembling a Wi-Fi network in his home. What his company will attempt to do is to link the laptop road warriors of today with a wide choice of service providers and three billable Boingo service levels. Laptop users will find that they are increasingly equipped with standard wireless Ethernet cards for use in the office and at home. Thanks to the 802.11 standard, these same cards will be their keys to wireless access on the go. "Just as TCIP/IP served as a catalyst for the wired Internet, I think that Wi-Fi can serve as a catalyst for the wireless Internet," said Dayton. "One unifying standard that brings it all together."

Using Boingo's software, which is available in downloadable beta form, businesspeople in the field (or the airport or the coffee shop or the library) can use their laptops to "sniff" for service providers when they are within a designated coverage area.

Earlier wireless Internet providers have been limited to only the most technically sophisticated customer base, both in the coffeehouse and in the field. This surely reduced the size of their intended markets. Metricom found that cost and speed weren't the only limiting factors that topped their subscribership at just over 50,000. Many of the former Metricom users I know are BSEEs or similarly knowledgeable computer professionals. Ease of use is the bridge that will enable providers to move into a mass-market opportunity.

The public beta software for the Boingo Wireless service includes a profile manager so customers can connect to favorite Wi-Fi signals quickly and easily. The company claims that their full release software will also include a searchable database of hundreds of Boingo hot spots so customers can find locations whether or not they are online. It will also feature an integrated authentication mechanism to make it simple to log on to the Boingo Wireless network. A one-click "Personal VPN" will resolve the issues that corporate MIS managers may have with Wi-Fi security.

Another point of departure for Boingo is that they will serve this nascent market with insights gained from the early days of the commercial Internet industry, both in the field and from the boardroom.

EarthLink Potential
Dayton is the enterprising upstart who founded EarthLink (Nasdaq: ELNK) in 1994 and helped lead its growth to 5-million customers, 6000 employees, and over $1 billion in annual revenue. He still serves as chairman of the company, which is the largest independent Internet service provider in the United States today.

"I've spent many years looking for another idea with EarthLink potential," said Dayton. "Last year I set up a Wi-Fi network in my house, and I realized I was looking at the next stage of the Internet. I knew I had to make the leap and be a CEO again. With Wi-Fi, the wireless Internet is now affordable and easy to build and use.

"I see a world where thousands of entrepreneurs and companies build millions of wireless broadband hot spots using Wi-Fi, blanketing cities with wireless broadband. These networks will be popping up everywhere, and it will be chaos. Boingo's mission is to organize that chaos and to make it easy to find and connect to the wireless Internet wherever you are."

Therein lies one of the key differentiators for the company. They aren't building a nationwide wireless network. But stay tuned. They will market one.

Dayton will serve as chairman of Boingo. Joining him on the board are Austin Beutner, president of Evercore Ventures; John Sidgmore, the former CEO of UUNET; Peter Barris, managing general partner of New Enterprise Associates (NEA); and Stewart Alsop, general partner at NEA. Sprint PCS joined Evercore and NEA in Boingo's $15-million first round of funding, which was announced on December 20.

"Sky Dayton is a great entrepreneur, and Wi-Fi is the biggest opportunity in technology today," says Alsop. "In the past 24 years, we've learned that the combination of the two always leads to a great investment."

NEA also counts Wayport among their portfolio of investments. The company, based in Austin, TX, may be considered one of the de facto leaders of the Wi-Fi industry, due to the financial troubles that other early-mover service providers have encountered. They are also one of Boingo's first strategic partners.

Ironically, John Sidgmore joined UUNET Technologies as president and CEO the same year that Dayton launched EarthLink. Independently they grew companies that played critical roles in the commercial development of the Internet. UUNET, which is now a WorldCom Company, has become the world's largest Internet access provider with more than 70,000 business customers and 6,500 employees worldwide.

"Wi-Fi has the potential to turn the communications industry on its head," said Sidgmore, currently vice chairman of WorldCom. "Boingo has tapped into the most exciting thing happening in telecom right now."

The executive team seems similarly loaded with management expertise and Internet industry know-how. Complementing them are the first two members of Boingo's Advisory Board: Michael O'Dell, former chief scientist at UUNET, and Dave Farber, professor of telecommunications at the University of Pennsylvania and the former CTO of the FCC.

Having had the opportunity to attend one of Farber's presentations on the role of unlicensed spectrum at the FCC in early 2000, I can understand the value of his association with Boingo. There are few people involved in the wireless industry today that are closer to the cutting edge, technologically speaking.

The Year Ahead
Just before New Year's, I asked about the Boingo future view as it pertained to the coming year.

"Wi-Fi will be built from the bottom up by entrepreneurs and individuals," said Dayton. "It's a mix of small networks with several POPs and carrier- class businesses like Wayport, that have hundreds. That's also how the ISP business was built. Ultimately it's my hope and my belief that there will be many, many companies in this industry."

He acknowledges the "important and vibrant community of single access points," some of which are seen as controversial for sharing their DSL and cable modem connections within their neighborhoods. Yet they will all contribute to the growth of Wi-Fi. On the subject of what Boingo can offer the independent provider, he reached back into his own history: "We have the whole back-end system here for the industry. If you're a small operator and you can put up an access point, we'll add you to our system.

"They don't have to build a billing system," Dayton continued. "They don't have to build an authentication system. They don't have to create a tech support group, they don't have to do the marketing. For a small operator that makes for a much more streamlined business model. This is very similar to what happened in the ISP space. EarthLink was the first company to go out and say 'instead of building a nationwide network of POPs we're going to work with infrastructure providers in cities around the country and around the world that do that work. Instead we're going to focus our energies on software, billing systems, tech support, authentication, and marketing.' As a result, what evolved were several layers of an ecosystem where companies could concentrate on any one layer and be successful, as opposed to trying to vertically integrate."

Have the stars aligned for Boingo? Well, every first-round startup is born with more potential than they may ever have in the future. They don't all enter the world with Boingo's pedigree however. Nor do they arrive with an important and often overlooked asset: good timing. Wi-Fi as an "industry" is only further legitimized by Boingo's entry. Only those who would romanticize the short-lived era of shared wireless networks, boosted with antennas made from Pringles cans, could be disappointed as new money and expertise moves in.

According to technology think tank Allied Business Intelligence of Oyster Bay, New York, subscriber revenue from North American hot spots was a mere $1.1 million last year. The firm predicts that it will grow to $868 million in 2006. Dayton can appreciate steady growth, remembering the formative stages of EarthLink, when he would take his wife out to dinner to celebrate the signing of 30 new customers. This time he is armed with both prescience and patience, as well as an experienced management team. And the belief that "the killer network of the future is a combination of Wi-Fi and 3G."

Who's On Board

Just some of the many distinguished wireless movers and shakers we're honored to have sitting on WBT's International Advisory Board or Technical Advisory Board

Simon Phipps Chief Software Evangelist, Sun Microsystems, responsible for expounding and explaining the "big picture" of software development. (www.sun.com)

Anita Osterhaug Director of Knowledge Products for Brokat AG, headquartered in Stuttgart, Germany, and San Jose, California. (www.brokat.com)

James Pearce Director of Encerca, the new name for AnywhereYouGo.com's Wireless Internet Lab, which now has its own Web site - an expansion of AYG's WAP testing, monitoring, and consultancy services. (www.encerca.com)

James Gosling Cocreator of the Java programming language, currently Vice President and Fellow at Sun Microsystems working at Sun Labs where his primary interest is software development tools. (www.sun.com)

Peter Roxburgh A Mobile Solutions developer with Secure Trading Ltd., the foremost service for processing Internet-based credit card payments in the United Kingdom. (www.securetrading.com)

Larry Mittag VP and Chief Technologist of Stellcom, Inc., he has more than 25 years of technical and strategic expertise with wireless systems integration and embedded systems design and development. (www.stellcom.com)

Rajiv Gupta Worldwide champion of "E-Speak" and Hewlett Packard's Chief Architect of E-services. (www.hp.com)

Douglas Lamont Visiting professor of marketing at DePaul University in Chicago, Illinois. The author of Conquering the Wireless World: The Age of M-Commerce, and six other international marketing books, he holds a PhD in business administration with a major in marketing.

Ron Dennis Cofounded Livemind, Inc., led the third-party developers group at AOL, and created AOL's Web Hosting Service and Software Greenhouse. Ron has guided several Internet start-ups. (www.livemind.com)

Andrea Hoffman Editor-in-Chief and Technical Director of Mobile Media Japan, an Internet portal for information on the Japanese wireless industry. (www.MobileMediaJapan.com)

Boingo Wireless At A Glance
Sky Dayton
Founder, Chairman, and Ceo

URL: www.boingo.com

Founded: February 2001

Headquarters: Santa Monica, CA

Chief Executive:
Sky Dayton
founder, chairman, and CEO

Employees: 27

Industry: Wireless (Wi-Fi)
Internet Access

Primary markets:
Mobile laptop users,
"road warriors"

Full release software and service availability:
Later this year

Service levels:
Boingo As-You-Go
no monthly fee,
$7.95 per 24 hour
connect per venue

Boingo Pro
$24.95 per month
for up to 10 24-hour connects; each additional connect is $4.95

Boingo Unlimited
$74.95 per month
for unlimited access

Free beta software available
today for download

Capital raised: $15 million

New Enterprise Associates,
Sprint PCS, Evercore Ventures

More Stories By Tim Bresien

Tim Bresien is WBT's VC editor, the principal consultant with infraStar, Inc., and a freelance writer covering investments in the wireless communications sector. He is a former research analyst with the telecommunications consulting firm of Bond & Pecaro, Inc., Washington, DC, and a cofounder of the Telecom Investor Forum, held annually at SUPERCOMM.

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