At cafes, malls and downtown business districts, there has been an explosion of Internet access points, or Wi-Fi hot spots, that let computer users log on to the Internet for free. That growth is a fundamental reason – though not the only one – that technology start-ups, investors and industry analysts who had high hopes for Wi-Fi are scrambling to find sustainable business models.
Ms. Branagan, a director of a medical device research company, pays T-Mobile, a unit of Deutsche Telekom, $6 an hour for a wireless Internet connection when she is in airports if there are no free access points. But it is another matter when she is working outside the office in San Francisco.
“The Internet is free here,” she said, as she sat doing research at The Canvas, an art gallery with a lounge and cafe setting in San Francisco’s Sunset district. “Why would I pay T-Mobile?” she asked, when the cafe owners provide free Internet access to attract patrons.
The number of Wi-Fi hot spots has grown rapidly in the last year, with as many as 15,000 in operation in public locations, according to the Yankee Group, a market research firm.
But the difficulty of making a profit was made evident last month with the demise of Cometa Networks, a well-heeled Wi-Fi start-up backed by I.B.M., the Intel Corporation and the AT&T Corporation. Cometa, founded in 2002 to build a network of access points at retail outlets, announced on May 19 that it would suspend operations because it was not providing a suitable return to investors. Verizon Wireless, which said last year that it would build 1,000 Wi-Fi hot spots in Manhattan, has cut that number to around 500.
Meanwhile, thousands of free hot spots have been established by public agencies, mom-and-pop businesses hoping to attract customers and individuals working to build a grass-roots based network. A handful of city governments, some in cooperation with local businesses, are deploying free Wi-Fi networks in parts of Jacksonville, Fla., lower Manhattan and Portland, Ore., among other places.
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