CRITICAL ISSUES IN LAUNCHING NEW TELECOMMUNICATIONS SERVICES: THE CASE OF WIRELESS INTERNET FOR PARIS AIRPORTS

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1 CRITICAL ISSUES IN LAUNCHING NEW TELECOMMUNICATIONS SERVICES: THE CASE OF WIRELESS INTERNET FOR PARIS AIRPORTS Pierre Vialle, Olivier Epinette, Olivier Segard Pierre Vialle, Professor, STORM research group, Business Administration Department, GET- INT, 9 rue Charles Fourier, EVRY Cedex, France, Olivier Epinette, Associate Professor, STORM research group, Business Administration Department, GET- INT, 9 rue Charles Fourier, EVRY Cedex, France, Olivier Segard, Assistant Professor, STORM research group, Business Administration Department, GET- INT, 9 rue Charles Fourier, EVRY Cedex, France, JEL-Codes: M31, L96 Keywords: network, telecommunications, innovation, service, value chain, co-operation, strategy, competence, e-business, m-business, product adoption, wireless Internet 1

2 INTRODUCTION The objective of this paper is to highlight critical aspects in providing new telecommunications services, from the analysis of a case study. The research deals with a Wireless Internet (WiFi) services project in the main Airports of Paris, the provision of which began in the year 2003, and comprises two components. First, we analyse the emergence of a value chain for a new service and show how different actors can or cannot position themselves on this value chain, according to their resources and capabilities. Second, we explore the perceptions and attitudes of business passengers in order to better understand the potential adoption and use of hotspot services, and provide a preliminary framework of analysis. The research is drawn from a qualitative survey, made of indepth interviews of potential suppliers (airline companies, service providers, airport managers) and business passengers. THE PROJECT CONTEXT An airport covers different activities and geographic zones. Several activities can be carried out on an airport platform, such as transport, control, cleaning, maintenance, or passenger care. Geographically, these activities broadly relate to three zones on the airport area: tarmac (services concerning aeroplanes), air terminals (services for passengers on site) and airport periphery (activities benefiting from close location to the airport, such as hotels or offices). Finally, three categories of people can be found on an airport site: employees of businesses and administrations located on the airport platform, passengers, and employees from outside firms on short duty at the airport (for example for repair activities). In this study, we focus on business travellers that have been identified as the main market target by ADP, the organisation managing the various airports around Paris. The study relates to a hotspot service in the main airports of Paris, using a Wireless Local Area Network (WLAN) technology. WLAN is a short-range, broadband data communication system using radio waves [2]. Various standards coexist, but the b standard, defined by the Institute of Electrical and Electronics Engineers (IEEE) tends to be dominant. It allows a theoretical flow of 11 Mb/s in the frequency band of the 2.4 GHz, on a distance of up to several hundred meters. The IEEE b standard is more popular under the name of WiFi. The deployment of a WiFi network is relatively easy and it offers a much higher level of flexibility than fixed networks. The number of accesses can be increased without needing to re-dimension the network, as would be the case with fixed networks. This system allows some limited mobility inside one cell, but contrary to cellular networks such as GSM networks, does not allow roaming between cells without service interruption. Such networks can be accessed by different types of terminals equipped with WiFi chips, such as mobile phones, Personal Digital Assistant (PDA), or laptop computers. There are three possible uses of WiFi. The first is private use, either for a home network, or for a company Local Area Network (LAN). The second is community networks, usually in rural areas. The third is hotspots in public venues such as coffee shops, hotels, railway stations or airports. A WiFi network can give access to the following services: - Internet access: including surfing, messaging and Virtual Private network services allowing access to Intranet, - Localised information services: reception of push information, such as infrastructure usage information and schedules (transport hotspots), or commercial information (for example from nearby shops), - Multimedia services, such as movies or music. As the available bandwidth is shared between current users, a large number of users can result in unacceptable download time. 2

3 As users of a particular hotspot may be customers of another hotspot, or of a mobile operator, the establishment of roaming agreements is necessary. Basically, a roaming agreement ensures that a customer of network A is able to use the service provided by network B, while being billed by network A, with some mechanism of revenue sharing between the two networks. Therefore, users can pay for service usage in three different ways. They can be billed by the hotspot manager, either directly through payment by credit card, or indirectly with prepaid cards that can be bought in the airport s newspaper shops. They can also be billed on their mobile phone account, as most mobile operators offer subscription schemes bundling General Packet Radio Service (GPRS) cellular services with WiFi services. THE EMERGENCE OF A NEW VALUE-CHAIN Motivation of actors Several airport actors are concerned by this project with different expectations according to their characteristics, such as the owner of the venue, the Wireless Internet Service Provider (WISP), the businesses on the airport and the consumers. ADP (Aéroports de Paris) is a public utility whose mission is the management of civil airports within a 50 kilometre radius of Paris. It is responsible for the management of facilities making it possible to ensure the arrival and the departure of passengers, of goods and of mail transported by air. It manages service activities, and assists airline companies. It grants concessions to its customers (airline companies, commercial companies or administrations). ADP manages one of the most important airports in continental Europe with approximately 70 million travellers each year. Its revenues amounted to 1,356 million in One of the main challenges of airport management is to ensure maximum security while giving a sense of freedom to passengers. The reasons evoked for the Wi-Fi project were to contribute to the image of ADP (among the general public, the airport related businesses, and political instances), to provide a supplementary service to support the core business of airport management, and additionally to provide some extra revenues on a longer term. Telecommunications on the airport zone are managed by a subsidiary company created in 2001, ADP Télécom. Its mission is to design, operate and market telecommunications networks and services, mainly on the airport sites of Roissy-Charles De Gaulle and Orly. ADP Télécom was chosen as the WISP by ADP. For ADP Télécom, this project was an occasion to extend its current capabilities to a new technology, to reach scope economies with other projects and to gain expertise that could be used on other markets. Other airport actors can be classified into two types according to their expectations concerning Wi- Fi services. On one hand, the WLAN service only constitutes an enhancement of the basic local services offered by companies such as the airport authorities, shops and restaurants. These companies are more interested in enhancing the service and thus they try to offer a suitable content. On the other hand, companies such as airline companies, car rentals and hotels, are focused on enhancing customer relationships. Therefore, offering a continuous range of value-added services through several media is their most important expectation. The difference between the motivations of the actors and the services suggested on the Paris airports hotspots is significant (table 1), and can be a hindering factor for the development of new services. 3

4 Table 1 The main actors motivations for Wi-Fi services ADP ADP Télécom Companies willing to enhance the service to customers by providing local content (shops, restaurants, ) Satisfy the needs for on-site mobility of employees, companies and passengers ; improve the productivity Complement source of income Differentiate from competitors ; Improve the image among the general public, business customers and political institutions Make use of current capabilities Increase profitability through economies of scope with other services Gain expertise in order to be able to penetrate new markets (general public, hotspots outside airports) Stimulate consumption by promoting products and services Provide transaction support Improve public image Companies willing to provide customers with value-added services (hotels, car rentals, ) Answer customer requests Increase relational marketing with customers Differentiate from competitors with value added services On-site companies do not constitute a privileged target for a WLAN offer. They have specific telecommunications requirements (e.g. communications with a plane), and are extremely demanding in terms of quality and reliability. As their needs are already satisfied by current services, they are not likely to change for WLAN services. The main target would be transit passengers and passengers departing for long flights, in particular senior executives and "frequent flyers" often equipped with computer equipment. They broadly account for one third of the passengers in the target airports. Positioning of actors on the value-chain We shall now analyse the emergence of the value chain that is necessary to provide wireless Internet services in the airport. In table 2, we draw inspiration from the Actor-Resource-Activity model of industrial networks [1], where each actor is positioned in a network according to the resources that are mobilised to produce some activities of the value-chain. Hotspot leadership The hotspot leadership is usually assumed by the venue owner or manager, in our case ADP. The hotspot strategy is clearly related to the management of airport activities, rather than that of a standalone activity. At the end of 2002, ADP decided to launch a Wi-Fi service aimed at the general public in its main airports. The provision of Internet access and other services to the public was part of a more general project aiming also at providing services to the various businesses and administrations located in the airport premises. ADP also defined the requirements to be met by suppliers. Apart from traditional airport requirements such as security or non interference with aeroplane operations, ADP stressed the importance of offering a wide range of advanced services, beyond the plain Internet access service. ADP also insisted that the network should be open and subject to multiple roaming agreements, so that customers of other hotspots could use the ADP facilities and vice-versa. The relationships established with partners such as airlines and the various businesses located in the venue are critical in order to be able to mobilise them to participate in this project. 4

5 Network provisioning ADP naturally contracted with its subsidiary ADP Telecom, because of its know-how in telecommunications and its experience of the specific constraints of operating in an airport. ADP Telecom sub-contracted the provision of equipment to the Siemens manufacturer, and the server platform to Netinary, a partner of Siemens. The network was installed within the specific airport areas prescribed by ADP, as well as the platform. Alpha testing (by ADP Telecom employees) was conducted, and a plain Internet access service was quickly provided. Authentication and security Intrusion (for example by hackers) is easier to achieve for radio links than for fixed lines. An intruder could pretend to be another user for the server, or alternatively appear as the server to a user. Therefore the authentication of users and the security of communications are critical functions. The platform provided by Netinary is based on a system similar to the one implemented on GSM networks, in order to achieve a high level of security. These functions are also critical for billing purposes. Billing and roaming As users of a particular hotspot may be customers of another hotspot, or of a mobile operator, the establishment of roaming agreements is necessary. Basically, a roaming agreement ensures that a customer of network A is able to use the service provided by network B, while being billed by network A, with some mechanism of revenue sharing between the two networks. In our case, as international travellers may be concerned, international roaming is critical, which requires the collaboration of international brokers such as Boingo. Concerning roaming with GSM operators, the platform allows the hotspot to inter-operate in a similar way to a foreign GSM Network. 5

6 Table 2 The Wi-Fi value chain in the Paris airports case Activity Functions Critical Resources Actors involved Hotspot leadership Network Provisioning Authentication and Security Billing and Roaming Content provision Marketing and Customer Service Define hotspot strategy and negotiate with suppliers and partners Design, install and maintain infrastructure, Negotiate with subcontractors and partners Ensure access provision and interoperability with roaming agents Ensure authentication of users Ensure security of communications Provide integration with other networks Provide technical and billing interconnection with other hotspot and mobile operators Manage data for billing purpose Provision of content services Aggregation of content from various sources Definition of offer with partners Promotion and sales of access and services Management of customer relationships Venue ownership Relationships with partners Technical capabilities Knowledge of airport activities Relationship with venue owner Network ownership Technical capabilities Network ownership Technical capabilities Ability to negotiate roaming agreements Content ownership Ability to relate content and customer expectations Sales network Customer ownership Brand image ADP ADP Telecom (with Siemens) ADP Telecom (with Netinary) ADP Telecom Airlines, shops (provision) ADP (provision and aggregation) ADP ADP Telecom Shops Other operators Content provision Content provision can be split into two functions: content provision itself and content aggregation. Content provision is naturally linked to content ownership. Critical resources are exclusive and indispensable content: in our context the timetable, gate numbers and other operational information owned by ADP are very critical. Other airport related content provided by airlines, car rental companies, hotels or shops naturally fit with the needs of customers. Content aggregation is assembling content from various sources to answer the needs of a target population. ADP, because of its position as venue manager, and because of the very critical content it owns is the content aggregator. In fact most of the information was already available on the ADP Internet portal, and could be provided by wireless access with minor changes. In order to provide advanced services contributing to the image of the airport, it was decided to establish a partnership with Virgin Mega and the Hachette media group, in order to provide entertainment services. Such services include provision of movies, video-clips, music, TV programs, and games. Movie provision may not be offered because of downloading time exceeding customer acceptance. Other advanced services include services targeted at business travellers such as access to or access to their company s intranet. Location based services, selecting content according to the geographical location of the user could be offered in the future. 6

7 Marketing and customer service ADP has a general responsibility concerning the marketing policy, whereas ADP Telecom is in charge of customer acquisition, support and retention. Acquisition is subject to network externalities, where the use of one service is dependant on the use of other goods and services. In order to be able to use this particular service, the user must have a laptop computer or PDA at hand, equipped with a specific Wi-Fi chip. A strong hypothesis is also that the use of Wi-Fi on this particular hotspot may be dependant from its use in other hotspots or cellular networks. Initially, ADP Telecom intended to rely only on its own sales, either directly through payment with a credit card, or indirectly with prepaid cards that could be bought in the airport s newspaper shops. However, it quickly appeared that the lack of existing direct relationships with end-customers was a strong barrier, and that it could be more efficient to contract with companies already having customers. Therefore, agreements were made with mobile operators, so that the customers could be billed on their mobile phone account, thus making the usage more simple. Most mobile operators offer subscription schemes bundling GPRS cellular services with Wi-Fi services. EXPLORATION OF INTENT TO ADOPT AND USE SERVICES Understanding and anticipating potential consumer behaviour is critical for suppliers of new high technology services. However, this is a particularly difficult exercise because of factors such as the complexity of the products involved, the presence of interdependencies, the low or non existing consumer experience, or the high incertitude of the impact of innovations. More specifically, consumer behaviour concerning wireless Internet services in public venues is hard to understand for the following reasons. First, these services can be used by a large variety of travelling professionals, even if senior executives currently constitute the main target of hotspots. Second, adoption and usage are dependent both on the decision of the individual users, and of the company employing them. Third, from the individual user s perspective, there is no clear border between professional and more personal expectations. Family, entertainment and business topics must be equally considered. Fourth, a multitude of companies can coexist on a hotspot, as in the case of an airport. So, the spectrum of localised mobile Internet services which can be proposed is broad. Fifth, the adoption and consumption of such services is subject to network externalities: consumption in one hotspot is dependent on consumption in other geographical areas. Finally, beyond the services to be provided, the physical characteristics of the hotspot could have an influence on the consumption experience. To explore this complex subject, we made a qualitative study, and not a quantitative research which would be limited to quantifying traditional uses, and might not take into account all the richness of the consumption experience in a hotspot, and of the psychosocial context. The qualitative study is based on twenty four interviews with medium and senior executives. From our preliminary results, we were able to conceive a simple framework aiming at explaining the intent of adoption and use of wireless Internet services. This framework specifically concerns an airport environment, but can easily be adapted to other types of public hotspots. The sampling frame was made up of several lists of business schools alumni. People were selected in order to ensure the strongest variety of the points of view on our study subject. The selection was operated starting from two variables, thinking that they could discriminate the answers: the function in the company and the degree of mobility. After having contacted further these two hundred people, we were able to carry out twenty seven interviews. Three were not able to be used because of bad audio recording quality. 7

8 To collect information, individual in-depth interviews were carried out. They are appropriate for collecting information concerning perception and behaviour. The interviewed person expressed himself freely, but within the framework of the topics suggested by the guideline. The former is composed of three parts. The first part makes it possible for the person interviewed to evacuate the stereotypes concerning the Internet and to centre on the current uses. The second part centres the discussion on travel and the situations of waiting able to occur on this occasion. The last part proposes to imagine the mobile Internet services able to be offered. Four categories of factors emerge from our qualitative analysis, namely individual characteristics and experience of business travellers, the policy of their organisation concerning Information and Communications Technology (I&CT), situational factors relative to the hotspot, and service availability inside and outside the hotspot (table 1). Table 3 Factors explaining intent to use Wireless Internet in an airport Factors Explanations Individual characteristics and experience Position Managers with higher positions are more likely to be equipped, but less likely to use Function Mobile communications are more crucial for some functions (e.g. sales, technical support) Age Older people are less likely to use Sex Men more likely to use than women Personality Desire to keep in touch, need for anticipation and reassurance Experience Experience in using the Internet and mobile devices (learning effect, familiarity), related to personal interest, technical functions, sector of industry User status Effect of positive/negative experience on general attitude towards computing and WiFi WiFi user in other contexts Organisation policy Attitude towards I&CT Strategic resource or cost to minimise Equipment and access policy Influence equipment Service policy Policy to spur or restrict usage Security policy May lead to restrict availability of remote access to IS Situational factors Perceived available time The more perceived available time, the more usage Travel characteristics The type of travel, in terms of duration, destination, transit, determine the available time. A low level of organisation induces need for information and transaction Physical environment Privacy, comfort, noise level, availability of sockets Service availability At hotspot Attractiveness and width of services available influence usage At other hotspots The more hotspots, the more adoption and incentive to use (network externalities) At company premises Availability of company WLAN induces adoption and propensity to use Roaming availability Reduce transaction costs, induce spontaneity of usage 8

9 Individual characteristics and experience Various factors seem to have an influence on the propensity to use wireless Internet in a hotspot: hierarchical position, function, age, sex, personality, experience and user status. The hierarchical position plays an ambiguous role. On the one hand people with a higher position are more likely to be equipped with terminals by their organisation, and particularly with PDAs. On the other hand, their comments suggest that travel time is often perceives as an opportunity to read, think and relax, rather than dealing with a computing device. The function in the organisation also has an influence on intended usage. First, for some functions, such as sales or technical support, communicating in situations of mobility can be critical. People carrying on such functions are therefore more likely to be equipped, to be experienced in communicating while being mobile, and to have urgent needs in a hotspot. In general, executives working in technical functions or in the I&CT sector are more experienced in using computing devices and therefore more likely to use WiFi services. Age can have a low influence on usage, as propensity to use seems to decrease with age. Men exhibit a higher propensity to use wireless Internet than women. One explanation could be that laptop computers and their connection do not appear practical. PDAs are considered as an interesting alternative, but are still not perceived as user friendly enough by women. Some personality features seem to influence usage, and particularly one characteristic that we call need for reassurance. Even when the trip is organised in advance, some respondents expressed the need to connect to the Internet in order to check information or to be able to deal with unexpected events, concerning, for example, a hotel or car reservation. The role of orientation towards communicating with others can be ambiguous. On the one hand, such people can be expected to communicate electronically, on the one hand they may prefer to communicate directly, for example, with their neighbour. The latter case seems to be more likely. Experience plays a role through two distinct but related aspects. The first concerns the accumulated experience, and hence familiarity and skills with the use of computing and telecommunications products and services. The more experienced the user, the higher the propensity to use other products and services such as wireless Internet. This is apparent, as explained before, through the type of function (e.g. technical), or the sector of industry. The second concerns the positive or negative attitude generated by former experience. Interestingly enough, some respondents having tested WiFi in another context (WLAN) had a negative attitude due to the problems they encountered. User status: being already a WiFi user in other hotspots naturally leads to an increase in the propensity to use it in an airport. Organisation policy concerning Information & Communications Technology For business travellers the policy of their company or organisation concerning I&CT can have a decisive impact on the availability of equipment and of usage. In [4] and [5], we identified that the adoption behaviour for new I&CT products and services was strongly dependent on the way these investments and expenses were considered, and that Information Technology (IT) managers found it difficult to assess the return on investment for this type of project. The attitude towards I&CT investment and expenses broadly oscillates between two extreme 9

10 positions. One possible attitude is to consider I&CT as a strategic investment (at least for a given number of projects), whose benefits are localised outside the IT function, such as improving internal and external co-ordination, reducing time to market, or increasing customer satisfaction. Another attitude is to treat these resources as a cost to be minimised, according to the available budget. In this case, investments will be considered if benefits are localised inside the IT function, such as a lower cost per bit, or lower maintenance cost. The attitude towards I&CT will impact on the equipment and access policy (deciding who will be equipped with a terminal equipment and allowed to access a service), as well as the service policy, such as the range of services available. Another critical point is the security policy of the IT department. A tight security policy may lead IT departments to restrict remote access to their Information System, in order to avoid malevolent intrusions (for example by hackers). IT departments may be even more cautious in the case of WiFi access, as intrusion is easier to achieve for radio links than for fixed lines. An intruder could pretend to be another user for the server, or alternatively appear as the server to a user. Situational factors The main influencing factors are the perceived available time, the travel characteristics, and the characteristics of the physical environment. The perceived available time is relative in two aspects: the user personality (e.g. tolerance of inactivity), and the competing entertainment or other activities at hand. Travel characteristics, in terms of duration, destination and transit time, have an influence on both time available and need for communication and information. For example, a passenger transiting between two intercontinental flights would have a high need to keep informed about his family or his business, and would also have enough time available for it. A low level of pre-organisation of travel should also induce stronger needs for communicating, for example in order to confirm a reservation, or to get additional tourist information. Consumption of WiFi services should also depend on the physical environment. This refers to ambience factors such as benefiting from a comfortable enough environment, in terms of furniture, silence, and isolation from other people. It also refers to more critical issues such as the availability of sockets for terminal equipment to be plugged in to. These factors appear to be critical and also difficult to provide, as the organisation of space in an airport is strongly determined by considerations of security, passenger management, and scarcity of available space. Service availability The expected consumption will be dependent on the availability of attractive services both inside and outside the hotspot considered. Service expectations are rather standard and mainly concern and Internet access. For PDA users, the provision of information in a suitable format is required. In terms of content, respondents seem to focus more on travel related information. Push information, for example to keep informed about accurate boarding and departure time, also raised interest. We did not identify much attraction towards multimedia services, such as downloading movies 1. Expected consumption is also related to service availability outside the hotspot considered, through the number of other hotspots, and/or the existence of WLANs in the organisation 1 However, this may result from a possible bias in the interviews, as we felt that respondents were rather reluctant to mention entertainment while talking about professional travel. 10

11 employing travellers. This is a typical example of network externalities where the utility of a service is dependent on the availability of complementary products and services [3]. In fact it is unlikely that potential users would adopt WiFi specifically in the case of the Paris airports. We would expect a two-stage decision process: first a decision to adopt Wireless Internet at a general level, or in a company WLAN, and then to use it in the airport under a given number of conditions. Multi-usage means the existence of roaming agreements between the various hotspot owners and mobile operators, including the possibility to be billed by one s usual provider. CONCLUSION This fine grain analysis of a specific project shows some of the difficulties to be encountered when launching new telecommunications services, and suggests some specific as well as more general conclusions pertaining to supply-side and demand-side elements. On the supply-side, it first shows that the ability to mobilise a network of partners and suppliers is paramount to the achievement of projects that imply the combination of resources from different types of actors. ADP, as venue manager, was de facto in a position to mobilise various resources. Second, it stresses the importance of pre-existing relationships with other actors and customers. The relative inability of ADP Telecom to commercialise by itself Wi-Fi services to consumers, because of the lack of pre-existing clientele and customer relationships, is a striking example. Third, it highlights the importance of the interaction between the venue environment and the hotspot: on the one hand, the hotspot service must take into account specific geographical and security imperatives. On the other hand, it is not enough to install a wireless network in a public venue, the venue must also be modified to allow comfortable and efficient use of service. This interaction may give rise to a virtuous or vicious cycle: low consumption because of the inadequacy of the environment may result in a lack of incentive for investing to improve the venue environment. On the demand side, a first key result of our research is the importance of the consumption situation, such as the availability of electrical connectors, a comfortable environment, or the perception of the serviceable time. The provision of localised services and of a related physical environment seems to be able to trigger the consumption of wireless Internet services on hotspots. A second key result is that focusing only on the individual's needs and expectations, a traditional characteristic of consumer marketing, is not sufficient in order to understand the product's potential for adoption. The individual adoption behaviour will be obviously influenced by the company s computer policy, such as the terminal equipment policy, the security policy or the services provided by the organisation. A third key result consists of the confirmation of the importance of network effects. The consumption of services in a specific hotspot is dependent on the consumption in other places, related to geographical range of availability of similar services, as well as the provision of adequate billing solutions. ACKNOWLEDGEMENT This research is supported by Louis Le Prince Ringuet Foundation. REFERENCES [1] Axelsson, B., G. Easton, Industrial Networks - A new View of Reality, London: Routledge, Inc., [2] Dineen, R., S. Anderton, Public wireless LAN: the business opportunity, Ovum,

12 [3] Katz, M., C. Shapiro, Network Externalities, Competition and Compatibility, American Economic Review, Vol. 75, pp , [4] Vialle, P., O. Epinette, The attitudes and perceptions of ICT managers of large firms towards M-business Internet adoption: beyond the magic, proceedings of Conference on Telecommunications and Information Markets (COTIM), Karlsruhe, Jul , [5] Vialle, P., The emergence of m-business: an analysis of the case of the French market, proceedings of 14th European ITS (International Telecommunications Society) Conference, Helsinki, Aug ,

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