Towerstream's Wi-Fi hotzones see plenty of traffic but no wireless carrier customers - yet

At the beginning of this year, WiMAX provider Towerstream announced it was getting into the Wi-Fi hotzone game with the aim of becoming a wholesale provider to operators desiring to offload heavy mobile data traffic. Today, Towerstream's Manhattan market is nearly built out with 1,000 access points--but Towerstream has yet to sign an off-load deal with an operator. Rather, the network has attracted some unexpected players like Skype, Boingo and 8coupons.

towerstream wifi offloading

Click here to see how Towerstream's Wi-Fi offloading system works.

"We've had a lot of interest from major carriers," insists Arthur Giftakis, vice president of engineering with Towerstream. "We have spoken with all of them and we're in deeper discussions with some of them ... The writing is on the wall. All technologies are needed to solve the data influx problem."

Indeed, all of the major U.S. operators have now talked up Wi-Fi offload as part of their mobile strategies. It's just unclear how exactly some of them plan incorporate Wi-Fi: Do they build their own or partner with others?

AT&T is aggressively building out its own hotzones and leveraging its massive footprint of hotspots in coffee shops and airports. Meanwhile, operators like Verizon Wireless (NYSE:VZ) and Sprint Nextel have said they will leverage Wi-Fi, but haven't detailed their plans yet.

Giftakis believes that since operators have to move quickly to offload the massive data traffic they are experiencing, they must partner with other players, especially one like Towerstream that has build out an extensive Wi-Fi footprint in one of the country's busiest markets. Rather than offering the typical hotspot technology, Towerstream is about delivering high capacity Wi-Fi with different coverage requirements than the traditional hotspot. The key is not replicating wireless network coverage but finding zones where the density of commuters is the highest.

Initial tests show plenty of traffic

Towerstream's network is already a proven hit with smartphone users in Manhattan, a market that will see some 1,500 access points installed by next year. When Towerstream launched a pilot project in midtown Manhattan last year, it saw an average of 250,000 connections and more than one terabyte of data transferred per day, primarily by smartphone users who happened to find the free trial network. That was when Towerstream was convinced of a business model.

Giftakis said during operator trials Towerstream has typically seen more than 100,000 unique devices come on the network per day. Towerstream is leveraging its WiMAX assets to backhaul the Wi-Fi network, which uses Ruckus Wireless equipment. Each hotspot is backhauled by a 400 Mbps radio, which can be programmed to jump to 800 Mbps. In other words, Towerstream can offer nearly endless capacity.

"We can have millions of users a day and still be well within the capacity limits," Giftakis said. "There is no capacity limit theoretically."

Today, any smartphone user can jump on the network when they are in Manhattan. However, that will soon change with the introduction of daily and monthly pricing options for users--a move that may spur operators into striking deals with Towerstream since their users will suddenly stop accessing Wi-Fi for free.

Towerstream partners

While wireless operators haven't publicly flocked to Towerstream's network, others have. Towerstream and Boingo Wireless announced a wholesale deal in October that allows Boingo to manage Internet services across Towerstream's Manhattan Wi-Fi network. The network broadcasts the Boingo Hotspot SSID and is available to Boingo's retail Wi-Fi customers and other users who want to purchase Wi-Fi access, as well as Boingo's wholesale platform service customers such as KT, Orange France, Skype and Verizon Wireless.

8coupons offers a consumer portal for local and daily deals.

And, earlier this month, Towerstream partnered with 8coupons, a consumer portal for local and daily deals, to offer geo-targeted deals through the Manhattan network.

"Not only are we providing free public Wi-Fi, we are also connecting New Yorkers to great deals within walking distance to where they are at that exact moment," touted Matt Moskowitz, director of marketing at 8coupons, in a recent release.

8coupons will offer daily deals that have free Wi-Fi access attached to them. Visitors can log on to view a surprise daily deal and then use Wi-Fi for free. 8coupon has an inventory of more than 50 daily deal providers in Manhattan such as LivingSocial, Groupon, KGB Deals, Gilt City, LifeBooker, Zozi and many more.

Since location is easily determined based on where a user is tapping into an access point, Wi-Fi has the unique ability to track users without grabbing personal information--a thorny issue mobile operators are tackling with at the moment.

And finally, Towerstream just announced an agreeement with Skype that will allow Skype users to access Towerstream's Manhattan Wi-Fi network. "At Skype, we are committed to removing barriers to communication and helping our users connect with those who matter most to them wherever they may be," said Skype Wi-Fi Product Manager Shadi Mahassel. "The partnership to leverage Towerstream's Wi-Fi network advances this mission by making it easier for Skype users in Manhattan to connect with friends, family or colleagues on the go."

Towerstream's future

But Manhattan isn't the finish line for Towerstream. The company is also building out hotzones in San Francisco and Chicago, but details haven't been announced.

"We're building aggressively," Giftakis said. "We're well-funded and have two of the biggest markets, but we're waiting to get some revenue in these first markets" before the company makes an aggressive expansion with the hotzone concept.

While potentially important, Wi-Fi offloading is a sideshow to Towerstream's main business. The company uses WiMAX to deliver advanced, high-speed Internet access to businesses in 12 markets including New York City, Boston, Los Angeles, Chicago, the San Francisco Bay Area, Miami, Seattle, Dallas/Fort Worth, Philadelphia, Nashville, Las Vegas/Reno, and the greater Providence area where the company is based.    

Towerstream's Wi-Fi hotzones see plenty of traffic but no wireless carrier customers - yet