Deploying wireless Internet access in a hotel is hardly a novel concept, but are you making the most of the technology? And are you aware of the potential pitfalls of deploying a wireless local area network (or “WLAN”) at your properties?
No longer just “nice to have,” wireless Internet is an essential service at hotels. Public WiFi access points, or “hotspots,” are an indispensable part of the common spaces—including lobbies, conference and banquet facilities—that franchisors are demanding and guests (and prospective guests) are expecting. And for many operators, in-room wireless Internet access has replaced wired Ethernet as the preferred means to provide guests with broadband connectivity.
Standardizing on in-room WLAN makes sense—it allows operators to avoid the hassles of pulling cable to the rooms, maintaining Ethernet cords in desk drawers, and installing in-room network access equipment, and they generally scale much easier than wired infrastructure. Moreover, guests are accustomed to the convenience that WiFi provides them at home or work, and they like the freedom to move around their hotel rooms and common areas while remaining connected to the Internet.
COSTS AND RISKS
Turning over the operation of your hotel’s WLAN comes with some non-obvious costs and risks. Turnkey solutions from carriers, network integrators, and WiFi specialists include charges for bandwidth, help-desk support, equipment maintenance, and capital costs for new site surveys, in-building wireless network equipment replacement or upgrades, and cabling installation or upgrades. The pricing models for WiFi services in the hospitality space vary; the most common are revenue sharing and per-room unit rates. To pick the right pricing, hotels must model future guest usage as it may change during the term due to factors such as the aging of the existing WLAN infrastructure, continued growth of 3G/4G-enabled mobile devices, widespread adoption of cloud computing, the proliferation of content streaming services, and the introduction of new technologies such as virtual desktop infrastructure.
To be sure, the financial issues are complex and can go both ways. The big carriers with mobile service offerings and system integration capabilities, such as AT&T and Verizon, are often interested in exploring revenue share arrangements with hospitality companies that may be willing to allow the carriers to shift their customers’ mobile device data traffic onto the hotels’ WiFi networks, thereby giving the carriers’ customers the ability to check email, surf the Web, etc., without incurring charges for use of the carriers’ data networks.
This latter practice is called “WiFi offload,” and the carriers like it because it takes some of the pressure off their already overburdened 3G/4G data networks and subscribers like it because it offers a lower-cost (sometimes free) alternative to capped wireless data plans. Hotels like it as well because hotspots can drive additional non-guest visitors into common areas where they might have lunch, order a drink or coffee, or browse the lobby shops. Moreover, hotspot promotions targeted at the carriers’ wireless customers can provide hotels or hotel brands additional marketing opportunities partially subsidized by the wireless carrier that is affiliated with their WiFi provider.
Of course, striking a deal with a major wireless carrier is not something that a single franchisee is likely able to do without the support of its entire brand or family of brands, but with public demand for wireless data service surging and carriers scrambling to expand their networks, carriers will be very interested in discussing an arrangement that allows them to expand their networks by adding an entire group of properties with existing public WiFi access. Structuring and negotiating these deals involves balancing competing and complementary interests while fairly allocating costs, selecting pricing and performance that will remain competitive over the term of the contract, and clearly defining the scope of the provider’s services. For example, WiFi offload increases usage of a hotel’s existing WiFi infrastructure, which in turn may increase WiFi support costs (e.g., more calls to the support desk) and impair the performance and availability of the Internet access for the hotel’s paying guests unless additional bandwidth, switches, and access points are added to handle the increased load. Deciding how to measure the bandwidth and infrastructure consumption attributable to WiFi offload and then allocating the costs of increasing the WLAN’s and network’s capacity as required to maintain acceptable levels of performance should all be worked out by the parties in advance of signing the contract.
Effective wireless Internet access management is not just about the network alone. The legal risks abound as WiFi has ballooned in popularity, and many of them can expose hotel operators to liability. A key risk to address when structuring your WiFi services agreement with a provider is liability for patent infringement. Many parties claim to hold patents for various advances in wireless network technology, and patent infringement lawsuits against companies that have purchased and deployed these networks have proliferated in recent months. The typical M.O. of the plaintiffs—who often are not the companies that patented the technology and usually do not make any products—is to buy a portfolio of patents for popular technology, and then try to extract patent license fees from companies that have purchased that technology. These entities assume that customers, rather than the companies that are actually manufacturing and selling products that incorporate the technology, are less likely or able to fight patent infringement claims in court, and more likely to be cowed into settling the claims by purchasing licenses to use the technology.
Whether a hotel defends itself in litigation or opts to avoid the litigation by purchasing a license, the costs are not insubstantial in these days of razor-thin margins, and hotels that have not yet purchased WiFi technology should anticipate this risk when they contract to buy or outsource the installation and operation of a WiFi network. Specifically, the hotel should insist on robust indemnification by the seller of the WiFi services and products (or the third-party integrator who is providing the turnkey WiFi service) so that if one of these patent-hoarding firms comes looking for a license fee—or, worse yet, files suit for infringement—the hotel can look to its provider to defend and pay any settlement.
A second risk of publicly available WiFi networks is the risk that a user will misuse the network to download copyrighted material, spam people with commercial messages, harass someone, or otherwise engage in unlawful or improper behavior. If they are using your network, their bad acts will be traceable back to you. So how does the hotelier avoid liability for misdeeds of users of its WiFi network? It’s important that whatever wireless network the hotel staff uses for the hotel’s business purposes be strictly segregated, and not accessible, from the publicly available wireless network. The hotel network should employ strong encryption and authentication controls to prevent unauthorized persons from hacking into the corporate virtual LAN.
To take full advantage of certain statutory safe harbors against copyright infringement under the Digital Millennium Copyright Act (“DMCA”), hotels should post on their websites and embed in their terms of service instructions for copyright holders to contact the hotel to report suspected copyright infringement. Hotels should also employ processes to prevent any known repeat infringer from using the hotel’s WLAN.
In the current climate, it is understandable why many hotel operators turn over operation and maintenance of their guest-facing public WLAN to experienced “hotspot” providers or dedicated hospitality industry high-speed Internet access vendors. To help navigate the engineering, financial, and legal issues arising out of these unique transactions, hotels should engage experienced sourcing advisers when selecting a WLAN solution.
Kevin DiLallo and Marc Lindsey are partners in the Washington, D.C.-based law firm Levine, Blaszak, Block & Boothby, LLP. David Rohde is a consultant with TechCaliber Consulting LLC, a global telecom and technology consultancy.