Why or Why Not WiFi?

Lodging Magazine (www.lodgingmagazine.com)
Kevin DiLallo, Marc Lindsey, David Rhode

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

Why or Why Not Wi-Fi?

By Kevin DiLallo, Marc Lindsey, and David Rohde

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 Wi-Fi 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 Wi-Fi local area networks (“WLANs”) makes sense – they allow operators to avoid the hassles of pulling cable to the rooms, maintaining Ethernet cords in desk drawers, installing in-room network access equipment, and WLANs generally scale much easier than wired infrastructure. Moreover, guests are accustomed to the convenience that Wi-Fi 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.

Turning over the operation of your hotel’s WLAN comes with some non-obvious costs and risks. Turnkey solutions from carriers, network integrators, and Wi-Fi 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 Wi-Fi 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, wide-spread 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’ Wi-Fi 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 “Wi-Fi 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 Wi-Fi 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 Wi-Fi 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 the provider’s services. For example, Wi-Fi offload increases usage of a hotel’s existing Wi-Fi infrastructure, which in turn may increase Wi-Fi 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 Wi-Fi 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 Wi-Fi has ballooned in popularity, and many of them can expose hotel operators to liability. A key risk to address when structuring your Wi-Fi 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 Wi-Fi technology should anticipate this risk when they contract to buy or outsource the installation and operation of a Wi-Fi network. Specifically, the hotel should insist on robust indemnification by the seller of the Wi-Fi services and products (or the third-party integrator who is providing the turnkey Wi-Fi 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 the hotel and pay any settlement costs or damage awards.

A second risk of publicly available Wi-Fi 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 Wi-Fi 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.

Although it adds cost to the solution, hotels should consider adopting commercially available Web content filtering services and spam blockers to prevent users from downloading protected content or sending bulk email messages over the publicly accessible portion of the hotel’s WLAN. All of the hotel’s guests should be required, as a condition to accessing the WLAN, to agree to the hotel’s terms of use (sometimes called an “Acceptable Use Policy”). The AUP and terms of use should clearly explain the rules applicable to the end user’s use of the services and the consequences of failing to follow those rules. Incidentally, most hotel’s Internet Service Provider (“ISP”) and the Wi-Fi services provider (which, in many cases, are one and the same) have their own AUP, and the hotel should ensure that its end users are also informed of, and agree to comply with, each provider’s AUP and end user terms of service as well as the hotel’s.

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 a hotel, where guests and visitors roam in common areas or hallways, it is difficult to identify individual users and associate their conduct with specific acts of infringement. Nevertheless, a demonstration that the hotel uses reasonable measures to deny repeat infringers access to the hotel’s WLAN may be instrumental in obtaining DMCA copyright infringement immunity. Maintaining blacklists of media access control (“MAC”) addresses — which are unique device identifiers – assigned to devices that are repeatedly used to pirate copyrighted audio or video content and then filtering out these blacklisted MAC addresses (i.e., denying them access to the WLAN) is an example of a reasonable measure hotels can and should take to minimize infringing activity.

If overlooked, privacy can trip up otherwise well thought-out transactions. Every hotel should have and publish to end users of its public WLAN clearly written privacy policies that explain what personal data the hotel collects and how that data is stored, used, and disclosed to others. You should obtain the advice of private counsel to draft an appropriate privacy policy. Not surprisingly, the Wi-Fi service providers have their own privacy policies and practices. Identifying the differences between the hotel’s privacy policy and its provider’s policy, determining which party’s privacy policy and practices will ultimately apply to the end users, deciding how to communicate the applicable privacy policy or policies to end users, and establishing ownership and control of data collected from and about end users’ use should all be worked out and documented in the contract before the parties shake hands.

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 advisors. Only when you have modeled all the revenues and costs and matched them with legal protection, is a hotel operator’s work in selecting a WLAN solution complete.