Why starting a Free WiFi Zone in India is so expensive?

We conducted several in-depth interviews with HCID researchers, financial analysts, business modeling experts, Internet service providers, hardware company suppliers, investors, business owners, lawyers, government official, software engineers and network architects to understand why decent public WiFi access is still a huge issue!
The following sections contain summary notes from the market research highlighting information that became relevant for a series of solutions in the later stages of design.
Economic Roadblocks
To understand economic roadblocks it is necessary to learn about the cost components and revenue models involved setting up and operating free (or low cost) Wi-Fi Zones.
Understanding Costs for free WiFi Service Providers
There are many costs involved for Internet (WiFi) Service Providers before starting a free (or low cost) Wi-Fi zone. Different factors such as network architecture styles and business modeling techniques lead to varied costs from one Wi-Fi Provider to another.
A broad classification of the common components of fixed and recurring costs has been illustrated as follows

If the user would not pay for access how do Quasi ISPs and ISPs financially sustain themselves?
The second step was to understand how ISPs and Quasi ISPs were paying for these cost components and financially sustaining themselves while giving out a free service.

Understanding financial models of Free Wi-Fi service providers in India.
Free Wi-Fi as a Service
Most cases of free Wi-Fi Zones maintained by Quasi ISPs followed the ‘Wi-Fi as a service’ model. In this model there is no extra charge to the user for accessing/using Internet. It is a part of the overall service or experience. For instance, a cafe that marks up the cost of coffee and offers free Wi-Fi as a service to its customer. However, in a price sensitive market like India, adding a few rupees to the menu often means losing a lot of customers to the competitor.
Hybrid Models
Most cases of free (or low cost) Wi-Fi Zones maintained by licensed ISPs can be classified into (one or combination of) the following three models.
Publicly Funded
The government of India has been taking measures to bridge the digital divide. One key measure is to partner with ISPs to offer free Wi-Fi at public spots. The cost of setting up and running the service is borne partly or wholly by the government.
User Funded Models
In User Funded Models ISPs create two user groups – Free Plan Users and Premium Plan Users. The free plan is usually slow, and limited by time and data download. The premium plan is a paid plan for faster speeds and lesser limitations on time and downloads. The fee received from the premium plan users is used to balance the expenses incurred on the free users.
Advertiser Funded / Data mining
In the recent years advertising has been an alternative way to monetize Wi-Fi Zones. During the sign in process an advertisement is shown to the user. The advertiser pays the ISP who in-turn enables free Wi-Fi for the user. In some cases, ISPs would collect user data such as emails, phones numbers etc. and sell it to advertisers.
Legal Roadblocks
To understand the market conditions completely, along with economic roadblocks, legal roadblocks affecting ISPs and Quasi ISPs were explored.
The section that deeply affects ‘affordability’ and enablement of Wi-Fi Zones
As of 2015, ISPs and Quasi ISPs face a series of economic and technical roadblocks because of one abruptly drafted legal notice published in 2009 by The Ministry of Communications IT (Department of Telecommunications) of the Government of India to all Internet Service Providers in India. The following is an extract from the entire legal notice.

To put it simply, it is stated that all public (or guest) Wi-Fi hotspots need a clear user authentication process and a user database management system. This notice lead to a huge technical and economical roadblock in enabling free Wi-Fi Zones in India; the implications of which are discussed below:

The requirement practically makes an open Wi-Fi network illegal. Unlike setting up an open wireless network, most small ISPs and Quasi ISPs do not have the technical resources to implement a legally compliant network management system with user authentication and database management.
Implementation of such systems substantially drive up costs as it requires additional hardware, software and skilled talent.
Additional Hardware
Additional server(s) required to store user’s login data (login date, time, IP and MAC address.) for a period of 1 year and run various other network management scripts that track usage activity.
Additional Skilled Talent
Setting up and monitoring such systems/software could mean having to hire additional talent – a network architect, a network solutions agency or someone with wireless networking expertise.
Additional Software and Service: Network Management, User Authentication with SMS Gateway and
Database Management System
Additional software and service is required for network management with user authentication and database management. While there are many open source software packages for network management with user authentication from around the world, the licenses can be extraordinarily expensive in the context of India.
Most network management software authenticates users via an email – which is NOT allowed as per Indian laws. This means the authentication system needs to be connected to a SMS gateway that can deliver the password on the user’s registered cellphone number prior to granting Internet access to him/her.
The user authentication system can also be considered as a ‘login validation system’ for those who want to access the wireless network for free Internet. A database of successfully logged in users is maintained through this system as per legal requirements.
Having an extra SMS gateway and paying for an SMS every time a user who logs in is an absurd cost driver. Along with the Internet service, Quasi ISPs now have to pay for SMS gateways as well. The additional software and service account for largest (fixed and recurring) cost elements for operating free Wi-Fi Zones. In some cases, annual recurring costs for such software and service, and its maintenance would be more than the actual Internet service costs.
Common Roadblocks for Enabling Free (or low cost) Wi-Fi Zones
After gaining insights on the various roadblocks faced by ISPS and Quasi ISPs, the most common (economic and legal) roadblocks that hindered user goals were identified and grouped.
The classification helped ideate upon and develop a series of different solutions to individually tackle the following problems:

High Cost of Wi-Fi Network Enablement: Ideate On Bringing Down Costs
With regard to the cost of Internet acquisition and distribution – Costs of commercial Internet, hardware, software etc. is very high and that drives up total fixed/recurring costs for businesses. Due to lack of inexpensive skilled resources it is difficult to set up, manage and audit the wireless network. This is the reason most existing ISPs kept their network open and unsecure.
High Legal Risks: Ideate On Creating an Open Source User Authentication System with Database Management System for WiFi Zones in India
We found out that many small Quasi ISPs lacked the right technologies for a clear user authentication. In case of a cyber-crime attack, the owner of the Internet connection would be penalized and would have to bare the liabilities on behalf of the user(s) as per Indian laws. Often, the penalty can be high enough for the businesses to go bankrupt.
No Clear Revenue Plan to Meet User Goals: Ideate On Sustainable Revenue Models
Monetization by service means the prices of their products or services go up. Monetization by user means breaking the overall venue experience and overall user goals. The wireless network would generate far too little digital inventory for advertisers to be interested hence making it difficult for ISPs or Quasi ISPs to monetize completely through ads.
Remarks
By understanding identifying and isolating problems we began ideating on a series of solutions here at Muft Internet. If you’re an ISP that needs legal or technological help in starting a WiFi zone in India – call us on +91 80802 40000.