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Hotspots becoming merchant-friendly?

Short for wireless fidelity and meant to be used generically when reffering to any type of 802.11 refers to a family of specifications for wireless local area network technology.


Google put the hot in hotspot recently, when it made citywide wireless Internet access available to its entire home base of Mountain View, Calif. The Wi-Fi (standard 802.11) network covers 12 square miles, and any device with a wireless card can access it. Other companies have announced or already installed similar networks in other cities. And several of them use a revenue model based on delivering advertisements to users' browsers.

These announcements pose the question, Can merchants use free Wi-Fi networks for card processing? The answer is yes ... and no.

Yes, because one company working with VeriFone is in the final testing stages of such a system that, come November, could bring free Internet access to merchants in Dayton, Ohio, for card processing.

And no, because most free citywide wireless networks will lack the service, support and security to ensure the kind of failure-proof system merchants need.

That said, free wireless could still give ISOs and merchant level salespeople (MLSs) a trial system. They could use loaner equipment to show merchants the benefits of a wireless network.

It provides a demonstration alternative, without extra costs or red tape, to convince merchants to go with a full-scale implementation of wireless equipment, said Scott Holt, Director of Marketing for ExaDigm Inc., which sells the Wi-Fi-capable XD1000 and XD2000 POS terminals with modular antennas.

When systems mesh ...

The Mountain View system, which Google is replicating in San Francisco for EarthLink Inc., has a mesh topology: 380 access points blanket the city, so if one node goes down, the others can "shoulder the load," said Chris Sacca, Head of Special Initiatives for Google.

The nodes operate off three point-to-multipoint connections. The Wi-Fi system is omni-directional. Although it is not enterprise-class, it will not be shut down regularly for maintenance. For businesses that require always-on system availability, paying an Internet service provider for a dedicated line makes more sense, he said.

Google's home-base network will have security features that other citywide networks will not share. For example, although anyone can operate a Secure Sockets Layer session over a Wi-Fi network, Mountain View users can take the added precaution of downloading virtual private network (VPN) software Google designed specifically for this network. The VPN software does not require a password and runs in the background, encrypting the data before sending it over the network.

EarthLink's San Francisco system, which will be point-to-multipoint, rather than omni-directional, will offer two tiers of service. The first tier will be Google-branded free Internet access at 300 kilobits per second. EarthLink will sell a second tier of dedicated lines, ranging from one to three megabits per second, to businesses as a DSL replacement. This will give San Franciscans service-provider choice, Sacca said. Tier two will be more interesting to merchants, since it will bring more consistent access to business applications such as inventories and customer resource management, he added.

From San Francisco to Dayton, Ohio

VeriFone is working with an unnamed hotspot provider in San Francisco, as well as HarborLink Network LLC in Dayton. In both cities, free Internet access will take a novel approach for merchants: segmented traffic, according to Steve McRae, Director of Solutions Delivery for VeriFone. In the Dayton trials, VeriFone determined that transmission of financial information through an unprotected network was a stumbling block, as was quality of service.

"You can expect only so much from a free service," McRae said. HarborLink agreed to segment traffic for merchants and to block unauthorized access to transmitted data. The service to merchants is still free, but they must buy device support from VeriFone.

The idea came from a Dayton-area MLS who had read about HarborLink's pilot, which currently covers one square mile of the city with free Wi-Fi Internet service using the wireless mesh, or omni-directional, topology. "That processor knew there was a product out there that could utilize wireless and got us together with [VeriFone]," said Rick Tangeman, President of HarborLink.

At the end of August, Dayton officials notified HarborLink that its proposal to extend the free service citywide had been accepted. The expansion will encompass 55 square miles, including the Dayton International Airport in Vandalia. The network uses an advertising revenue model, delivering ads to browsers when users log on. VeriFone Wi-Fi terminals will not receive the ads.

'Count me in'

When Darin Cronebach, Director of New Business Development for the Dayton-based ISO Descomm, first heard that VeriFone's Omni 3750 might be used by a restaurant chain that contracts with HarborLink, he wanted to provide the payment processing services.

"I thought, 'What a nice combination deal we could sell,'" Cronebach said. "If you can package processing, wireless connections and throw in the manufacturer, you've got everything you could possibly need."

Three companies working together have a better chance of closing a merchant deal than going one by one to sell parts of a system, he said. Pricing arrangements are still to be determined, but would likely take the form of a percentage or residual to HarborLink on the back end.

HarborLink has discussed pricing models and payment-system requirements with a few merchant service providers, which would want varying levels of partnership with the company, Tangeman said. ISOs are looking for advantages they can sell to merchants, he added.

When HarborLink spoke with merchants, applications that drew interest included restaurant payment at the table and outdoor sales capability; one college-area client expressed interest in using the VeriFone terminal to verify ages on driver's licenses as patrons come in the door, Tangeman said.

The segmentation of merchant traffic gives each terminal its own virtual local area network session for each transaction. VeriFone gave HarborLink specifications required to ensure secure transmissions. "In effect, we would authenticate that device to make sure its credentials are appropriate," Tangeman said. Merchants should still use encryption to enhance security.

HarborLink is in discussions with 13 other communities to provide free hotspots, from the suburbs of Dayton to other municipalities in Ohio and California, he said. In each community, the hotspot will target the business district.

A merchant's utopia

In October, VeriFone and Netopia Inc., a broadband equipment and services provider, will make available a bundled pay-at-the-table service to merchants, McRae said. The pay-at-the-table capability will ride on top of Netopia's access point router and network. As part of that bundle, New Edge Networks will install the DSL circuits and connections.

Merchants using VeriFone Wi-Fi-enabled terminals (the Omni 3750, or the battery-operated, modular Vx 610 or Vx 670) will be able to sell or give to their patrons an hour's worth of Wi-Fi service at a time. This gives merchants another revenue-generating or rewards opportunity; the service can be offered as an incentive during off-peak hours.

Article published in issue number 060901

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