Most economists agree that an economic recovery is on shaky ground. But Vex Corporation isn't putting much stock in ominous assessments.
Instead, the Sao Paulo, Brazil-based wireless Internet service provider, which builds and services commercially sponsored Wi-Fi Internet access points or hot spots in 40 countries, sees an opportunity to claim a complementary piece of the approximately $13-billion annual Canadian wireless business.
"We believe the three major carriers don't want to build their own Wi-Fi networks, but it's only a matter of time before they'll want to own one if somebody else does," says Asif Khan, Toronto-based country manager for Vex Corporation in Canada.
There are about 3,600 free or paid Wi-Fi connections in Canada, compared with nearly 68,000 in the United States, according to San Francisco-based wireless media firm Jiwire Inc.
Vex's core Canadian strategy is to partner with large, nationally established companies such as hotel and restaurant chains, build a free Wi-Fi network across their various locations (at a cost of about $500 per location), and then monetize those networks by negotiating paid, multi-year sponsorships with major brands. While Mr. Khan won't specify which brands Vex has approached in Canada to date, the company has struck deals with the likes of Coca-Cola, Mercedes-Benz and the Intercontinental Hotel chain in other markets. Vex will then share some of that sponsorship revenue with the chain, which pays nothing to host the network and can leverage the free Internet access to attract Wi-Fi-hungry customers.
While a business model that relies on deals with cash-strapped corporations in a time of recession may seem bold, perhaps even foolhardy, consider that with clients such as McDonald's, Vex grew by 30 per cent globally in each of the past three years with revenue averaging between $10-million and $20-million annually. Mr. Khan says the privately owned company is poised to grow by 50 per cent this year, driven mainly by rapid expansion into Eastern Europe.
So, why the aggressive push into Canada? Vex's research pointed to a gaping hole in the Wi-Fi market.
"Consumers are increasingly buying and demanding devices that are Wi-Fi capable," Mr. Khan explains. "North America is a market where you can't get away with charging people for Wi-Fi any more."
And with three new wireless carriers poised to enter the Canadian market to compete with Rogers, Telus and Bell starting in 2010, Vex is banking on an eventual clogging of the popular 3G network that could push Canadian carriers to seek relationships with Wi-Fi network providers.
But the Vex model could face a rocky ride in the Great White North, says Kevin Respiro, a Toronto-based senior analyst with technology research firm IDC Canada.
"If you look at the competitive landscape, the Vex free, sponsorship-driven model is a slight variation on one that has been tried in Canada for years," he explains. "The commercial viability of a free Wi-Fi service has really failed to materialize. I would argue that Vex has an uphill battle."
Even in the event of major 3G network congestion, he says the major wireless carriers would rather find ways to strengthen their 3G networks to maintain service quality and retain brand equitythan work with a service provider such as Vex.
Still, Mr. Khan believes that Vex's decision to enter the Canadian market is a wise one.
"We're in a tough economy, people are looking to save money and free Wi-Fi is a great way to do that."