The City Council approved the Airport’s first Wi-Fi Concession Agreement with Opti-Fi Networks on October 24, 2005, with the network implementation effective January 2006. Boingo Wireless Inc. (Boingo) purchased Opti-Fi in November 2008 and has been operating the Wi-Fi Concession in the Terminal Building since that time. The term of the Wi-Fi Concession Agreement was extended to allow staff time to research industry changes in access models and technology, and in access trends at airports around the country.

Staff prepared a Request for Proposal (RFP) for a new Wi-Fi Concession seeking a firm with expertise in Wi-Fi operation to establish a new user-friendly network at the Airport utilizing current Wi-Fi technology. This proposal requested that the successful Concessionaire provide a turnkey solution for the Airport, including providing technical support for the customers, maintenance of the equipment, and the accounting functions related to providing this service. The RFP was issued in June, requesting proposals on three access models: paid access, hybrid with 30-minute complimentary access, and free access. The RFP was advertised in the Billings Times on June 6, 13, and 20, and posted on the Airport’s Website. A pre-submittal meeting and site visit was held on June 18. Proposals were due by the close of business on July 17. While four RFPs were sent to interested companies, only one proposal was received. Fortunately, this proposal is from Boingo, a company that not only has installed a number of Wi-Fi networks in airports around the country, but also with which the Airport has had a positive experience and enjoyed years of good service under the expiring agreement. Because some airports are providing Wi-Fi service for free to their passengers, staff felt that evaluating the cost of free or some sort of hybrid service that included a free component along with paid access was important.  However, the cost to the Airport to provide the free or hybrid service were deemed too high and staff felt the Wi-Fi service should be paid for by those who are utilizing the system. Given the current state of the airline industry, it is hard to justify subsidizing a free Wi-Fi program through the airline agreements with the City. Boingo’s proposal provides for Wi-Fi service starting at the price of $4.95/hour, $7.95/day for short term or ad hoc usage. Frequent travelers will also have the opportunity to purchase monthly subscriptions at reduced rates of $7.95/month for a 2-mobile device subscription and $9.95/month for a laptop subscription. The monthly subscriptions will allow access anywhere Boingo provides Wi-Fi service.

The City Council may:

• Approve the Concession Agreement with Boingo; or
• Not approve the Concession Agreement with Boingo

Boingo’s proposal included options for the three types of access models.   Due to the costs of maintaining and operating a Wi-Fi system, there are costs that will in some cases, depending on the model selected, exceed the projected revenues to be generated.  In those cases, the Airport would be expected to cover some of those costs, differing according to which access model is selected.  There are trade offs between who pays the expenses, the percentage of revenue share, and a minimum annual guarantee of revenue.  The Wi-Fi Concession's Gross Revenues will be derived from the following sources:
• Paid Access:  from subscriptions, day passes, and roaming only.  This model has no advertising.
• Hybrid and Free Access:  from subscriptions, day passes, roaming, and advertising.

In the Fully Paid Access Model, Boingo will:
• Design/install/maintain/operate the system at its expense
• Cover the bandwidth costs
• Offer the Airport 20% revenue share, with a minimum annual guarantee of $6,000.

In the Hybrid Access Model, in exchange for the 30-minute complimentary service:
• Boingo will design/install/maintain/operate the system at is expense
• The Airport would need to cover the bandwidth costs, which are estimated to be $14,400/year or $72,000 for the 5-year term of the Concession 
• There would be no revenue share or minimum annual guarantee in this model.

In the Free Access Model,
• Boingo will design and install the system
• The Airport will purchase, own/maintain/operate the entire system
• Maintenance/repair costs are unknown, but would be the responsibility of the Airport
• Boingo would monetize the network through advertising sponsorships only
• Boingo will offer the Airport 50% share of the advertising revenue with no minimum annual guarantee.

Projected Impact to Airport of 5-Year Contract:
Paid Access Model:
• Airport Revenue: $39,704
• Airport Expense: $0 
Hybrid Access Model:
• Airport Revenue: $0
• Airport Expense (including lost revenues): $96-750 - $111,704
Free Access Model:
• Airport Revenue: $24,750
• Airport Expense (including reduced revenues):  $146,954
• Airport NET (Income – Expense): -$122,204

The Free Access Model would create the most expense for the Airport and the most operation/maintenance responsibility for the Airport, coupled with the least amount of revenue.  After further examining the Hybrid Access Model, while the expense to the Airport would be less than the Free Access Model, and this model frees the Airport from both operation and maintenance responsibility, it also provides no revenue to the Airport.  This would be a loss of $30,000 - $40,000 over the course of the 5-year contract.  The Paid Access Model presents a system with new equipment and increased bandwidth at no cost to the Airport.  Additionally, this model covers all operation, maintenance and repairs during the 5-year period, and offers the greatest revenue share potential, along with a guaranteed minimum for each year.  Additionally, users would have advertising-free access and not be required to watch advertisements or have reduced bandwidth speeds.  For the paid access model, there is no capital cost associated with the installation of the new Wi-Fi system and the City will receive 20% of the access fee and subscription revenues generated on the Wi-Fi Concession at the Airport. Revenues to the City are projected at $7,500 to $8,300 per year.

Staff recommends that Council approve the 5-year Concession Agreement with Boingo Wireless, Inc. to install and operate a paid access Wi-Fi system in the Terminal Building at the City of Billings Logan International Airport.  The Aviation and Transit Department Board has reviewed and concurs with this recommendation.