Gowex’s demise will strengthen the wico opportunity

In the increasingly animated world of wireless concessions, news that wifi provider Gowex has filed for bankruptcy comes as a shock to many. With the company offering services in 91 cities including New York, Bordeaux, Madrid, Santiago de Chile and Dublin, the move will clearly have major repercussions for city authorities around the world, not least in Edinburgh, Newcastle and Gateshead where wireless concession agreements with the Spanish-based company were announced earlier this year.

According to reporting from Reuters, Gowex filed for bankruptcy on Monday 14 July because it was in a state of “imminent insolvency” and faced a “financial standstill” after a high number of contracts were ended and new projects cancelled. This followed news reports the previous week that Former Chief Executive and Chairman Jenaro Garcia Martin had said he had misrepresented the financial accounts for at least the last four years. He is now facing the prospect of a prison sentence.

Gowex’s relatively recent entry to the UK market had been a boost to the sector bringing in a large international player with an installed wifi base, the experience to match and a strong smart city play. Gowex added to the pot of potential wico suppliers, no doubt helped sharpen competitive tendering negotiations and extended the range of business models on offer.

Now things look messy with Reuters reporting that the financial and management situation at the company remains unclear and we feel for the employees and customers caught up in developments through no fault or involvement of their own. Indeed it may prove to be a lengthy and cumbersome process for those councils currently contracted to Gowex to extricate themselves from wireless concessions, especially if they have to wait for a definitive release from Gowex itself.

On the positive side this sad news does lend weight to the argument that stand-alone free wifi is not the way forward for local authorities looking to bring better connectivity to their citizens. The business model for free wifi has always been problematic, as experienced by a number of local authorities in early deployments within the UK. Councils are increasingly taking note of the commercial world which treats wifi as one element of a wider strategy. The likes of O2 WiFi, The Cloud (BSkyB) and BT Wifi, use the technology to support existing customers from other lines of business, while food and retail outlets leverage wifi as a means to increase footfall and visitor dwell time.

Free wifi is not the be all and end all. It is the combination of wifi as one element alongside others that is the answer for local authorities looking to implement a comprehensive and longer term digital strategy. A wireless concession should be about using public authority assets for a range of benefits, whether developing small cell sites for mobile providers, ensuring mobile traffic off-load, developing new wifi sponsorship approaches and ‘big data’ usage, or connecting business parks and community centres. These elements feed off and support one another.

It can be argued the UK has got off lightly with Gowex pulling the plug before further concession wins and therefore further investment in time and infrastructure takes place. Gowex’s demise is essentially a wake-up call for local authorities and wico suppliers alike to develop new approaches and integrated business models to deliver a holistic digital strategy that adapts and develops over the long-term. With this thinking at its core, the wifi opportunity remains as strong as ever.

Point Topic will continue to track developments and announcements as wico coverage and apps develop. If you see anything you think is interesting, please let us know. Our Wireless Concessions report, co-produced with Regional Network Solutions, was published on 30 May 2014.

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  • Philip Virgo

    It can also be argued that only three UK councils (from more than thirty looking at wifi deals last year) were sufficiently greedy and ill-advised to find the Gowex offer more attractive than those from BT, O2 and others which offered more to consumers and local business with less intrusive (personal data and traffic analysis) conditions.

    • PointTopicMod

      We don’t really know what documentation and evidence was available and presented by Gowex. It might look greedy in hindsight but plenty of places around Europe were sucked in too.

      • Philip Virgo

        I received and forwarded a private warning from an advisor who was being ignored before one of the UK councils entered into its deal. That advisor had looked at the experience of other Gowex cities as well as the small print of the deal on offer. P.S. I am a fan of wireless concessions and included a link to your report in one of my revent blog entries
        but it is apparent that the practical experience is very uneven.

        • Oliver Johnson

          That’s true and a shame that those in the know weren’t credited with more insight. Still have some sympathy for the decision though, getting your errors laundered quite so publically wouldn’t be something that most of us would suffer well or happily I think.

        • PointTopicMod

          That’s true and a shame that those in the know weren’t credited with more insight. Still have some sympathy for the decision though, getting your errors laundered quite so publically wouldn’t be something that most of us would suffer well or happily I think.

          • Philip Virgo

            I disagree and have no sympathy. The current parlous state of public sector procurement, not just with regard to broadband, will not improve without more rigorous PUBLIC examination of why and how the decisions are taken. in the mid 1970s I was Public Corporations Sector Comptroller (including evaluating and agreeing bids involving special terms) in ICL. In those days the procurement process had to be open and the contracts entered into were public, no crap about “commercial in confidence” save during the adjudication process. Any special deals became public as soon as the contract was awarded and could rapidly backfire if they entailed a departure from the original invitation to tender that had not been made available to others. That had signifcant motivational implications on both sides. I have had several discussions with former public servants about how and why the changes in process came about. All have, however, concluded that the current processes are inherently “corrupt” (intellectually if not necessarily financially) and rarely lead to best value (however measured).

            That said, the previous processes also had serious flaws, particularly when it came to assessing the likely ability of the supplier to deliver the quality of service required over the life of the contract.

          • PointTopicMod

            I’m happy to admit my relative inexperience with contracts and procurement so perhaps I’m being too lenient.

            It seems counter intuitive that commercial sensitivity trumps our right to know where our cash is going and why and that’s certainly one of the top gripes we hear from various UK organisations when we’re discussing these areas. Doesn’t instill a sense of confidence.