Municipal plans to provide Prague residents with free wireless access have stalled, but a fast-growing Irish company is coming to the city to satisfy this demand, offering a simple system to help cafés and hotels provide free, ad-supported broadband wireless service to their customers. The first hotspot will open Jan. 20 at Café Vyšehrad, with the company planning to install "several hundred" more hotspots this year.

The company, Anacapa, operates its wireless system under the name Free-HotSpot.com and currently offers free wireless access at 620 locations in 14 European countries, most launched last year. Partner businesses cover the cost of DSL access to the Internet, and in return receive increased customer loyalty and a cut of advertising revenue, ostensibly enough to have the DSL access pay for itself.

The price for customers? Watching a 30-second ad for every hour of use.

"They're showing how this dream, free hotspots for everybody, can be fulfilled," said Michael Gebert, head of the WBI Awards, the independent awards for Wi-Fi technology. "So many on that road before have died, changed business models or filed for bankruptcy."

What has made Free HotSpot successful is a rigorously conceived business model, said Joe Brunoli, vice president of the company. Its founder noticed two trends: a coming critical mass of wireless users and the falling price of off-the-shelf routers, which broadcast wireless signals.

Farming out technical support and setup to contractors in each country, including the Czech IT firm MIPECOM, Free HotSpot provides subscribing businesses with identical free routers loaded with custom software. Contractors install the router (and DSL line, if necessary) for a fee of 4,000 Kč ($190).

Once the router is online, the connection is shared in a range of 200 meters (660 feet). Users watch a 30-second rich-media advertisement, called an "ultramercial" — featuring, say, a movie trailer for Denzel Washington's Deja Vu — and then are given unlimited access for an hour; watch another 30-second commercial, gain another hour.

What's notable about the system is its near unlimited scalability, as each hotspot's ads are coordinated by one set of backend servers in California.

"This means we can target ads down to a specific hotspot," said Brunoli. "For example, an advertiser can say, 'I want this ad to run in the French-speaking parts of Europe, or in all the restaurants in Prague, or at only one specific location.' "

For targeting, advertisers pay a premium of 20 percent to 30 percent on the base rate of 15 euro cents (20 U.S. cents/4 Kč) per view. Early advertisers have included Sony, Ford and Vonage. Free HotSpot retains 80 percent of this ad revenue, dividing the remainder equally between the hotspot's owner and its local contractor.

Businesses should not expect to run a profit from this 10 percent cut, but can expect the revenue to cover the cost of the DSL line and initial installation fee, Brunoli said.

The real benefit is the allure free wireless adds to a business. Surveys by the company in Paris found that 96 percent of the users on its network would return to the same location to use the free Wi-Fi.

Miloslav Kluc, owner of Café Vyšehrad, was sold on the boost wireless could give his business, perched as it is near Prague Congress Center and its conventioneers.

"We want to provide our guests with the best services," he said. "Wireless Internet access could bring in more customers and increase our sales. "

International recognition

Bars and restaurants that already provide wireless could gain from joining, said Tomáš Moravec, director of MIPECOM's hotspot program. Free HotSpot's site, which it promotes as a social portal, provides listings of its hotspots throughout Europe.

"Lots of foreigners know about this project from other countries," he said. "They've asked where to find free hotspot points."

Also providing hotspots are telecoms. T-Mobile operates 52 paid hotspots in Prague, charging 150 Kč for one hour, or 500 Kč for one day. Telefónica O2 charges a monthly fee of 150 Kč for its hotspots, which includes 10 hours of access, with each additional hour costing 30 Kč.

Studies have found that primarily businesspeople use the paid hotspots, with Jupiter Media concluding that 60 percent of Internet users flat out refuse to pay for wireless access.

Brunoli said that none of his company's partners have complained about customers exploiting the free Internet, dismissing images of students lingering in a café all day on a single cup of joe — the average access time is 48 minutes. And, since the service is free, customers are more likely to spend that money on snacks and coffee, the company says.

Free HotSpot has faced some competition from municipal wireless projects, where Internet access is provided as a public utility.

Prague is continuing construction on its citywide Wi-Fi network, which will primarily serve as a resource for government services and tourism information; blanket coverage is expected by 2008.

The city dropped plans to offer free public Internet access after the telecoms filed a complaint with the European Commission.

The two sides are now in talks on establishing a paid system.