Worldroom connects

Worldroom Connect - a new broadband internet service provider for hotel rooms - attracts investors, customers and me.

I have seen the future and it is broadband. In my hotel room in Singapore last week, I used the Worldroom Connect service run by I-Quest and quite frankly it was a revelation. Worldroom Connect is a system of broadband internet access for hotel rooms. You simply plug your laptop into the desktop box provided by Worldroom and away you go û hassle-free internet access û or plug and play as the company likes to call it.

The S$20 ($11.53) charge for 24 hours of continuous access simply appears on your hotel bill. There is no need to change the settings of your computer nor to establish cumbersome international dial-up accounts. Unlike most technology enhancements, it worked as it should and it did make life easier. Many of the stories you might have read on this site last week actually travelled through the Worldroom system.

This panegyric comes a day after I-Quest made two announcements about its corporate future: firstly it has secured its latest round of venture capital funding and secondly it has signed up master contracts with two leading hotel groups. As with all things internet, these two sides of the business û operation and ownership û are intertwined through the presence of strategic investors.

The HK$90 million ($11.6 million) financing has come from a group of private equity specialists, comprising GE Tech, Global Sources, GE Capital Equity Investments and Lazard Asia Investment. It is unclear what the terms of this financing are as I-Quest has filed for a July listing on Hong Kong's Growth Enterprise Market, and as such it is in a quiet period.

The two new hotel groups it has signed up are the Thistle Hotel Group and Great Eagle Hotels International. Together these contracts as well as other deals recently signed with individual hotels mean that Worldroom Connect desktop boxes sit in over 57,000 rooms in 170 hotels around the world.

What is telling is that GE Tech û one of the four latest investors in I-Quest û is the wholly owned venture capital arm of Great Eagle Hotels. This strategy of selling ownership in a company to a key customer is nothing new. It allows I-Quest to secure lucrative users of its service while giving the hotel equity ownership of the revenue coming from its rooms. This is why Global Sources has also invested in the company. I-Quest is looking to develop an inter-hotel B2B system and will use Global Sources' existing B2B platform.

Defensive play

Tying these two potential groups of competitors û the hotels and a B2B company û into equity ownership could look like a defensive strategy. Hotels traditionally make a vast amount of money from the telephone rates they charge their guests. These include vastly inflated IDD charges as well as supplementary charges for local calls.

Hotels are realizing that they could make a similar killing from selling broadband access. Luckily, I-Quest has taken first-mover advantage by going in and wiring up their hotel rooms for them and giving them a share of the revenue. But when those contracts expire there is little to stop the hotels from just replicating the Worldroom system themselves û unless they own part of the company as Great Eagle does.

I-Quest claims that the barriers to entry are quite high for the hotels, especially as Worldroom seeks to extrapolate its services away from just pipes and move into content and e-commerce applications. I hope that the barriers to exit are similarly high and that the hotels are not tempted to take full ownership of their guests' internet time. They already make enough money out of our telephone time after all.

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