Microsoft's Municipal Wi-Fi Push

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Indeed, many wireless service providers could be interested in Microsoft's tailored local content, such as maps, restaurant reviews, local weather, and business listings. Eventually, the company might use its mapping technology to offer innovative new services such as locate-me: When you fire up your laptop or Wi-Fi phone, the device will know exactly where you are by your hot-spot location. Then, MSN will provide you with directions to the nearest Starbucks or back to your hotel—or allow you to place a Web call there, right from your laptop. All the while, Microsoft's adCenter technology will serve up contextual ads: If you are looking for a restaurant in Windows Live Search, adCenter might suggest a local burger joint to check out.

How to Sell Free?

To be sure, that vision won't be easy for Microsoft or its rivals to fulfill. Many users like the idea of free Wi-Fi access, but how to make free access pay for itself remains unclear. Different ideas abound: Wi-Fi community access provider FON, whose users share Wi-Fi access with each other for free, is trying to make ends meet by selling wireless access points and charging monthly access fees for nonsharers. FON's investor partners include Google and Web-calling pioneer Skype, a property of eBay (EBAY).

Free, ad-based Wi-Fi networks are another option, also unproven. Research firm JupiterKagan has found that only 27% of free Wi-Fi users would be willing to see ads. "Advertising alone does not pay the bills," says Cole Reinwand, vice-president of product strategy and marketing at EarthLink, which will provide, together with Google, fee-based and ad-free services.

That's not how MetroFi sees it. It's sign-up rates for the free service are "an order of magnitude higher" than for fee-based Wi-Fi, reports Chuck Haas, MetroFi's CEO. "Obviously, free sells."

Microsoft is intent on making its Wi-Fi entry a success. It's a market the company has pursued relentlessly for years. Microsoft even tried to sell access points a few years ago, but Cisco (CSCO) and others came to dominate the market, and Microsoft exited the hardware business. But with its online-search market share sinking and its new music player Zune to support, Gates & Co. need to get it right this time.

Kharif is a reporter for BusinessWeek Online in Portland, Ore.