The Business Case Behind Boston Logan Airport Making Wireless Internet Free

(MoneyWatch)  Yesterday, the folks at Boston Logan Airport decided that they would stop charging passengers for using wireless internet at the airport. This will be particularly amusing to those who remember Logan's efforts to kill free wifi a few years back, so why the change of heart? They think they can make up for lower costs with revenues from different sources.

Free wifi is always at the top of passenger wishlists at airports, but it doesn't always make sense. See, airlines demand low costs from airports, so airports have to save money wherever they can. Providing free wireless access costs money, so most airports have outsourced the network to a third party and they share in the revenues.

That is why, in my opinion, we saw Logan fight so hard against Continental's (CAL) efforts to offer free wifi in its Presidents Club lounge in 2005. Sure, Logan argued that it could somehow interfere with communications equipment, but I don't buy that for a second. It's all about the revenue, which had been estimated at over $1 million a year about a year before the fight took place.

So what caused this change of heart? Well, a couple of things. First of all, they say they've paid off the costs of their original investment.

A robust, secure WiFi system was installed throughout the airport six years ago at a cost of several million dollars. The charge for the service allowed that investment to be recovered. For the next two years, Massport will continue its partnership with AWG, and the free WiFi will be supported by advertising and sponsorship programs.

Now that they've paid that off, they need less revenue to cover the costs. But I think that's somewhat of a red herring. I think the real reason they're doing this is because they think the ad/sponsor model can work for them. Thanks, Google (GOOG).

During the holiday season this year, Google sponsored free wifi at a bunch of airports around the US. In Boston, they noticed that when the wifi was free, user numbers increased six times over. They now think they can make up much of the revenue lost from customers by having sponsors and ads on the service reaching a much greater number of users.

If they can pull it off, then passengers may have to sit through an ad before logging on, but it will still be a better customer experience than having to pay. Of course, if they can't recover all the revenue they've lost, then that's not good for the airport's cost base. Personally, I hope they're right. I like free wifi.