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[qi:045] Meraki Networks, a Mountain View, Calif.-based mesh networking gear maker, which is leading the unique ComMuniFi model of providing wireless broadband access in communities, neighborhoods and small cities, has quietly launched a new three-tier business model that may boost the revenues, but it also might alienate some of its existing customer base. The problem: 2x increase in price of some of its gear from $50 to $150 per wireless router.
As part of the new plan has Meraki now will offer gear and services tailored to three market segments – Standard (for community and individuals wanting to set up free networks), Pro and Carriers. As part of this change, the company is going to increase the price of its gear by as much as 200 percent, a move that impacts its customers in the Pro-tier.
The Pro-tier includes property owners and small network and hot-spot operators, who are currently using Meraki to offer for-pay wireless broadband. The price increase has some of their customers, especially those who are currently operating Meraki-based networks, up in arms. They will now have to pay $150 per Meraki router versus $50 they paid previously.
Many of them were lured by the low cost of Meraki gear, in addition to the superlative technology, and the company runs the risk of alienating some of those customers. “It is no longer the cost effective system it was credited to be,” wrote one poster on the Meraki forums, while another lamented, “[What] a shame ….. drawn in by a cost effective method just to be slapped in the face by an uncaring company that used us as pawns.”
“This is part of the business evolution of the company,” says Sanjit Biswas, co-founder and CEO of the company that has raised venture capital backing from Google (GOOG) and Sequoia Capital. This is a dilemma that is faced by most projects that have roots in open source but eventually have to evolve into a for-profit business.
Biswas justified the price increase because it comes with other benefits such as guaranteed support. The company will also start selling its gear through the channel in addition to direct sales, and needed to boost prices. I am not sure about the magnitude of the price increase.
Biswas explained that company has envisaged lot of interest from Internet Service Providers and carriers, especially those outside of the US, and that is why the company is introducing a “carrier edition” of its products. The price for devices being used to power free community networks remains unchanged at $50, though the company is going to include advertising on the landing pages for these networks.
The advertising move shouldn’t come as a surprise. Last month, Sonic.net, a Bay Area ISP had started offering wireless broadband using Meraki gear, and that offering included advertising as part of the package. Of course, given Google’s investment in the company, it isn’t hard to connect the dots.
“This is still an experiment, and if it works, then we can see advertising revenues subsidizing the hardware costs,” Biswas said. There are plans to share advertising revenues with network operators as well.
Related: Our previous coverage of Meraki.