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Wi-Fi – Money maker or not?


For the last five years or more it has been pretty much impossible to turn up at any broadband or mobile conference around the world without sitting through a panel session on one question: Can operators make money from Wi-Fi?

Views on Wi-Fi are pretty much split down the middle – similar to the Fiber-to-the-Home vs VDSL debate – with some operators insisting that Wi-Fi is a distraction not worth pursuing and others claiming it is an underutilized resource that could be a key tool to have on-board.

To be clear Wi-Fi has played a key role in the strategies of many fixed-broadband and mobile broadband players for a number of years – albeit for different reasons.

Fixed line giants such as NTT East and NTT West in Japan have offered their fixed broadband subscribers – principally their FTTH subscribers – Wi-Fi as an add-on to their subscriptions for a number of years now with subscribers paying an additional ¥295/month for unlimited access to 9,000 hot-spots across the country.

NTT East and NTT West are prohibited by law from bundling their fixed-broadband services alongside any mobile broadband services from sister company NTT DoCoMo so the addition of Wi-Fi to their packages does provide subscribers with an element of mobility.

Other fixed-broadband operators follow a similar model to NTT East and NTT West whilst many others simply opt to include Wi-Fi as a free value-added services to their subscribers – although many doing this impose daily download limits to prevent over-usage.

Fixed-line broadband players offering schemes such as these are essentially trying to add additional value to their subscribers, they are not necessarily trying to make money from the Wi-Fi service itself.

For the mobile operators out there who include Wi-Fi as part of their service package there is a very different motive at play – these operators are not just trying to add more value that will increase customer loyalty they are also trying to – as most folks will know by now – offload data from congested mobile networks.

The idea from the mobile operators is simple, if they can take traffic off of crowded mobile networks – which are using expensive and limited mobile spectrum – and put it onto Wi-Fi networks with far greater capacity and which use fixed-line backhaul then they are making sizeable cost savings.

The idea behind this is that freeing up bandwidth on their mobile networks by offloading to Wi-Fi means that they can accommodate more paying customers onto their mobile networks and avoid the cost of putting more expensive capacity into their mobile networks.

The Wi-Fi offload plan has been around for a number of years now and has some big operators amongst its most devoted fans whilst other operators – including big players like Australian giant Telstra – have taken Wi-Fi off the table.

The reason for the skepticism is simple, many operators feel that Wi-Fi is an unnecessary distraction from their core goal of providing seamless, high-quality mobile connectivity and worry that they cannot guaranteed quality of service over Wi-Fi in the same way they can on their mobile networks.

Moreover, some operators say that in the continuing absence of truly seamless handover between mobile and Wi-Fi networks – although operators like Telefonica are focusing a lot on developing such technology – that it is too difficult for many subscribers to manually find and connect to Wi-Fi hot-spots.

What’s more, some operators say that the benefits of Wi-Fi as an off-loading mechanism for mobile network traffic are over-stated with UK operator O2 commenting at the recent Wi-Fi World conference in London that its Wi-Fi traffic was largely incremental and not offloaded – although this is by no means a universal view.

However, despite the concerns from some operators there are plenty more operators who are willing to bet pretty big that they can profit from Wi-Fi – although there are a number of different models taking shape in the market.

As most things do in the telecom market these days the choice for operators is between under-taking a go-it-alone strategy with Wi-Fi deployment or swallowing their pride and partnering with a specialist Wi-Fi service provider such as Fon, Boingo or iPass.

In particular, many operators are partnering with these Wi-Fi players to offer Wi-Fi roaming services to their subscribers when they travel overseas – in an effort to help their subscribers keep their devices active when travelling without experiencing bill-shock.

Taking this approach a step further German giant Deutsche Telekom has launched its WLAN TO GO venture – in partnership with fast growing Fon – in which users who share their home Wi-Fi hot-spots with other users are granted access to millions of other hot-spots across the world.

The Deutsche Telekom – Fon model is a great example of how out of the box thinking from market newcomers allied to the market power of established players can create a potentially compelling subscriber proposition.

What it also does is remind us that although Wi-Fi may come with some significant baggage – some of which can’t easily be unloaded – that it can play a crucial role in the value chain for operators.

So, whilst Wi-Fi as a standalone product might not be a huge earner for operators it can play a critical role in providing added value for subscribers and providing a point of difference for operators – and that’s not a bad starting point at all.

For all blogs posts by Tony Brown, visit Tony’s community profile.

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