Where is Mobile Offload to Carrier Wi-Fi?
Over the last few years, there has been much discussion about major mobile network operators (MNOs) using Carrier Wi-Fi as a tool in their arsenal to provide broadband capacity to their customers. And yet we have seen very few actual agreements between Wi-Fi service providers and MNOs to augment the operator’s current capacity with third party Wi-Fi capacity. The need is there for additional wireless broadband capacity, and the need will continue to intensify. There are a number of operators that are building extensive Wi-Fi networks in the US, in part in anticipation that the MNOs will buy some of their capacity. But what will need to happen for Mobile Data Offload to Carrier Wi-Fi to actually take-off in the market, both as a revenue opportunity for Wi-Fi providers and as a network capacity tool that MNOs will take to heart as part of their capacity arsenal?
Operators are faced with the challenge of having to continuously boost capacity of their 4G networks to keep up with the ever increasing demands of their wireless broadband customers. Whether you look at the Cisco VIN report, look at data of traffic increases, or just watch your kids use their iPhones and iPads, you must agree that the growth will only continue. In order to deal with this challenge, operators can get more spectrum, apply technology to their network, or using other modes of capacity. Spectrum is in scarce supply for most operators, or can be very expensive when it is available. Verizon Wireless had to spend $500M at the end of last year to add capacity and bolster their LTE network in urban areas with small cells. According to our Wireless 20/20 analysis, the issue is that this year Verizon Wireless will need to invest another $800M dollars, and next year they will invest $1.3B in a never ending race to try and keep up with escalating demand. EE in the UK might be an example for many operators that have recently deployed 4G networks and are not yet seeing acute capacity constraints. But operators should be warned. If you are not seeing the capacity problems that Verizon is seeing, you will be very soon.
In parallel, many operators are evaluating at all kinds of different schemes to understand how to monetize their Wi-Fi networks. Cable companies such as Comcast, Cablevision and Time Warner have deployed millions of public Wi-Fi access points in homes, shopping centers, retail stores and commuter stations that are available to their broadband customers to access when away from their homes and offices. Much effort is being made to determine how these operators can generate revenue from Wi-Fi services that should be offered free. Many different schemes are being developed based on revenue from advertising, social media, big data analytics and managed services for example. Wireless 20/20 is working with more than a dozen operator clients to develop WiFi deployment plans, and most implementing a kind of “wedding cake” revenue scheme. But in almost all cases, many operators are missing the elephant in the room. The revenue potential of all of these other revenue schemes pales in comparison to the revenue potential to sell capacity to operators through Wi-Fi offload. Whether these agreements are direct deals negotiated between Wi-Fi providers and MNOs, or selling capacity on an as need basis through a WI-Fi marketplace such as BandwidthX, our Wireless 20/20 analysis demonstrates that Wi-Fi Offload is a multi-billion dollar opportunity.
Comcast cliams that its Xfinity Wi-Fi network will reach 8 million hotspots by the end of 2014, covering 19 of the country’s 30 largest cities with fast and reliable wireless Internet access. So if the Wi-Fi assets are available nearly everywhere, and there is a need on the operator side, when will Carrier WiFi become a reality? Our Wireless 20/20 analysis shows that there can be significant savings for MNOs if they can embrace Wi-Fi Offload. If instead of investing $500M in small cells, Verizon could invest only $250M and buy $100M of WiFi capacity at the time and place when their LTE network is overloaded. It appears that with the scarcity of spectrum and the inability of operators to “technology” their way out of the data traffic tsunami, alternative sources of capacity, like WiFi and carrier neutral small cells or in-building solutions, may be the best way to add significant capacity. MNOs will begin to seriously look at these alternatives when their capacity problems become more acute. It will happen when operators really feel the pain. This will be great news both for the MNOs and Wi-Fi operators alike.
This article was contributed to 4G Trends by Randall Schwartz, Senior Consultant of Wireless 20/20, who will be co-chairing sessions on Carrier Wi-Fi in both the Tower & Small Cell Summit and Track 1 of 4G World 2014, co-located with CTIA Super-Mobility Week in Las Vegas.
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