Wi-Fi : Chasing the Trillion Dollar Pie

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I just left the Wi-Fi Innovation Summit in San Francisco. Congrats to Claus and Hassen for putting together another great show. We heard speaker’s from the operator and vendor communities, and I wanted to share some of the highlights and my impressions.

Still a Modest piece of the Pie

Wi-Fi continues to generate a lot of buzz thanks to recent, high-profile launches such as Google Fi, the cable operators’ hotspot networks and T-Mobile’s Wi-Fi calling service. Even so, Wi-Fi still gets a small slice of the mobile broadband pie. The wireless industry has annual revenue of about $3.3 trillion, and while an exact figure regarding Wi-Fi service revenues is not available, it is estimated that Wi-Fi piece is “only” in the tens of billions. On the other hand, Wi-Fi is responsible for the majority of mobile data traffic (the figures vary but are north of 60 percent) as smartphone users spent 80 percent of their active time within the premises of the home, school or the office.

So the Wi-Fi industry needs to start disrupting the market and do it quickly. Perhaps it needs to disrupt itself first. This is what iPass’s new CEO called the need for “jail breaking” during his presentation. iPass is a great example of the Wi-Fi cash paradox. It is the largest Wi-Fi aggregator, with almost 18 million hotspots, yet it struggles to monetize its footprint in a way that reflects its market share.

Maybe the reason is that even with 18 million hotspots, iPass estimated that it still handles only 2 percent of public Wi-Fi traffic. Number of sessions are a key measure to understand the business potential of any given network. By some estimates, a hotel group such as Accor handles more sessions than some of the leading Wi-Fi aggregators.

Mobile operators love Wi-Fi because it’s cheaper than cellular for delivering service, especially when their customers are roaming. But so far, the Wi-Fi ecosystem hasn’t capitalized on that opportunity to the extent it can. The good news for iPass and other ecosystem members is that industry initiatives such as Passpoint will make it easier for mobile operators and their customers to use hotspots.

Aggregators and hotspot owners also realize they need to a lot of work on their own. For example, iPass is using flat-rate, unlimited-usage roaming plans to encourage usage by eliminating the fear of big bills. But predictable pricing won’t drive a lot more revenue unless the user experience becomes consistently better. According to Devicescape, 91 percent of potential public Wi-Fi connections go unused, and 83% of the time, it’s because consumers say it’s too complex to connect. So quality of experience is as important as price.

 

Is Wi-Fi complementary or disruptive?

It remains to be seen if new hotspot operators such as Comcast or Cablevision adopt the disruptor strategy. It’s expensive and time-consuming to build or aggregate a Wi-Fi footprint big enough that many consumers and business users will make it their first choice. Google’s new Fi MVNO hedges its bet on Wi-Fi: Customers get Sprint and T-Mobile as fallback, but Google will refund customers for unused cellular data to encourage customers to use Wi-Fi when it’s available. Google hopes Fi’s simple pricing will help convert customers from Verizon and AT&T.

 

Wi-Fi still a customer-retention tool?

To Comcast, Time Warner Cable and other MSOs, Wi-Fi is clearly a customer-retention tool. This is consistent with our research findings from the Carrier Wi-Fi: State of the Market 2014 report.

TWC said it has 90,000 hotspots (400,000 when including partners) and will continue to invest in lighting up more as it is able to generate an ROI on reduced churn. However, it is facing technological challenges with the subscriber registration process and hurdles such as customer awareness about hotspots outside the home.

Forty percent of Wi-Fi users are now using secure Passpoint 2.0 (launched in May 2014) Time Warner network. The uptake was made possible by mobile apps pushing the service mainly to new customers in the network. TWC launched Passpoint roaming with Boingo in December 2014. Most public Wi-Fi deployments follow mobile density, but it remains unclear how venue owners will welcome the opportunity to work with operators. Many will want to control their patrons’ experiences and data.

Will cable operators start offering a mobile play beyond their natural footprint? That possibility didn’t get much discussion at the summit. Technology providers such as Benu Networks are promising to help MSOs unleash new revenue opportunities with more agile network architecture. Don’t miss our upcoming webinar “Carrier grade Wi-Fi is not a utility with Benu Networks’ on April 28, 2015 at 11 AM EDT.

T-Mobile sees Wi-Fi calling as customer-retention tool. By calling itself an “uncarrier,” has T-Mobile made “carrier” a negative word? With T-Mobile customers making 7.6 million Wi-Fi calls per day, the operator sees the service having a positive impact on customer retention.

Unified voice

LTE unlicensed (now known as LTE Licensed Assisted Access), smart cities, the Internet of moving things and potential monetization strategies were other important topics discussed in the conference. At the moment, the consensus is that each carrier or venue will mix up its own set of monetization techniques, which will include advertising, sponsored content, customer retention and upselling everything possible.

Challenges ahead include a proper and unified response to LTE-LAA, the proliferation of unregulated drones, Wi-Fi jammers and potential interference from Globalstar’s satellite service. Between the Wi-Fi Alliance, the WBA and the various groups with conflicting interests, the Wi-Fi community lacks a unified voice as regulatory battles get underway.

Wi-Fi networks remain poorly managed and inconsistent. If Wi-Fi is to grab a bigger piece of the trillion dollar mobile pie, it must continue to harmonize and improve the customer experience and tackle the many challenges ahead.

On a personal note, I had the honor and pleasure to share a few words with Dr. Michael Marcus, who was part of the original ISM team at the FCC 30 years ago. He shared some fascinating insights about the history of Wi-Fi.