WiFi Hotspots – The second coming

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Long long ago, in a far far land …… during the hey days of the first wave of metro WiFi, I had the opportunity to be part of an initiative by a large operator (lets keep the name and geography confidential) to evaluate the technical and business viability of a metro WiFi network. The key value proposition they were gunning for was to offer a WiFi first, cellular second voice and data service. The hypothesis was that by combining a MVNO deal from a cellular operator (a reluctant partner at best) with a WiFi network hung off utility poles where they had right of way and back hauled and powered over their HFC network hung of the same utility poles, they could offer a service better (and more competitive) than any other standard MVNO. The key finding in that exercise was that achieving ubiquitous coverage by hanging 11n access at the height of clutter in suburbia makes for way too many access points per square mile (key metric), to offer any kind of contiguous coverage value proposition. Note that data plans and smartphones were significantly less popular at that time in that geo, than they are today, so the offload of voice service to WiFi (and its corresponding MVNO cost benefits), became a key business driver. In that process the service would have become directly cannibalistic to the crown jewels of the cellular MVNO partner (i.e. cellular voice ARPU), as the WiFi first customers would need smaller cellular only minute plans (not many in those days had all you can eat flat rate plans). Given the antagonistic nature of the business model the MVNO partner had less of a motivation to make this work… as it happens, contiguous coverage being difficult to achieve, doing standards based cross access handoff required a decent level of support and interop with the cellular partner (doing the handoff by anchoring OTT was sub-optimal in scale and performance in the voice case with the state of the art at that time). Needless to say the approach didn’t fly at that point and the general approach at the wired operator eventually morphed to just offering WiFi hotspots to preferred tier customers in the places where people congregate viz train stations, malls, airports, strip malls etc.

So what is different come 2015 when we hear that several WiFi first initiatives are underway.

The world looks very different today form the perspective of smartphone and data plan penetration as well as WiFi radio presence on the smartphones.

Data consumption continues to implode due to trends such as media consumption anytime anywhere. This implies that data offload by itself is a big win and cellular operators will play ball if data offload doesn’t equate to arpu offload. They need to be capacity constrained and the cost equation of offload has to favor the cost structure offered by the offload partner over rolling out more capacity using small cells (thats a big if, but I tend to believe that large hot spot/metro WiFi networks already built on sunk costs as a competitive tool by wired network operators, can offer the right price points).

The cellular competitive landscape has changed a lot. Developed markets are way more saturated with cellular penetration today then they were several years ago and that means the #3 and #4 players are willing to go to bed with someone they may have earlier been wary of in less competitive times….anything to gain market share from the #1 and #2 players in a saturated market.

Given the trends in IoT figuring out how to meter/reconcile, and offer/extract SLAs on offloaded connectivity is something the industry is in the process of firing out anyway.

Sophistication and ability to monetize eyeballs with addressable or targeted advertising has gone up significantly over the years, making it possible for the offload partner to generate additional revenue off a fresh set of eyeballs walking “through their backyard” so to speak.

Ultimately the business driver for both parties (and not the technical challenges, which have all been solvable for a while) is what determines the success this time as well. Given some of the business model and pricing innovations I am seeing in cellular data pricing, I suspect the industry is a lot better prepared to push those boundaries to find a win-win model this time around.

Given the above landscape differences, my bet is on the second coming of outdoor/public/hotspot WiFi, faring much better. It will be interesting to actively follow how this pans out for the eco-system of players who collaborate/compete in this playing field as well as for consumers who will be the ultimate winners.

N.B. – These are my personal observations as an engaged industry observer.

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