Help for LTE: Wi-Fi benefits and challenges for mobile operators

Article by Chris Nicoll, Principal Analyst, Analysys Mason

(PresseBox) ( London, )
Nearly 70% of fixed and mobile operators we surveyed have deployed Wi-Fi to meet the data consumption and service requirements of their customers, yet most operators are finding it difficult to create a compelling business case for Wi-Fi.[1] However, as the role for Wi-Fi in a mobile network becomes clearer, the monetisation options are becoming clearer as well according to Analysys Mason's recently published report on The case for Wi-Fi: benefits and challenges for mobile operators in an LTE world'.

Wi-Fi is frequently seen to be competing with cellular services, but it is playing an increasingly important role in mobile network operators' (MNOs') approaches to traffic management, improving customer satisfaction and controlling churn - and particularly for MNOs that also offer fixed line and content services the ability to extend premium home services to on-the-go users. Monetising Wi-Fi services has been difficult, but this situation will change.

Wi-Fi plays four key roles for mobile operators

Contrary to concerns that many MNOs have about Wi-Fi cannibalising cellular traffic, we have seen few specific examples or cases where this is extensively happening. Instead, our conversations with MNOs around the world suggest that Wi-Fi plays four key roles in MNO business strategy.

Capacity and coverage extension. Wi-Fi adds network capacity and coverage to macro cellular networks where mobile spectrum may be constrained. Wi-Fi can also fill in for 'notspots' and we expect it to be used with most small-cell deployments.
Supplementary wireless data service for end users. Wi-Fi can also be used to augment cellular data caps, offering a low-cost/no-cost wireless service to users and connectivity to devices (such as tablets) that are not connected to the cellular network.
Roaming support for out-of-area and international services. Cellular data tariffs are usually high enough to encourage users to find suitable Wi-Fi services for non-critical data communication needs.
Service and brand differentiation extending home-based premium services to users on the go. MNO-branded Wi-Fi hotspots serve as a reminder for subscribers (and non-subscribers).

Monetisation continues to be a challenge

Today's Wi-Fi business cases are relatively basic. Few operators that took part in our survey consider Wi-Fi as a significant revenue generator; and those that have already deployed the technology indicated that it is revenue-neutral. However, most MNOs view Wi-Fi as critical to customer satisfaction and retention.

Monetisation options are largely limited to direct user charging, location-based services or charging the venue operator, sponsored content and retail partnering with stores such as Starbucks. We expect future monetisation options to include selling insight about Wi-Fi users' behaviour and usage as well as direct marketing activities such as couponing and tie-ins to loyalty programmes by retailers. New Wi-Fi solutions from vendors such as Cisco Systems and Ruckus Wireless provide extensive data analytics that can enhance location-based services and offer additional revenue-generating opportunities for marketing, advertising and loyalty programmes. However, both MNOs and retailers will need to create new business systems in order to capitalise upon the business opportunities that are offered by the insights. In particular, MNOs will be challenged to invest in systems to enable Wi-Fi analytics data to be combined with a variety of other sources including the MNO's cellular network data and the retailers' data in order to generate useful marketing insights.

Wi-Fi clearly provides key benefits for most MNOs. Monetisation of Wi-Fi by the carriers is in the early stages of development, but Passpoint 2.0 and Phase 2 of the Next Generation Hotspot specifications will be launched in 2013 and both will bring Wi-Fi closer to cellular standards for security, access control and performance management. Monetisation opportunities will improve with these new developments and we expect to see better monetisation of Wi-Fi across MNO and retail markets by 2015.

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[1] For more information, see Analysys Mason/Amdocs White Paper Service provider Wi-Fi: a unique global perspective on control and monetization strategies, January 2013.
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