Tuesday, January 21, 2014

Qualcomm Invests $14 Million in Wi-Fi Sharing Company Fon

There are several interesting conclusions one might draw about a $14 million investment Qualcomm has made in Fon, the Spanish Wi-Fi sharing company.

At a practical level, the investment will allow Fon to create new Wi-Fi routers--based on Qualcomm chips--that automatically will recognize and authenticate Facebook friends.

When a Fonista's Facebook friend enters a local Fon Wi-Fi zone, the router automatically will authenticate in the background. If authenticated, those Facebook friends will get access to the Fonista's Wi-Fi network without needing to remember any new passwords. 

Fig8 - Mobile VNI 2013

Since the investment embeds Qualcomm technology in Fon routers, Qualcomm's immediate interest is obvious. Fon gains an easier way to authenticate new users, increased engagement and stickiness of its service. 

There are other implications, however. What can one make of a product (mobile Internet access) that its seller (mobile service provider) prefers its own customers essentially not use too much?

For that is precisely what the massive "Wi-Fi offload" trend represents. By some conservative estimates, about 33 percent of mobile Internet traffic already is offloaded to Wi-Fi. By 2014, says Cisco, about 47 percent of total mobile Internet consumption will use Wi-Fi, not the mobile carrier network.  

Other estimates are even more suggestive, finding that as much as 68 percent of all Android device Internet access occurs using Wi-Fi, across North America, Asia and Africa.

VNI Forecast Comparison 7

The point: encouragement of Wi-Fi offload by mobile operators illustrates a huge potential business model problem for mobile ISPs. They sell a product using a retail model that is dangerous, if in fact customers actually use the product. 

That is why mobile service providers encourage users to shift to Wi-Fi whenever possible. 

One might argue the huge amount of Wi-Fi offload illustrates the key role fixed networks now play in mobile Internet access and show why mobile Internet access demand requires additional spectrum.

Most important of all, Wi-Fi offload shows a dangerous vulnerability. It is not so clear that the mobile ISP business model actually is terribly well suited to dramatically-higher demand. If customers really start consuming vastly more data, the networks will crash, end user experience will deteriorate and profit margins will evaporate. 

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