Is Wi-Fi a ¨Power Shift¨ in Telecommunications?

There has been a long-simmering debate about whether public Wi-Fi hotspots can become a competitor to mobile networks. As with many such debates, actual practice suggests the choice is false.

These days, mobile operators consider Wi-Fi access an integral part of the overall access resources picture. And even mobile operators that might like to base all their access operations on Wi-Fi acknowledge that a combination works best.

EE has argued LTE users use Wi-Fi less. But those users do not stop using Wi-Fi. Still, the questions might grow as the footprint offered by public Wi-Fi hotspots grows.

Maravedis Rethink estimates there will be 47.7 million public Wi-Fi hotspots deployed worldwide by the end of 2014.

By 2018, the number of global hotspots will grow to over 340 million, Maravedis Rethink estimates.

France, the United States and China will have the biggest public Wi-Fi footprints. Already, China has five times more commercial Wi-Fi hotspots than any other country.

And many of those locations are networked so that roaming is possible. Some 22.7 million Wi-Fi hotspots are enabled for roaming between different provider networks in 2014, and will grow to 289.3 million in 2018.

Some questions might remain about how prevalent ¨homespot” networks will become. Homespots leverage private end user Wi-Fi locations to create public Wi-Fi hotspots.

There are perhaps 40 million such homespots in operation in 2014, growing to over 325 million in 2018. The big question is potential demand for homespot connections in suburban and less-dense areas.

Executives at iPass argue (perhaps understandably) that Wi-Fi is changing the power structures of the telecommunications industry.

Perhaps 50 percent of all commercial hotspots are controlled by brands whose core business isn't telecommunications, argues Evan Kaplan, iPass CEO. ¨We are witnessing a power shift from traditional telcos to business owners, such as cafes, hoteliers and retailers who are all getting in on the Wi-Fi game.¨

There is plenty of room for debate about the future role of Wi-Fi as an access medium, and in most cases, the debate will center on how much each network--mobile and Wi-Fi) is used, where, when, by whom, for what devices and application scenarios, and what the business models might be.

But it might already be clear that pricing of mobile Internet access plays a role.

In France, for example, despite high levels of smartphone ownership (60 percent, according to a recent survey by Deloitte, up from about 53 percent in 2013 ), only 11 percent of respondents had a 4G phone.

Many respondents apparently were put off by the high costs of both 4G handsets and data plans, although there are indications this is a misperception, as perhaps 81 percent also report they pay no additional fees for 4G access.

On the other hand, Wi-Fi hotspot availability might have something to do with lagging interest, as France has the most public hotspots of any nation, according to iPass. "Most of the devices we use are Wi-Fi only and even on the most advanced 4G handsets, 78 percent of data goes over Wi-Fi,” said Kaplan.

LTE service pricing tends to reflect a desire by most operators to price Long Term Evolution as a premium service, a tack that generally has not been taken by U.S. mobile operators, which might explain high adoption rates in the U.S. market.

To be sure, as mobile revenue shifts from voice to Internet access, it is understandable that service providers would look to price at a premium.

Mobile data has emerged as the single most important driver of telecom revenue growth, according to Pyramid Research, which forecasts that mobile data revenue will reach $633 billion globally in 2018, increasing from 40 percent of overall mobile revenue in 2013 to 52 percent in 2018.

Asia-Pacific, the world's most populous region, which accounted for nearly 38 percent of the world's mobile data revenue in 2013, should lead the growth.

Pyramid Research expects the global 4G subscription base to grow at a 52-percent compound annual growth rate, from 211 million users in 2013 to 1,750 million users in 2018.

But that growth will still be conditioned by device costs and retail service pricing.

And then there is Wi-Fi. It remains unclear how much reliance users will continue to place on Wi-Fi access even when they have Long Term Evolution access.

WiFi is the connectivity of choice among LTE subscribers. According to a study by Mobidia Technology, a provider of mobile analytics, Wi-Fi accounted for an enormous 75 percent to 90 percent of all mobile data consumed in “leading LTE markets,”according to a study by Mobidia.

Is there a danger that Wi-Fi cannibalizes some mobile data revenue? Probably. But is Wi-Fi also necessary to keep customers happy by allowing them to use lots of data without stressing trhe mobile network? That also likely is necessary.

So pricing will play a huge role as consumers make decisions about which networks to use, and whether LTE makes good sense. Price LTE too high, and adoption will fall; price it too low and the mobile networks could crash.
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