Having long been regarded as the ugly-duckling of wireless technology, Wi-Fi is fast evolving into a necessary strategic tool for mobile operators.
The simple story of Wi-Fi as a way to carry low-priority cellular data traffic is being rewritten as operators look to use the technology to drive and enhance service differentiation.
A recent study conducted by Analysys Mason, on behalf of Amdocs, placed service differentiation ahead of data offloading as the leading reason why operators are adopting Wi-Fi.
However, while cellular data offload is relatively easy to understand and quantify, using Wi-Fi to differentiate a mobile service is less simple.
O2 UK pushes its own model with retailers
Gavin Franks, managing director of O2 UK Wi-Fi, stressed that the accepted model used to build Wi-Fi networks is undergoing radical change. "The approach taken by The Cloud and BT in the UK with their Wi-Fi networks needs updating," he said. "These business models have been focused on simply providing laptop customers seated in a coffee shop with access to the Internet."
Franks said O2 UK saw how smartphones were triggering a mobile revolution and took the decision to make Wi-Fi a relevant technology by bringing it to the forefront of the customer experience. This effort involves working closely with the owners of department stores, hotels, entertainment venues and others to provide them with a Wi-Fi service they could then use to engage with their customers and add value.
"What retailers are recognising, driven by increasing pressure on their sales figures from online activities, is a drive to differentiate the experience for their in-store customers," Franks said.
"We're not giving away free Wi-Fi, it's very much a B2B2C proposition," he added. "The venue owner is paying us to provide the service which they then offer free to their customers. What we're undertaking in exchange is building value by providing them with insight into the activities of their customers."
This ability for venue owners to better understand the behaviour of their customers is partly provided through Wi-Fi networks' ability to track their location to as close as 50 metres, said Analysys Mason analyst Chris Nicoll.
"This will enable the owners to analyse the flow of traffic through the venue and provides much improved insight to what is happening within the shopping mall, train station, exhibition hall, etc.," he said.
"Promotions are also much more relevant if the consumer is close to the retailer making the offer," Nicoll said. "These opportunities are not necessarily simple, and it will require the mobile operator to think differently."
This focus on providing venue owners with Wi-Fi services is pushing operators to become the exclusive provider within the more valuable locations.
BT Wi-Fi CEO Andy Baker said that new entrants are realising which venues are in key locations and a land-grab is already underway. "As a venue owner I can't see why I would need more than one Wi-Fi provider in my location," he said." The owner wants one landing page regardless of whether they are a coffee shop or giant department store, so I believe there will only be one Wi-Fi solution per venue."
Operators that want to capture some of the Wi-Fi market are scrambling to catch up, claims Baker. "But they're hampered by starting from scratch. Our nearest competitors–The Cloud and O2–have around 15,000 Wi-Fi hotspots each to our 4.5 million (this includes Fon access points). We've significantly accelerated the expansion of our UK Wi-Fi network over the past two to three years."
Operators started to accelerate their efforts to acquire key venues around 12 months ago, according to Steven Glapa, senior director of marketing at Wi-Fi equipment vendor. Ruckus Wireless. "Obvious high-value land-grab sites for Wi-Fi are train stations," he said. "The first operator to provide a service can gain a dominant position and extend the value of its network."
Glapa dismisses the use of LTE within venues, claiming that Wi-Fi has a spectrum advantage in terms of achieving very high density and capacity.
"We see LTE small cells having a use outdoors, but when you shift from coverage to capacity as an objective LTE becomes expensive relative to Wi-Fi," he said. "A train station may need something like 100 femtocells to achieve the required capacity which could be expensive using licensed spectrum."
Integrating Wi-Fi with mobile
This viewpoint sits uncomfortably with France Telecom's technical director of strategy, Yves Bellego. "We don't consider public Wi-Fi as a stand-alone activity with a dedicated business model."
Bellego said that voice services are best provided by the macro networks with small cells for in-building coverage. "But Wi-Fi is becoming a good complement to the cellular network with the rise of indoor data usage, and has become a valid technological solution to provide capacity and performance in a cost-effective way."
However, Bellego is adamant that the customer experience is not about 2G, 3G, LTE or a Wi-Fi experience. "The role of the operator is to deliver a good experience by using the right set of technologies and deployments," he said. "This is why we believe that methods for seamless mobility between cellular and Wi-Fi are needed, and that standardisation is the way to have these mechanisms."
There are already plans underway to bring Wi-Fi closer, if not almost totally, into the cellular ecosystem. Curenntly the Wireless Broadband Alliance, Wi-Fi Alliance, 3GPP and other industry bodies are pushing to have Wi-Fi working with cellular infrastructure in a near-seamless manner.
"Operators are particularly looking to take video traffic off their cellular networks in high density city areas," Analysys Mason's Nicoll said. "With new Wi-Fi up in the 5 GHz range, where channels don't overlap and you get much better performance, Wi-Fi presents a good opportunity to retain data traffic within the operator's network and remove it from the expensive and limited cellular spectrum."
The heavyweight operators involved with this initiative, which, according to Nicoll, includes AT&T, China Mobile, Deutsche Telekom, France Telecom, EE, Telecom Italia and NTT DoCoMo, are looking at how they can resolve real-world cellular issues such as spectrum exhaustion, in-building coverage and capacity.
Wi-Fi provides answers to solving some of these critical problems on the licensed spectrum side, such as taking traffic and splitting it appropriately to one or the other –whilst providing a secure and seamless experience for their users, Nicoll said.
However, the burgeoning involvement of these international operators could, and likely will, dictate the speed and direction that Wi-Fi will take in near- and mid-term.