Carriers' evolution to integrated service providers

Wi-Fi deployments will allow fixed-line service providers to sell a variety of broadband services across wide market demographics including consumers, businesses and public venues. In addition, it is a way for these carriers to make up part of the loss of their fixed-line revenues to cellular carriers. Wireline carriers are already feeling the effects of cellular phones on second lines in homes, small businesses and large enterprises. Consumers are opting for cellular phones with free long-distance instead of a second line or even a primary line at home. Many business users who are away from their desks use their mobile phones for voice.

Wireline service providers that own cellular companies are reaping the benefits even if its money out of one pocket and into another. For those wireline operators that do not have a cellular division, offering public Wi-Fi service is a good way to fight back and a good source of incremental income. For one, it will give fixed-line operators the opportunity to expand into mobile services through voice over WLANs as well as using their excess backhaul capacity for incremental services. In large hot spots such as airports or college campuses where cellular service might be sub-par, fixed-line operators can deploy a VoWLAN system with better quality of service and at significantly lower price.

Every Wi-Fi-enabled hot spot requires a high-speed connection in the form of T-1, DSL or cable back to the Internet. As a result, as hot spots proliferate so do sales of broadband connections. Some carriers are concerned that the existence of hot spots near a users’ home location, will push users to go to the hot spot rather than install a DSL system at home. This might be the case in café societies of Europe, but it will not be the case in the United States, where business users are either on the road or move from the office to the home environment.

Wireline carriers are in a unique position to offer public Wi-Fi services since they own and operate these backhaul networks, which are a significant part of the cost of deploying a Wi-Fi network. They also own a diverse customer base that they can cross-sell services. This will provide new revenue streams, provide access to a growing customer base, allow bundling of services, and allows for new partnerships for new value-added services. A recent cost analysis has shown that the subscriber acquisition costs of public Wi-Fi are lower than broadband and offer greater returns. WLAN operators report acquisition costs of $800 per subscriber including sales, marketing, installation, and customer premise equipment. This compares to $1000 per subscriber for xDSL and $1,200 per sub for cable (cost analysis performed by Jonathan Tirone; company unknown).

Offering WLAN services in the SOHO market as a complementary service to broadband access such as DSL and cable can boost the uptake of these services. In late 2002, Telecom Italia started offering Wi-Fi to its residential customers as a way of increasing DSL uptake. Customers will receive WLAN CPEs when they sign up for DSL service as a value-added service. This strategy has lowered churn and it will also introduce consumers to the value of Wi-Fi. Consumers who are used to high-speed service at home or at the office look for the same while on the road. Offering public Wi-Fi will then bring in its own revenues.

In addition, offering public Wi-Fi will open the door to provide additional data services to large hot spots. BT for example, views its Openzone as a means to get its foot in the door for additional data services. For its hotel clients, the carrier is offering in-room solutions, private WLAN solutions for the hotel’s own use, CCTV security cameras and wireless waitress applications, upselling the service as more of a private Wi-Fi network with an integral visitor network. Openzone religiously uses its major business sales force to target airports, railway stations, large hotels, etc.

Carriers can also offer public Wi-Fi services to enterprises for the usage of their visitors with virtual LANs or as a paid service. BT for example has a public WLAN service in its own headquarters in London both for marketing reasons to showcase Openzone, but also for the usage of visiting partners and business associates who would not normally have access to the company’s LAN. Technologies are coming down the pipe which will allow an integrated private and public Wi-Fi environment using one set of radio equipment. Enterprises, especially those with a public face could offer this service either as a free amenity or for a fee.

More information on other areas of the WLAN market, please refer to eTinium’s study, Seamless Mobility: The Marriage of 3G and Wi-Fi.

Goli Ameri is the President of eTinium Inc., a telecom consulting and market research company specializing in wireless and switching technologies. She can be reached at gameri@etinium.net.