While SA Carriers will continue to pursue technological advancements to handle demand, they maybe reticent about Carrier Wifi in their RAN portfolio because of high cost of integration , OaM and apparent lack of business case . At the same time, long-term spectrum availability, spectrum efficiency , LTE Femto cells and continued backhaul improvements are likely to be a key focus to assure continued mobile broadband momentum.From an MNO perspective, a major concern of Wi-Fi spectrum is the fact that it is shared with many other users and operators, usually unknown, and the traffic is unmanaged or coordinated. In busy areas, this can lead to congestion in public areas, manifesting itself as slower data rates or no connectivity.
A major problem for mobile operators is that the current trend for multi-mode networking (i.e. combination of WiFi and 3G access) limits the ability of operators to provide VAS services and/or capture 2-sided business model revenues, since so much activity is off-network and outside of the operator’s control plane. As MNOs will face traffic congestion challenges over the next 5 years, they will need to make technology choices regarding capacity enhancement in the near future. Opting for small cells based on mature cellular based standards may be seen in some markets as the technically superior and least risky option. At the current time, this is the route favoured by many visionary MNOs outside Africa .
To make matters worse slow regulation processes have negatively impacted South Africa’s broadband deployment. The delay in local loop unbundling has either discouraged potential players in the fixed broadband market or forced them to invest in their own infrastructure, making the deployment limited and targeted at more profitable areas. Spectrum resources could derail plans for South African mobile operators. BMI Analysis strongly believes that the quality and breadth of mobile content is key to operators’ outperformance in the 3G/4G market, but note that as operators encourage greater usage of data intensive services such as music and video steaming, their limited spectrum resources will fall under increasing strain
Mobile operators have been able to refarm existing 2G spectrum in order to launch LTE services and consolidation in the telecoms sector is also expected to help address spectrum scarcity. While Vodacom’s planned acquisition of Neotel is primarily related to its extensive fibre coverage, it will also give the mobile operator access to Neotel’s large chunk of spectrum in the 3.5GHz band. However, with operators now under even greater pressure to boost data revenues and broadening access to data intensive services. Most Analysts believe that any further delays in spectrum allocation could threaten their ability to maintain quality of service standard on their networks.
There are too many players in South Africa, so there is a strong likelihood and need for consolidation. Under resourced telcos should be obliged to use their spectrum or return it to the Regulator instead of hoarding : this combined with sluggish Regulators is the bane of so called spectrum dearth Africa !! Despite the clear economic rationale, there may still be some obstacles to consolidation, such as the unrealistic ambitions of owners and senior management or an investor reluctance to take a financial write down. There is a nagging perception that Telco / Wireless operator assets ( spectrum , tower , fibre , IT Core , brand equity , subscriber revenues etc ) in South Africa are overstated and overvalued. So it should not be acquisitions for the sake of acquisitions. Without scale economies future success is at risk.
According to GSMA where necessary, mobile network operators will tend to use small LTE cells to relieve congestion in traffic hotspots rather than relying on Wi-Fi. The prospects for Wi-Fi delivering significant capacity relief in areas of the cellular network facing congestion are limited. On the contrary, Wi-Fi and cellular traffic are expected to grow in parallel and rapidly, offering complementary capabilities.For MNOs, the ability to monitor traffic levels in the band, steer traffic between bands and cells and implement policy rules are key requirements. Wi-Fi does not provide this level of visibility and control, except for Wi-Fi deployed by the MNO itself. While there exist functional and performance short-falls with the use of Wi-Fi for small cells, they should not prevent its use in some scenarios. It could be challenging for example for operators with limited 3G or 4G spectrum allocations or those unable to deploy small cells and backhaul on their own. In this case, a Wi-Fi based solution could be justified.
Perhaps the most transparent example of usage patterns on operator-deployed Wi-Fi networks comes from the world’s largest mobile market, where market leader China Mobile has regularly reported the distribution of traffic across the world’s largest public Wi-Fi network by number of hotspots, which at end-June 2012 stood at a total of 2.83 million access points across hundreds of thousands of hotspot locations. The data shared by China Mobile highlights an alarming statistic which is the discrepancy in the amount of revenue generated per megabyte by China Mobile on traffic that flows across its cellular and Wi-Fi networks. China Mobile, it generates US$0.0367 for every megabyte transmitted on its cellular networks, but just US$0.0004 on Wi-Fi. China Mobile would generate an additional $ 1.4 billion in annualised revenues for each 5% of data traffic that was monetised via its cellular network instead of over WiFi.
As the telecom ecosystem expands, beyond the unending need for broadband access to content and speed, new business models should be explored among both traditional and new players, which could open up markets and change the landscape. Deployed effectively, Carrier WiFi solutions can enhance consumers’ personal and professional lives in realms including education, health care, automotive, hospitality and beyond. Telcos must focus on ” exponential technology innovation ” built on proactive, thoughtful planning of the ecosystem the business operates in. Ongoing, accelerating advancements in computing power, storage and bandwidth in smartphones are providing the platform for disruptive innovations, an impact that is amplified when technologies coalesce into open platforms and ecosystems.
There is no doubt that the smartphone will be the first departure point for users seeking to gain access to digital services such as e-commerce, information and other services.New devices with wifi chipsets will continue to arrive with varied price points and different form factors in smartphones and tablets. Mobile capabilities are being extended into completely new devices, including wearable technology such as glasses, smart watches and fitness/health devices etc. The ecosystem evolving around online – including mobile – substantially broadens the availability and distribution options for content. Smartphones and tablets are directly contributing to this shift and increasingly drive where and how content is delivered. While the availability of low cost wifi enabled smartphones will boost internet connectivity in the low income prepaid user segments the current pricing for ” Out of Bundle ” data will limit the actual network traffic and alienate MBB subscribers.
New entrants will come into the market from adjacent sectors – broadcast media and even advertising groups are viewing telcos as a ready-made channel to market. The rise in online video consumption and faster access technologies ( Fttx , 4G ) has sparked a slew of VOD initiatives in the last few weeks enabling wireless operators and digital content providers to bypass traditional satellite broadcasters. The rising trend in Internet advertising might indicate collaborative partnerships to potentially subsidize low income segments The aggregation of content over a larger subscriber base or the aggregation of advertising agencies across a larger base of broadcast platforms could result in respectively lower direct costs or higher revenues.
The evolution of the Wifi Standard is opening up new application opportunities in the IoT and M2M arena. The availability of Cloud as the orchestrator of various Wifi capabilities would suggest an entirely virtualised technology architecture to deliver and manage connectivity. Cloud is rapidly becoming important for many telcos; small businesses as well as public administrations require some form of cloud service. In this context, M&A can serve multiple purposes, either with regard to accelerating market timing, shaping its structure, or acquiring specific skills and technologies (e.g. lightweight, scalable, low-cost infrastructure.
Despite the rosy WiFi technology scenarios Mobile operators need to respond to a number of important questions before they incorporate Carrier WiFi into their RAN portfolio and Small Cell Strategies . What is the impact of a seemingly unstoppable transition to free-to-end-user Wi-Fi in public locations on users’ perceived value of Internet access on the go? What impact is user dependency on Wi-Fi having on their willingness to pay for bigger data plans or to deliberately avoid incurring (lucrative) overage charges ? How does Carrier WiFi fit into small strategy with the arrival of LTE ? Should WiFi rollout be left to ISP , FTTx players and Municipal / Govt free wifi projects if the MNO’s get sufficient 4G Spectrum ? does it make economic sense and under which circumstances should MNO’s deploy WiFi for data offload ? Is the really worth the MNO’s effort to deploy WiFi with the arrival of LTE Direct ?
As the China Mobile case has served to highlight, there is a major monetization gulf between the ability of mobile operators to generate returns from managed public Wi-Fi traffic compared with when it flows over their cellular networks.Lookout for my next blog post responding to the vexing questions above, how MNO’s could monetise Carrier WiFi and how best to incorporate it so as to make Small Cell strategies really effective !!
Sadiq Malik ( Telco Strategist )