By Gu Xiaofeng
Carriers and Internet companies should cooperate to bring their advantages into full play. Carriers can focus on optimizing and guaranteeing Wi-Fi access experience while Internet companies can concentrate on user resource monetization. Together the two can build a healthy and sustainable business ecosystem.
With the popularity of smart devices and mobile Internet, wireless access is becoming mainstream. From the point of view of end users, mobile and fixed broadband will eventually converge to provide ubiquitous ultra broadband for wireless connection. The Wi-Fi industry chain is very mature and supports a variety of types of smart devices including tablets, video game consoles, ebook readers, and digital cameras. According to Mobidia statistics, around 70% of smartphone data traffic is consumed via Wi-Fi. In indoor scenarios, the percentage is as high as 80% or more. Wi-Fi technology is developing steadily. The latest 802.11ac can boost Wi-Fi transmission throughput to over 1Gbps. The ultra-high-speed surfing experience breaks the bottleneck of home Internet. Therefore, as the major access mode for smart devices, Wi-Fi is the key to ubiquitous ultra broadband coverage in homes, office buildings, public places, and even vehicles.
Wi-Fi: An underestimated market
Currently, except for some public hotspots, carriers do not provide Wi-Fi for homes, office buildings, or shopping malls. Traditionally, carriers offer in these places voice, broadband, or leased line services. Deploying Wi-Fi in these places can hardly create any new revenues and the maintenance costs are high. Especially in shopping malls, Wi-Fi may offload traffic of higher-value cellular networks, so it is understandable that carriers lack the initiative to deploy Wi-Fi. As a result, most carriers only deploy pipelines to customers' houses or malls where end user experience cannot be perceived.
For many Internet companies though, the potential market space of Wi-Fi service in homes, shopping malls, and public hotspots is greatly underestimated. While carriers stick to fiber-to-the-home (FTTH), Internet companies are vying for the user access portal. Chinese Internet companies represented by HiWiFi and Xiaomi have already broken into the home market using smart routers, thereby seizing the portal of future smart home services. Smart routers have become another typical OTT service. As to restaurants and shopping malls where foot traffic is huge, competition for Wi-Fi service by Internet companies is even fiercer. Through business model innovation, Internet companies provide free Wi-Fi for users to channel commerce towards online to offline (O2O) shop portals. There are over 300 companies engaging in commercial Wi-Fi service in China. TreeBear, a company invested by Alibaba Group, is a typical example. The company provides shops with customized portal service. While offering free Wi-Fi within their shops, shop owners can obtain users' WeChat numbers, phone numbers, QQ numbers, and email addresses for advertisement delivery and secondary marketing. They can also turn customers into fans of their online shops. Internet companies then gain revenues through platform big data analytics and developing customized value-added applications for vendors.
Google is also deploying Wi-Fi hotspots in America. Google has its own cloud platform and allows users to access Google's Wi-Fi hotspots for free after being authenticated by Google's Wi-Fi app. After the first authentication, users' smart devices can access any Google hotspots without user perception. This boosts the usage of Google search engine, bringing more advertisement revenue.
Internet companies' entry into the Wi-Fi market is a huge threat to carriers. They offer OTT-style free Wi-Fi based on carriers' fixed networks. Free Wi-Fi offloads the traffic of carriers' mobile cellular networks but does not produce any revenue for them. How should carriers transform their business model to cope with the challenge?
Improved network value through Wi-FI extension
Faced with intense competition from OTT Wi-Fi, carriers are also paying increasing attention to Wi-Fi's role as the Internet access portal. Many of them are trying to extend fixed networks to users' smart devices by deploying Wi-Fi.
Home Wi-Fi operation and business model
PCCW of Hong Kong provides customers with home and enterprise Wi-Fi networking. For large residential buildings and office buildings, the carrier offers Wi-Fi devices and conducts professional Wi-Fi network deployment. This expands PCCW's business range. It can charge HKD9800 from high-end home customers for the Wi-Fi networking. Thousands of home users have subscribed to the service.
After carriers extend Wi-Fi to home users, they can conduct business innovation based on the information obtained. Liaoning Unicom collects information on users' network visit, terminal type, and even mobile number through Wi-Fi. By analyzing the data, the carrier can formulate accurate marketing plans, develop new preferential packages, and give subsidies to attract users of other carriers.
In-shop Wi-Fi operation
In the commercial Wi-Fi domain, China Telecom and China Mobile are considering to cooperate with OTT companies. Guangdong Telecom's third-party partner eShore is operating a portal platform, providing customized Wi-Fi marketing service to shops. Using the carriers's brand and marketing platform, eShore provides commercial Wi-Fi service (bundled with communication services) to shop owners. The third-party company conducts post-paid business operation and shares profits with Guangdong Telecom, which anticipates over 700,000 Wi-Fi shop users in a single year.
Hangzhou Mobile also works with the famous Zhejiang-based OTT company – Shuxiong to bundle the company's Wi-Fi marketing service with its own broadband service and provide them to shop owners. Shuxiong earns profits with the post-paid model, while Hangzhou Mobile enhances the competitiveness of its broadband service among shop customers. Shop vendors, on the other hand, can use Wi-Fi for secondary marketing in order to attract online fans.
In some countries where Internet innovation is insufficient, carriers can play an even more important role in Wi-Fi service. An operator in Mexico targets small office/home offices (SOHOs) as well as street convenience stores and restaurants. They plan to provide broadband access and Wi-Fi to over 20,000 convenience stores in Mexico City, and use the additional four to eight Service Set Identifiers (SSIDs) in the access device for Wi-Fi sharing. Through this initiative, they will obtain tens of thousands of Wi-Fi hotspots for free while gaining many small business broadband subscribers. These SSIDs can be used for marketing, leased to other carriers for traffic offloading, or leased to OTT companies for user access portal monetization. This business model has already been proven by Japan's NTT Broadband Platform (NTTBP).
Win-win cooperation
The industry trend shows that Wi-Fi will become the most critical technology in the last 10 meters to users. Wi-Fi will become an important access portal for mobile users and a new competition field for Internet players. Internet companies face the great challenge of providing superior Wi-Fi coverage and experience and conducting network operation and maintenance (O&M). Carriers, however, have E2E network control, comprehensive O&M teams, rich network operation experience, and unique advantages in sales channels and brand image. As to the Wi-Fi operation model, carriers and Internet companies should work hand in hand to bring their own advantages into full play. Carriers are dedicated to assuring Wi-Fi experience while Internet companies focus on the operation and monetization of user resources. Together they can build a healthy and sustainable business ecosystem.
