How BT is going to set its LTE spectrum to work
May 13, 2013
As the headlines had it, BT is going to move back to play in mobile, which it hastily evacuated when if faced a debt crisis early last decade.
But, as we pointed out (see - Is BT re-entering the mobile market?), it comes back into a very different market from the one it exited. Instead of that paltry £200 million table stake, serious 3G spectrum buyers at the beginning of the millennium were paying billions of pounds (one of the main reasons BT became financially embarrassed).
What they were buying was the apparently inexhaustible money tap promised by mobile broadband. All sorts of ARPU-rasing wheezes were in prospect - after all, if something as simple as SMS could account for hundreds of millions in revenue in 2G, just think of what might be garnered by true mobile broadband. As we now know things haven't quite turned out that way - ARPU is set to reduce as revenues from both voice and SMS decline and the big mobile telcos in Europe are looking at a difficult few years as they scramble to find other ways to increase ARPU in a saturated market.
That's not to say that mobile broadband can't be a huge revenue winner - it certainly can and will, but with new mobile network types and business models.
Most experts believe that the new network economics will demand a mix of small cell (WiFi and LTE) and traditional macro network. While it's been out of the main mobile business BT has been working away at its home WiFi solutions and now appears to be hatching a plan to maximise the home and hotspot model.
According to BT CEO, Ian Livingston, as reported in the UK's Sunday Telegraph newspaper, the BT approach will be to use its new spectrum holdings to strengthen its home bundle. It will introduce dual mode (LTE and WiFi) home hubs which will enable it to improve its indoor coverage and provide an LTE mobile device (phone or tablet) offer for the BT bundle. When users are away from home (or other users' hotspots) BT will have a deal with another network (probably its own network child, O2) to take up the slack
This may be the basis of the illusive new model - much lower-cost small cell deployment (much of it in-home) as part of a bundled deal, with another network picking up the rather small rump of traffic if and when the user moves outside small cell range.
Because mobile network use is now much more nomadic (go to a place, consume; then move on to another place) rather than true mobile (telephony on the move with cell hand-off), the heavy-lifting in the network will be done by the small cells which are, by some measures, about a 20th the cost of macro cells to site and operate.
Another important part of the new equation, and one not at all clear, is the place of free WiFi. As more carrier WiFi is rolled out with small cell LTE attached, will it naturally eventually displace the growing 'venue' WiFi - free to the user, funded by the premises you happen to be in. Or will it?
Free WiFi continues to grow and it raises an interesting question: what is the ultimate commercial mechanism? Will today's free 'venue' WiFi just give way to highly organised indoor carrier WiFi or will the two co-exist side by side. Will free WiFi eventually be turned over to today's big operators?
That seems unlikely. Venues don't want to be wholesale capacity providers for operators, selling off their connections for a few pennies. Quite the reverse. They want to be the visible providers of service to their customers. They want the service to be free and they want the customers to know that they (the venue owner) is the one doing the providing.
In other words they want eyeballs in the same way that TV channel providers want viewers.
According to David Nowicki, Chief Marketing Officer at Devicescape - a company that 'curates' free WiFi hotspots and logs users on to the right ones - venue owners (coffee shops, department stores etc) increasingly view Devicescape as a partner tasked to bring in more customers to camp on their nework via a client in the handset which selects the WiFi connection offering the best performance.
You might think, as did I, that Devicescape might morph into a sort of WiFi broker, buying WiFi capacity on the fly from WiFi network operators on behalf of cellular operators and making it 'seamlessly' available to subscribers on an as-needed basis.
That may be part of the future in some form, but that vista ignores the dynamic behind 'free' WiFi from venue owners perspective. These players see Devicescape (and other third parties) playing the role of bringing more users onto their WiFi. The more the merrier.
At least for now. That dynamic could change as users tire of venue advertising and want WiFi services free of ads. At that point policy engines like Devicescape's will be set to prioritise those networks instead. Until then, free is probably where it's at.