How Service Providers Can Monetize Wi-Fi Hotspots
Feb 27, 2013
The insatiable demand for smartphones, tablets, and other connected devices is generating staggering amounts of mobile data and placing a crushing burden on networks. One barometer is the recently released Cisco Visual Networking Index (VNI), which predicts that global mobile data traffic will increase 13-fold from 2012 to 2017, reaching 11.2 exabytes per month.
In parallel, the use of Wi-Fi for Internet access is also exploding, as more mobile devices are Wi-Fi enabled, the number of public hotspots expands, and user acceptance grows. The two trends are intersecting in crucial ways.
Until recently, most technologists and mobile-industry executives viewed Wi-Fi as the “poor cousin” to licensed mobile communications. And they saw little role for it in mobile networks or their business. The upsurge of mobile-data traffic has changed all of that. Most mobile operators now realize that offloading data traffic to Wi-Fi can, and must, play a significant role in helping them to avoid clogged networks and unhappy customers.
Mobile operators understand the business case behind off-loading data traffic to cheaper Wi-Fi -- deferring significant capital expenditures for further build-out of the licensed network. However, they ask, is there more to Wi-Fi than just data offload? And, more appropriately, can they actually make money from Wi-Fi -- turning a cost of doing business into profitable business models?
The simple answer is, yes. In fact, the Cisco Internet Business Group (IBSG) has identified and built business cases with service providers around 15 additional ways to benefit from Wi-Fi, beyond data off-loading.
IBSG’s white paper, "Profiting from the Rise of Wi-Fi," describes these business models in more detail, but the 15 business models basically fall into four different categories:Business Effectiveness—using Wi-Fi access networks to decrease operational costs or improve customer retention and service differentiationEnd-User Services—solutions for business and consumer end users using Wi-Fi for internet connectivity for their devices (e.g., smartphones, tablets, laptops)Intercarrier Wholesale—providing Wi-Fi-based services to other service providers, (e.g., cellular network operators, Wi-Fi providers)Value-Added Services—enhancing basic Wi-Fi access with additional services and alternative funding models
As the pervasiveness and customer adoption of Wi-Fi continue to grow exponentially, these new business models are providing real and meaningful opportunities for service providers. For example, we are seeing home broadband providers improve their customer retention by 10 to 15 percent through bundling free public Wi-Fi access with their broadband service.
In addition, we believe that by offering a Wi-Fi enabled “Business Anywhere” service, operators can generate $10-15 per business user per month. In the retail setting, delivering enhanced, value-added services will bring an incremental $100-150 per store; this is on top of the $50-250 that operators charge per wireless access point to run a managed Wi-Fi service for retailers.
But don’t take our word for it. End users tell us that they want these new Wi-Fi business models and see great value in them. Unique mobile-customer research by IBSG (What Do Consumers Want From Wi-Fi) revealed that mobile users appreciate the lower cost and unlimited data usage of Wi-Fi and greatly value the flexibility and convenience that it offers.
In particular, customers were interested in the national/international roaming business models and the Wi-Fi value-added retail offerings. These, consumers believed, would make them more efficient, save them money, and enhance their shopping experiences.
Among U.S. broadband subscribers who identified that free public Wi-Fi was part of their subscription, a remarkable 61 percent told us that the inclusion of Wi-Fi was very or extremely important in their choice of broadband provider. The inclusion is not only a good way to attract subscribers; it is also a good way to keep them.
Of course, not all business models are attractive to all service provider segments. Business models will need to be aligned to the different industry segments, while priorities are set and a starting plan created. We feel that our research, insights, and recommended approach will arm SPs with guidelines for setting priorities and determining which strategy is best for making real money from Wi-Fi.
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