BandwidthX shows good short term promise
Mobile operators are intensely interested in carrier Wi-Fi, to offload burdensome data from their precious networks, and to enable them to harness all that unlicensed spectrum and capacity to improve a user experience they still control.
However, for all the talk of integrated Wi-Fi/cellular base station chips and small cells, most cellcos are too busy and under too much price pressure to spend time building out Wi-Fi networks.
There are alternatives to that all-inclusive HetNet – continuing just work with hotspot partners and use standards like HotSpot 2.0 to improve hand-off and control; scavenge for low cost Wi-Fi capacity available via “homespots” (residential gateways with some capacity left unsecured for community access); and an emerging and interesting option, the Wi-Fi trading exchange.
BandwidthX is one firm pioneering this approach, launching its exchange at June's WBA Wi-Fi Global Congress. It is unlikely to be the only such trading hub, and the model could easily be taken over by a major like Google (which intermittently proposes something similar for all spectrum, including licensed).
But BandwidthX has launched at a pivotal point in time, and its lead to market, while not unassailable, could see it rise in short order to be the pre-eminent player in Wi-Fi offload roaming. If it achieves mass uptake as a trading proposition, it could, in turn, change the offload landscape overnight.
The company plans to operate a cloud-based Bandwidth Market, which enables cellcos to buy Wi-Fi capacity as, when and where they need it from participating ISPs and Wi-Fi service providers who have spare capacity in their networks. The idea is that Bandwidth Market establishes an equitable clearing price for each Wi-Fi capacity transaction, separately taking into account bid and offer pricing in an automatic negotiation.
No changes are needed to existing access points or mobile networks – just a small application needs to be added to the mobile devices to participate in the trading.
All communications are authenticated using the International Mobile Subscriber Identity (IMSI) plus a shared secret. The app makes devices scan for access points and then share the results of the scan with the cloud based marketplace, which tells it which SSIDS it can see are participating in the exchange and what its asking price for bandwidth is.
CEO Pertti Visuri - previously best known for founding AirGain, the embedded antenna specialist – spoke to Wireless Watch's sister publication, Faultline, last week. The businesses may seem different, but Visuri brings, from AirGain, an understanding of onboard smartphone antennas which is important to make this system work.
What Visuri said made Faultline analysts re-think their view on Wi-Fi considerably, especially the capex and opex considerations for cellcos embracing Wi-Fi. The marketplace approach could reduce these significantly and permanently make ISPs and cellular operators interdependent.
Visuri said: “About 10 years ago we did some work (at AirGain) improving the Freebox gate-way for Free in France. At the time it didn't occur to us, but now we know why it needed such a good Wi-Fi performance. It was always planning this.” Free has been famously disruptive in France, pioneering the homespot model and using its broadband/Wi-Fi systems to gain penetration, and lower cost via offload, for its cheap mobile offerings.
If a cellular operator can gain access to Wi-Fi for a lot less than the cost of creating its own network, it will slow its buildout, or approach Wi-Fi in a far more gradual and strategic way – for instance building out networks in areas where there is greatest need or profit potential and relying on the marketplace elsewhere.
Visuri explained: “In Wi-Fi several devices cohabit the same spectrum in a smooth and reasonable way. If you walk downtown in any town, anywhere there are 20 or 30 Wi-Fi SSIDS, so it makes sense to use them.” Not only are homespots underused when at their largest capacity, but capacities are going up and when homes are empty they are totally unused.
The price partners pay for that spare capacity can vary by time of day or location or the type of device, or even by the mobile operator in charge of the device. Both types of provider (Wi-Fi and cellular) set a price profile, and as Visuri points out, “not all gigabytes are created equal,” meaning that those available in the night time are virtually worthless, because cellular networks are less congested then.
Once a phone has offers of Wi-Fi there is a discussion in the cloud server, where a cellular operator might effectively be saying “I am prepared to pay $15 per gigabyte of data when my network is busy at this location,” and the marketplace will match the offers from buyers and bidders and determine a clearing price
“We have Alvin Roth, who won a Nobel Prize in Economics, on our advisory board,” said Visuri. Roth jointly won his Nobel Prize for theories in market design and is known to believe in the real world application of those theories.
“The system always returns prices which are lower than the asking price, and higher than the offered price,” he added. “Then when the deal is made, we use the existing cellular connection to pass on credentials from the cloud. If it needs a password, User ID or if the system has EAP SIM or HotSpot 2.0, this then provides the credentials to the app in the device. That's the app, not the operating system.”
The accounting is done in the app too, because it already monitors how many megabytes are used from the network and the price which was agreed in the trading negotiation. The whole transaction is reported using the existing Radius AAA protocol. “We have designed this so that it is able to plug into existing operator systems, like any connected exchange,” Visuri added. He would not reveal the fees BandwidthX receives itself.
Effect on cellco capex
The marketplace idea is nothing new of course – it exists in energy businesses as well as consumer e-commerce. But there are far-reaching implications of applying it to wireless, beyond providing a more dynamic and flexible approach than static roaming deals.
It can give the cellco more control, and more flexibility, in its proposition to users. Churn is limited because it becomes rarer for data to be blocked, capped or to fail because the network is congested. And if the cellco charges more overall than it is paying out in Wi-Fi costs to ISPs, it is still making a profit on that bandwidth. It could even charge less for Wi-Fi if it wanted, or give back credits against caps when users spend more time on the WLan.
There are an almost infinite number of new models that cellular operators could try out with this arrangement, including ultra-cheap handsets which prioritize Wi-Fi - as some US-based MVNOs have attempted.
“We made some calculations on production cost for network upgrades. You take the way Ziggo in the Netherlands has created one million homespots with a software upgrade. The incremental cost of putting the remaining unused bandwidth to use is close to zero. All the money they get for it goes straight to the bottom line,” said Visuri.
“But for the mobile operator to build more network, it has to calculate site rentals, tower building, backhaul, power. We have calculated the cost of building all this and think it can almost never be recouped. The cost of the Wi-Fi usage would be more than paid for by improved churn, and by not having to spend on capex.”
Such thinking changes capex calculations completely and discourages cellular operators from building their own Wi-Fi capabilities.