The top 5 reasons cable operators are making big bets on Wi-Fi


It is no secret that cable operators in the United States and elsewhere are rapidly deploying millions of private and public Wi-Fi hotspots. Though cable MSO executives often contend the primary reason for their interest in Wi-Fi is to keep their customers satisfied, many industry observers suggest there is an even bigger plan that could impact traditional cellular operators and potentially alter the overall wireless industry landscape.

FierceWirelessTech has talked to a number of experts to nail down the top five motivators--listed from least important (at least right now) to most important--for cable companies to become Wi-Fi providers. Scroll down for our list:

5. Deploying Wi-Fi helps cable operators flesh out a quad-play strategy

Nick Cadwgan, MSO Wi-Fi marketing lead for Alcatel-Lucent
Nick Cadwgan

Some pundits contend that through the deployment of Wi-Fi, MSOs are targeting the emerging multimedia marketplace, which is also in the cross-hairs of cellular carriers. "If you look at the forward strategies for the mobile operators, they're all talking about how they are going to monetize video-basic strategies over their infrastructure," said Nick Cadwgan, MSO Wi-Fi marketing lead for Alcatel-Lucent.

Therefore, the emerging battleground between cable and cellular operators involves nomadic provision of video services. "They're competing for the new user experience. Whoever gets there first will have market leadership, and what you're really trying to do is cement your own customer base and then strategically go and rob your competitors," Cadwgan said.

Ever since the word "convergence" was first whispered in the telco and cable industries, operators of all types have dreamily eyed the quad play that combines broadband Internet access, TV and telephone with wireless services. That vision is still driving many long-term business decisions.

"The cable operators for obvious reasons are diligent about quad play and they want to make sure that when demand for a quad play really emerges, they'll be in the right place at the right time with the right facilities," said Craig Moffett, senior analyst at MoffettNathanson Research.

4. Cable operators can offer managed services and location offerings with Wi-Fi

Wi-Fi is also helping cable operators establish beachheads outside the home and inside of businesses, and managed Wi-Fi services help drive new revenues to cable operators. A white paper (PDF) issued by Cisco in June 2013 said the vendor had estimated that basic managed services can deliver $50 to $250 per month in new revenue as service providers manage both the public Wi-Fi networks as well as the private networks used within businesses.

Installing Wi-Fi on business customers' premises also opens the door to revenue-sharing opportunities through location-based advertising and related analytics and big data. When it comes to cable Wi-Fi deployments, enabling location-based services is "icing on the cake," said Bryan Goldberg, global carrier solutions architect at Ruckus Wireless. "Once you start putting analytics with location, it's more glue for that relationship," he added.

Key applications of micro-location services that can be enabled by Wi-Fi hotspots include movement analysis, such as footfall analytics in a retail environment, and user engagement, which might include targeted on-premise content, guided tours and other applications. Such data can be used to for the creation of personalized content and targeted advertising that is delivered to end-user devices.

3. Wi-Fi might give cable operators a leg up against wireless carriers

Cable MSOs with extensive Wi-Fi deployments make it a point to remind their broadband customers that using their cable operators' free Wi-Fi hotpots for wireless multimedia service can be a whole lot less expensive than consuming that same data over a costly tiered cellular data plan. In May, Time Warner Cable (NYSE: TWC) even rolled out a portal that helps users calculate savings from offloading cellular data to MSO's Wi-Fi hotspots.

Comcast offers a Wi-Fi finder

So, does this mean the cable operators are trying to steal cellular subscribers? Yes and no.

Moffett contends there are two phases in the cable Wi-Fi plan. The first entails expanding their Wi-Fi footprint as much as possible by building out hotspots into dense, urban areas and installing dual-SSID routers into homes and businesses so each individual customer can become a quasi-public hotspot for everyone else. Moffett said phase 2 of the cable Wi-Fi blueprint arrives "when cable operators really turn Wi-Fi into a revenue-generating business of its own." That, however, requires a mind shift on the part of consumers from "cellular first" to "Wi-Fi first."

"That may seem like a subtle change, but it's transformational to the weight that you'll use your wireless subscription," Moffett said.

"It is highly debated as to when phase 2 will come," he added. Moffett noted Comcast (NASDAQ: CMCSA) hinted at its interest in that scenario during spring 2014, but Moffett said the MSO's comments were clearly timed to augment its case for acquiring Time Warner Cable.

And cable's incursion into the wireless arena will likely have dramatic impacts on mobile operators' revenue streams. "I think the wireless operators should be very worried, not because the cable operators are likely to come in and steal a huge portion of the customer base but instead because the cable operators can be very disruptive to wireless pricing," he added.

According to Goldberg, it is a given that cable MSOs will take some traffic from cellular. That, in turn, will cause people to sign up for less-expensive cellular service tiers because they will be able to get by with smaller cellular data buckets. The result will be lower average revenues per user for cellular operators.

Some European MSOs are already adopting strategies to complement their Wi-Fi footprints. For example, Numericable is in the process of buying media group Vivendi's French mobile operator SFR.

Yet rather than become cellular operators themselves, most MSOs likely intend to become MVNOs so they can send lower-value voice communications over cellular while they create canopies of Wi-Fi coverage in dense, urban European markets to deliver high-value, multimedia content, Cadwgan said. "The whole aim of the MVNO is to keep as much traffic off the cellular data [network] as possible," he added.

Similarly, Moffett said U.S. cable operators intend to use Wi-Fi to cover 80 or even 90 percent of all homes, offices and densely clustered urban areas. They can then set up an MVNO agreement with a wireless operator to fill in the remaining 10 percent of occasions that Wi-Fi cannot serve.

In addition to becoming MVNOs themselves, cable MSOs could also wholesale Wi-Fi capacity to other MVNOs to create yet another revenue stream.

Kelly Davis-Felner, vice president of marketing at the Wi-Fi Alliance
Kelly Davis-Felner

Wireless data roaming will likely grow in importance to the MSOs. Major U.S. cable operators Bright House Networks, Cablevision (NYSE: CVC), Comcast, Cox Communications and Time Warner Cable already enable roaming across 250,000 of their individual hotspots via the "CableWiFi" initiative, without requiring the use of Hotspot 2.0/Passpoint technology. But Kelly Davis-Felner, vice president of marketing at the Wi-Fi Alliance, expects Passpoint will become a necessary component for successful cellular-to-Wi-Fi offloading and roaming on a broad scale.

MSOs, because they are relatively new to the Wi-Fi arena, have an edge in that they can easily include compatible gear as they roll out their new Wi-Fi hotspots. "Passpoint does not add much cost to a greenfield deployment," Davis-Felner said. "Where you see barriers to Passpoint deployments is in the case of operators that have large installed bases of non-Passpoint gear that requires a truck to replace it," she added.

2. Wi-Fi is another service cable providers can give their customers

Cable operators have long asserted that Wi-Fi enables them to extend their customer touch points and differentiate their wired broadband offerings. "They can give their wired broadband customers wireless connectivity outside the home and it's a cost-effective way to differentiate cable broadband service from DSL and even telco fiber," said Moffett.

"The telcos for obvious reasons are loath to give away any wireless services for free because they are in the wireless business. So the cable operators can gain at least a modicum of advantage by giving away Wi-Fi service for free as a way to add value to their wired offerings," he added.

According to Davis-Felner, rolling out Wi-Fi hotspots is "a low-cost way from a cable operator's standpoint to greatly expand its service offering and extend the subscriber relationship outside the home."

The changing modes of residential broadband interaction are helping drive usage of Wi-Fi outside the home. Alcatel-Lucent's Cadwgan notes MSOs' content is increasingly being delivered via cable or fiber into homes but then distributed within the home via Wi-Fi to mobile data devices, primarily tablets, rather than televisions. Building on that trend, cable companies have recognized that nomadic but stationary wireless delivery is necessary for consumption of long-form videos, such as movies, while a person is home or away though not necessarily mobile.

1. Cable operators are building Wi-Fi because they can

Ultimately, the main reason cable operators are rolling out vast Wi-Fi footprints might be because, quite frankly, they can. Like Kevin Costner building a baseball field in a corn patch, cable companies possess the raw ingredients to roll out immense Wi-Fi networks, and so they are doing just that.

A Wi-Fi network requires backhaul, power and locations for access points, all things cable operators naturally have as a function of their legacy business. MSOs have "the three legs of the stool," Goldberg said. "It's almost the birthright of an MSO" to be able to build out Wi-Fi, he added.

U.S. cable operators have repeatedly dabbled in the mobile business, flitting in and out like a moth attracted to a flame. In 2008, Comcast, Time Warner Cable and Cox Communications ended their joint venture, branded Pivot, with mobile carrier Sprint. And in 2012, SpectrumCo, the joint venture of Comcast, Time Warner Cable and Bright House Networks, and Cox Communications, sold 20 MHz of nationwide AWS spectrum to Verizon Wireless for $3.9 billion. So why do the pundits think the MSOs will continue with their current wireless momentum this time?

"This time feels very different than the other times," Moffett said. "The other times the cable operators were trying to jumpstart a business from zero and build it out of whole cloth. This time around, cable operators are gradually piggybacking on a phase 1 strategy. So it is a much more cost-effective approach that allows them to grow into the opportunity as it emerges."

Goldberg describes the cable industry's earlier dalliances with cellular as being the equivalent of "bullets before cannon balls," a concept coined by business writers Jim Collins and Morten Hansen. "You fire lots of bullets and then when you figure out what you're doing you replace the bullets with cannonballs," Goldberg said. "The cable Wi-Fi rollout is becoming the cannonball." 

The top 5 reasons cable operators are making big bets on Wi-Fi

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