For the past 3-4 years, countless articles and blogs have proclaimed that "Wi-Fi and mobile services are no longer competitive." "Mobile operators no longer see Wi-Fi as 'the enemy'." "The technologies are complementary." This was a hopeful song to sing, but the reality of the American market is coming out quite differently.
First of all, over the past four years we have seen little investment in Wi-Fi networks by American mobile operators. It's different internationally, with millions of APs at China Mobile, KDDI, SKT, Telefonica, and others, but a close examination of Verizon Wireless and AT&T reveals that they have deployed very few Wi-Fi access points.
Meanwhile, cable companies have been investing heavily. Cable operators have the backhaul, and in many cases they have an easy way to mount outdoor APs in a convenient location, 15-20 feet above the street. Cable operators also have the opportunity to upgrade software in consumer cable modem/Wi-Fi routers, to offer a public SSID in a "homespot." In the United States, cable operators have quickly deployed more than 20 times the number of hotspots owned by mobile operators, plus millions of homespots.
To check on the Comcast deployment locally, I took a walk from my office in Silicon Valley. Within 200 meters, there are five Comcast access points, including four at local businesses and one outdoor AP, hanging from the overhead cable. There are no small cells or APs owned by mobile operators within 5 miles of my office. Cable operators will deploy more than 500,000 hotspots in 2014, plus 7 million homespots. American mobile operators are far behind, and don't seem to realize it--AT&T still boasts about 20,000 hotspots as if that's a big number.
Mobile operators are making a sensible technology choice, to integrate small cells and Wi-Fi, and then develop License-Assisted Access (LAA) to aggregate licensed and unlicensed spectrum. As an engineer, I can see the logic of this path, which offers the best quality of service through LTE signaling, with lower cost through the use of Wi-Fi spectrum. However, while we wait several years for the technology to come together, the mobile operators are missing their opportunity to partner with the cable operators.
Now that cable operators have millions of APs (both hotspots and homespots), and Wi-Fi calling has been introduced on iPhone and other platforms, the cable operators can offer services in direct competition with the mobile operators. Don't like paying Verizon $70/month for your mobile plan? You can buy a plan with unlimited voice/text/data for $5/month from Republic Wireless or even free from Scratch Wireless, using a Wi-Fi network that comes for free along with the cable bill. This option doesn't work for everyone, but for urban users that spend 90 percent of their time in Wi-Fi coverage, it's a great deal.
T-Mobile US is also moving in this direction, with a new push toward Wi-Fi calling on its smartphones. Sprint supports Scratch Wireless with pay-by-the-day mobile connectivity, which kicks in when Wi-Fi is not available. These two players have accepted the idea that the lower tier of the market will pay $5 per month or less for true mobility.
In my opinion, Verizon and AT&T have made a critical blunder. Both companies should move quickly to partner with CableLabs consortium members, before the competition becomes intense and ARPU takes a dive.
Joe Madden is Principal Analyst at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provide market analysis on the mobile infrastructure and mobile handset markets. He provides market forecasts for handset, DAS, small cell, and base station markets, with in-depth research down to the nitty gritty details of frequency bands and power levels. Mr. Madden graduated, cum laude, from UCLA in 1989 and is a Silicon Valley veteran. He has survived IPOs, LBOs, divestitures, acquistions, and mergers during his 24 years in mobile communications.