Today’s world is characterized by what I call the “mobile explosion”—an environment defined by mobile cloud becoming a platform for delivering everything. It is a world of heterogeneous networks, licensed macro small cell networks, and unlicensed small cell networks (Wi-Fi for example), all seamlessly combined. In this world, however, I believe we are facing a mobile paradox: on the one hand, there is a staggering demand for data from our smartphones, tablets, and other connected devices; on the other hand, the telecommunications industry is grappling with business and monetization challenges around profitability, how to build up these networks fast enough, and competition from over-the-top (OTT) operators.  But, operators are struggling with building the business case and understanding how to make Wi-Fi pay.

 

The much quoted Cisco Visual Networking Index (VNI) 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 unlicensed small cell networks (Wi-Fi) for Internet access is exploding as more mobile devices are Wi-Fi-enabled, the number of public hotspots expands, and user acceptance grows. Until recently, most technologists and mobile industry executives viewed Wi-Fi as the “poor cousin” to licensed mobile communications.  And they most certainly never saw any role for Wi-Fi in mobile networks or their business. The explosion 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 avoid clogged networks and unhappy customers.

 

In the “Business Models and Monetization Video” in Big Thinkers in Small Cells, my colleagues and I discuss revenue opportunities and challenges mobile operators face today with small cells, both licensed and unlicensed. Mobile operators understand the business case behind offloading data traffic to cheaper Wi-Fi—deferring significant capital expenditures for further build-out of the licensed network.  However, operators around the world are asking if there is more to Wi-Fi than just data offload (the simple answer is “yes”). Or, more appropriately, how do they actually make money from Wi-Fi—turning a cost of doing business into profitable business models?

 

The Cisco Internet Business Group (IBSG) has identified and built business cases with service providers around additional ways to benefit from Wi-Fi, beyond data offloading. Our recent white paper (Wi-Fi: Service Providers Can Make Money with New Business Models) describes each of these business models in more detail – laying out the economics and providing case studies of success operators. 

 

As the pervasiveness and customer adoption of Wi-Fi continue to grow exponentially, these new business models provide meaningful opportunities for service providers. For example, we are seeing home broadband providers improve their customer retention by 10 to 15 percent by bundling their broadband service with access to free public Wi-Fi. In addition, we believe that operators can generate $10 to $15 per business user monthly by establishing a Wi-Fi-enabled “Business Anywhere Service.” Or, the could drive an incremental $100-$150 per retail store by delivering enhanced, value-added retail experiences, 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 just take my word for it. End users tell us that they want these new Wi‑Fi business models and truly see value in them. Unique Cisco IBSG customer research revealed that mobile users not only appreciate the lower cost and unlimited data usage of Wi-Fi, but also greatly value the flexibility and convenience that it offers. In particular, customers were very interested in the national/international roaming business model and the Wi-Fi value-added retail offering that would make them more efficient, save them money, and enhance their shopping experience. Remarkably, among U.S. broadband subscribers we surveyed who have free public Wi-Fi as part of their subscription, 61 percent said the inclusion of Wi-Fi was “very” or “extremely” important in their choice of broadband provider. Wi-Fi is a good way not only to attract subscribers, but to keep them as well.

 

Of course, not all business models are attractive to all service provider segments. In addition to aligning the business models to different industry segments, providers need to set priorities and plan where to start. 

 

We feel that Cisco IBSG’s research, insights, and approach arm SPs with guidelines for setting priorities and determining which approach is best for making real money from all small cell technologies. Click here to learn more about what additional Big Thinkers in Small Cells have to say about Business Model and Monetization Opportunities.

 

This is blog 3 of a new blog series Trends in Mobility on the Cisco SP Mobility Community. Read the next blog post for this series Trends in Mobility #4: Wi-Fi Technology Delivers New Value to Service Providers

 

About the Author

Stuart Taylor's further industry research, insights and perspectives can be found at his blog The Connected Life

Follow Stuart Taylor on Twitter: @STaylorCisco

 

More Resources

Trends in Mobility #1: The Next Generation of the Internet is Mobile By: Stuart Taylor

Trends in Mobility #2: The Future of the Mobile Industry By: Stuart Taylor

Trends in Mobility #5: Mobile Business Users Connect with Wi-Fi By: Stuart Taylor

White Paper: The New Mobile World Order - Perspectives on the Future of the Mobile Industry

POV Paper: The Next Generation of the Internet Revolutionizing the Way We Work, Live, Play, and Learn (PDF)