With residential fixed broadband penetration in North America at 78% and higher in most of Northern Europe, the notion of re-purposing each home’s Wi-Fi service to simultaneously perform as a node in a public Wi-Fi hotspot network is gaining traction.
The idea of the "homespot", is to share surplus bandwidth available at each home with roaming subscribers in the local vicinity to provide them with hotspot roaming and Wi-Fi offload services. Imagine you’re driving down the street looking for an address, you can seamlessly connect to a local Wi-Fi hotspot with a phone, tablet or laptop, and get Google maps, streetview etc. with better performance than 3G/4G and without eating into your cellular data quota.
BT in the UK has been doing this for some time, claiming to have about 500,000 Wi-Fi hotspots in and around Greater London (of which more than 475,000 are “homespots” and only a few thousand are what we typically consider as Wi-Fi hotspots at public venues, retail locations and so on. Now others are following this path.
There are a number of startup Wi-Fi providers (e.g. Fon, The Cloud, Cloud4WiFi and others) targeting SMBs and retail with a cloud managed Wi-Fi service model, combined with advanced social marketing features and visitor analytics. But that’s not all. With each new customer acquisition, they are simultaneously building a Wi-Fi hotspot network that any of their subscribers can ride. No doubt they will soon offer that footprint to MNOs for a fee or as part of a mutual roaming agreement. FON in fact, is already doing this, partnered with BT and many others in Europe they claim to have the largest Wi-Fi roaming network in the world with over 12 million hotspots.
Cable operators have a strategic asset
Meanwhile Cable operators, with their massive installed base of Wi-Fi enabled residential cable modems, have begun to realize they are sitting on something big. Once converted into homespots their networks would be a strategic asset which they can quickly monetize as a value added service to their own subscribers to make up for declining profits in video services, and to MNOs for Wi-Fi offload and Wi-Fi roaming.
Cable operator margins are getting squeezed by rising cost of content, amid gradually declining broadband subscription fees combined with a cord-cutting trend as mature mobile subscribers abandon landlines in droves. Triple play is neither as popular as they hoped, nor as profitable. So they are highly motivated to leverage Wi-Fi enabled cable modems and set-top-boxes to build out a WI-Fi homespot network.
The cost of doing so is relatively low and the time to market quick. All it requires is new firmware downloads for the CPE devices to offer dual SSIDs and Hotspot 2.0 support, plus enhancements to OSS and management systems to gain visibility and control of the homespot network. But the upside potential is enormous because cable access accounts for a very significant share of the fixed broadband market, and is still growing.
Cable dominates US fixed broadband
Out of 86.1 million U.S. households with fixed broadband Internet access, as of June 2013, cable is the dominant fixed broadband network with over 50% market share. That’s an installed base of 43 million homes, growing by 2 million new connections annually. In contrast, DSL has only 34% market share, and is actually in decline, as FTTH with 8% market share sees the fastest growth of all, at over 3% quarter on quarter.
In Northern Europe, developed Asia and other parts of the world, cable has not historically been as strong as in US markets. Nevertheless, according to latest broadband statistics from OECD for June 2013, worldwide cable penetration is 30% of the estimated 321 million fixed broadband subscriptions. Not too shabby!
In 2012 five cable companies, Cablevision, Comcast, Time Warner Cable, Cox Communications and Bright House Networks, formed a consortium called CableWiFi through which they can let their subscribers roam any of the 200,000 consortium owned hotspots. Cox has begun offering roaming on the CableWiFi network as part of a tiered service plan, and the others will follow suit. In June 2013 Comcast also announced plans to rollout homespots and has started offering a secondary public SSID in some homes for this purpose.
Clearly by using the homespot approach to exploit their installed infrastructure, cable operators will be able to unleash an enormous Wi-Fi footprint virtually overnight. They have the opportunity to deploy a carrier-class roaming hotspot service with excellent capacity and coverage to match or exceed any competitor, except another cable operator. And they can do so with an extremely low cost of entry to the market. This will be a disruptive force. Regardless whether they allow MNOs to use their network for Wi-Fi offload, it is a value added, churn-reducer they can offer to their own broadband subscribers, to enable nomadic Internet access.
But since on average cable-based broadband services have three times the download rates of DSL services, a cable-based Wi-Fi homespot network is an attractive destination for would-be Wi-Fi off-loaders. So there is good reason to assume cable operators will forge roaming agreements with as many MNOs as possible.
Service provider Wi-Fi accelerating
The demand for Wi-Fi offload continues unabated. According to Cisco’s most recent VNI report of Feb 2014, 45% of mobile traffic was offloaded to Wi-Fi in 2013, and this percentage is expected to grow to 52% by 2018. To combat the never ending growth in mobile data, service providers are doubling down on Wi-Fi infrastructure roll outs. In fact, according to the Dell‘Oro Group, global Wi-Fi sales to Service Providers have grown more than 100% per year since 2010, versus only 25%-35% annual growth for Enterprise Wi-Fi, as service providers build out their Wi-Fi hotspot and managed Wi-Fi network. The race for large Wi-Fi hotspot footprints is coming from all fronts.
While MNOs and other carriers roll out new gear to build their Wi-Fi infrastructure, Cable operators can light up national or regional homespot networks using their existing infrastructure at minimal cost, just with software upgrades. This gives them an incredible cost differential they may be able to exploit to lure new customers or even become providers of aggregated Wi-Fi roaming in their own right, challenging the likes of Boingo, iPass, FON etc.
It is the dawn of a new era of seamless Wi-Fi / Mobile roaming across heterogeneous networks. As cable operators upgrade their residential modems to homespots, they have an unrivalled opportunity to become big players in Wi-Fi roaming and Wi-Fi offload. But the winners and losers will also be decided by the roaming agreements they are able to forge with other network operators.