‘Wi-Fi First’ market update
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Transcript of ‘Wi-Fi First’ market update
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T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .
Technology Business Research (TBR) Webinar Series Wi-Fi First: Wi-Fi poised to disrupt cellular model July 9, 2015
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2 TBR Webinar Series | 7.9.15 | www.tbri.com | ©2015 Technology Business Research Inc.
Chris Antlitz Telecom Senior Analyst
Email: [email protected] Twitter: @chrisNMP
Wi-Fi First: Wi-Fi poised to disrupt cellular model
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TBR’s Networking and Mobility Practice covers telecom operators and network vendors globally
NMP Overview
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Telecom Market Landscapes: Description
MARKET LANDSCAPE
Includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities
Telecom Market Landscape Portfolio
SMALL CELL
5G
ALTERNATIVE NETWORK PROVIDERS
NFV
Wi-Fi is a subset of TBR’s research on the Alternative Network Providers market.
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Wi-Fi terminology is expanding as the ecosystem develops
Definitions
Term Definition
Wi-Fi A local area wireless networking technology that uses unlicensed spectrum
Wi-Fi Operator
A service provider that provides access to a Wi-Fi network to its subscribers
Wi-Fi First Prioritizing the use of Wi-Fi for voice, text and data, using cellular only as a backup for coverage when not in a Wi-Fi zone
Wi-Fi Only Using Wi-Fi exclusively for voice, text and data
Wi-Fi operators are a disruptive force to the traditional telecom business model, and they are considered alternative network providers because they aim to provide network access at a price significantly lower than traditional cellular services.
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The majority of households in the U.S. have Wi-Fi coverage.
Wi-Fi coverage is pervasive in the U.S., and these networks are being leveraged for significant data offload
Introduction: Setting the Stage
Note: This webinar focuses on the U.S. Wi-Fi market.
115 million+
Some Tier 1 U.S. cities, such as New York, have nearly ubiquitous Wi-Fi coverage.
Over 75% of all mobile traffic is generated indoors.
Most smartphone subscribers leverage Wi-Fi offload to reduce how much they draw off their cellular plan buckets.
Most highly trafficked locations have Wi-Fi:
• Hotels • Stadiums • Subways
• Airports • Chain restaurants
Most connected devices leverage Wi-Fi for connectivity:
• Tablets • e-readers
• Wearables • Monitors
Most commercial buildings in the U.S. have some Wi-Fi access.
75%
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Wi-Fi becomes a viable alternative to cellular
Business Models
Traditional Model: Cellular Only
Alternative Model: Wi-Fi First + Cellular or Wi-Fi Only
• Relatively expensive (licensed spectrum plus capex plus opex)
• Traffic monetized
• Optimized and seamless user experience
• Outdoor coverage is pervasive; indoor is challenged.
• Optimized traffic management
• Relatively inexpensive to own and operate (leverages unlicensed spectrum, Wi-Fi hotspots and backhaul; cost savings passed on to subscribers)
• Content, retail, ads and cellular monetized
• Improvements being made in handover and coordination are making service good enough in comparison to cellular.
• Outdoor coverage has big gaps for Wi-Fi only; indoor is pervasive.
• Access points can get overwhelmed.
• Wi-Fi is the lowest-cost, highest-impact way to deliver wireless connectivity.
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The economics of cellular are unsustainable compared to Wi-Fi
Economics of Wi-Fi versus Cellular
$44,900
$0
$10,000
$20,000
$30,000
$40,000
$50,000
AWS - 3 Spectrum Unlicensed (Wi-Fi) Spectrum
In $
Mill
ion
s
SPECTRUM COST COMPARISON TBR
Free
Source: TBR Data
$6,900
$600
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
RAN Wi-Fi
In $
Mill
ion
s
2014 U.S. ACCESS SPEND COMPARISON TBR
Source: TBR Data
Spectrum costs have been increasing relentlessly. Something has to give because operators are increasingly struggling to monetize these assets.
The cost per bit of Wi-Fi is vastly lower compared to cellular RAN.
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Wi-Fi operators can charge far less than cellular carriers for plans, saving individual consumers hundreds of dollars annually
Plan Pricing Comparison
Annual Plan Cost $711.48 $359.40 $177.36 $119.40 Free
Annual Cost Savings over Cellular
$0.00 $352.08 $534.12 $592.08 $711.48
$59.29
$29.95
$14.78 $9.95
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Tier 1 U.S.Cellular
Operators
CablevisionNon-Internet
Sub
RepublicWireless
CablevisionInternet Sub
ScratchWireless
AR
PU
ARPU COMPARISON
Source: TBR Data
TBR
Free
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CableWiFi Alliance
A cable consortium focused on building nationwide Wi-Fi footprint with 400,000 hot spots and counting; prepping for Wi-Fi voice and text service and leveraging as an incremental revenue driver and churn reducer
Freewheel
Wi-Fi Only offering introduced by Cablevision; unlimited free voice, text and data
Comcast
Comcast is aggressively deploying dual gateway SSID routers in preparation for its Wi-Fi First/Only service.
Wi-Fi First + Cellular model
Republic Wireless and others are eliminating the coverage gap by using cellular where necessary, but the majority (75%-plus) of traffic flows through a Wi-Fi network.
Google Sidewalk Labs
Converting old phone booths in New York into Wi-Fi hot spots and charging stations
Telecom Wi-Fi
Incumbent operators are disrupting themselves by offering their own Wi-Fi services (e.g., T-Mobile Wi-Fi Calling).
Wi-Fi ECOSYSTEM
2
1
4
6
3 5
1
2
3
4
5
6
The Wi-Fi ecosystem is dynamic and growing rapidly
Wi-Fi Ecosystem Key Developments
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Wi-Fi has some shortcomings that will need to be addressed before it can fully challenge cellular
Shortcomings of Wi-Fi
Wi-Fi stakeholders and standards bodies are focused on addressing Wi-Fi’s shortcomings.
Limited device selection
Consumers want choices.
Coverage gaps
Addressed using cellular as back up or deploying more access points
with coordination technology
Handover
Needs to be seamless; coordination currently
not optimized
Quality
Need to better manage the access point
Security
Needs to improve
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Cellular still has a future in a Wi-Fi First world
Future of Cellular
Cellular will become de facto fall back to Wi-Fi
Particularly in suburban and rural areas
Mission-critical use cases
Government, healthcare, large enterprise, etc.
M2M solutions
Connected car and medical devices
Cellular operators will continue to have a love-hate relationship with Wi-Fi. The technology poses a significant threat to the cellular business model, but helps reduce the cost per bit and enhances indoor coverage where cellular doesn’t penetrate well.
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Incumbent telecom operators will be blindsided by the Wi-Fi revolution if they don’t start preparing now
Implications for Incumbent Telecom Operators
Revenue will decline as subscribers defect to Wi-Fi plans.
Cash flow will decline because ARPUs will be in race to the bottom as operators try to stem subscriber losses.
Operators will need to bring new revenue streams to market to offset cannibalization of access business.
Access will become a commoditized sunk cost; the real value lies in value-added services with some room for a premium provider.
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Operators should leverage Wi-Fi to enhance their businesses while focusing on building revenue-generating businesses
Recommendations for Incumbent Telecom Operators
Prioritize network analytics to monetize cellular.
Leverage Wi-Fi to enhance indoor coverage and focus on selling premium service.
Promote network quality to retain subscribers.
Outsource network operations to reduce opex and stave off margin erosion.
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Disruption will hurt some vendors and help others; balance of power will shift from cellular-centric vendors to Wi-Fi-centric vendors
Implications for Network Vendors
High Risk
Wi-Fi is threat
Low Risk
Wi-Fi is opportunity
• Alcatel-Lucent
• Nokia Networks
• Ericsson
• Huawei
• ZTE
• Samsung
• Cisco
• HP (Aruba)
• Ruckus Wireless
• Motorola Solutions
• Arris
• Pace
• Aerohive Networks
• Aptilo Networks
• Other Wi-Fi vendors
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Vendors need to provide converged cellular-Wi-Fi solutions to customers while adapting businesses to be more services-oriented
Recommendations for Network Vendors
Build up value-added services portfolio to
help operators identify and implement new revenue-generating
businesses.
Promote LTE-LAA and related technologies to
leverage Wi-Fi spectrum and improve cellular coverage and quality.
Accelerate downsizing of “old” business and make room for new.
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Wi-Fi economics are superior to cellular and shortcomings will ultimately be addressed.
Cellular will still have a role to play in a Wi-Fi First world, but operators need to adapt.
Network vendors must transition with customers to Wi-Fi- centric world.
Wi-Fi disruption is at the doorstep and industry participants must recognize and adapt to this market transition
Conclusion
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Wi-Fi First: Wi-Fi poised to disrupt cellular model
James McIlroy Vice President of Sales Email: [email protected] Telephone: 603.929.1166
Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel LinkedIn: www.linkedin.com/company/technology-business-research
Chris Antlitz Telecom Senior Analyst
Email: [email protected] Twitter: @chrisNMP Phone: 603.758.1850
Q&A
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Telecom Syndicated Research Coverage Telecom Vendors Operators Benchmarks
• Alcatel-Lucent • Cisco Systems • Ericsson • HP Telecom & Mobility* • Huawei* • IBM Telecom & Mobility* • Juniper Networks • Microsoft Telecom & Mobility • Nokia Networks • Samsung Networks • ZTE*
• AT&T • Comcast • Sprint • T-Mobile USA • Time Warner Cable • Verizon
• Carrier Cloud Benchmark*
• Enterprise Operator Benchmark*
• Telecom Vendor Benchmark
o Telecom Infrastructure Services (TIS)
Telecom Infrastructure Services Benchmark
Telecom Infrastructure Services Margin Benchmark**
Telecom Infrastructure Services Global Market Forecast**
Telecom Infrastructure Services North America Market Forecast**
• U.S. & Canada Mobile Operator Benchmark
Market Research
• Alternative Network Providers Market Landscape* • Carrier Cloud Market Forecast** • 5G Market Landscape* • NFV Market Forecast** • NFV Market Landscape* • Small-cell Market Landscape* • Telecom Software Mediated Networks Customer Adoption Study* • Wi-Fi First Market Landscape*
TBR Telecom Syndicated Coverage
*Semiannual Report **Annual Report
About Us Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators.
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