Making Money from Wi-Fi
The insatiable demand for smartphones, tablets, and other connected devices is generating staggering amounts of mobile data. The much-quoted Cisco Visual Networking Index (VNI) predicts that global mobile data traffic will increase 18-fold from 2011 to 2016, reaching 10.8 exabytes per month. In tandem, the use of 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 it as the “poor cousin” to licensed mobile communications. And they most certainly never considered a 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 should, play a significant role in reducing clogged networks and the number of unhappy customers.
Mobile operators understand that off-loading data traffic to cheaper Wi-Fi defers significant capital expenditures for further build-out of the licensed network. Operators around the world however, are asking if there is more to Wi-Fi than just data offload? Can they actually make money from Wi-Fi by turning the cost of doing business into profitable business models? The simple answer is yes. In fact, Cisco Internet Business Group (IBSG) has identified and built 15 business models – beyond data off-loading – that offer significant benefits to service providers.
The recently published IBSG white paper, Profiting from the Rise of Wi-Fi, describes these business models in more detail, which essentially fall into four different categories:
1. Business Effectiveness – using Wi-Fi access networks to decrease operational costs or improve customer retention and service differentiation
2. End-User Services – solutions for business and consumer end users using Wi-Fi for internet connectivity for their devices (e.g., smartphones, tablets, laptops)
3. Inter-Carrier Wholesale – providing Wi-Fi-based services to other service providers, (e.g., Cellular Network Operators, Wi-Fi Providers)
4. Value-Added Services – enhancing basic Wi-Fi access with additional services and alternative funding models
As the pervasiveness and customer adoption of Wi-Fi continues to grow exponentially, these new business models provide real and meaningful opportunities for service providers. For example, we are seeing home broadband providers improve their customer retention by 10 to 15 percent through bundling access to free public Wi-Fi with their broadband service. In addition, we believe that operators can generate $10‑15 per business user per month for a Wi-Fi enabled “Business Anywhere Service.” Or, an incremental $100-150 per retail store for 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 take our word for it. End users tell us that they want these new Wi‑Fi business models and truly see value in them. Unique customer research that IBSG has recently completed reveals that not only do mobile users appreciate the lower cost and unlimited data usage of Wi-Fi, but they greatly value the flexibility and convenience that it offers. In particular, customers were very interested in the national/international roaming business model or the Wi-Fi value-added retail offering that would make them more efficient, save them money, and enhance their shopping experience. Remarkably, 61% of US broadband subscribers, who identified that free public Wi-Fi was part of their subscription, told us that the inclusion of Wi-Fi was very or extremely important in their choice of broadband provider. This inclusion is not only a good way to attract subscribers, but to keep them as well.
Of course, not all business models are attractive to all service provider segments. It’s not enough to simply align the business models to the different industry segments; we also need to set priorities and a plan of where to start. We feel that this research, insights, and approach arm SPs with guidelines for setting priorities and determining which approach is best for making real money from Wi‑Fi.