Will "Wi-Fi First" Work as a Revenue Model in U.S. Market?

How effective might “Wi-Fi first” or “Wi-Fi only” mobile services prove to be, in the U.S. market? Most observers in the U.S. cable TV industry, and a few mobile operators, tend to be sanguine.

Cable TV operators tend to be optimistic for several reasons. It already is clear that large networks of small cells (Wi-Fi today, carrier Wi-Fi and mobile small cells in the future) are going to be necessary, which means lots of backhaul.

And cable operators would argue they have the best network of “small cells” and the backhaul to support retail operations or supply wholesale connections to others. Either way, there is revenue to be had.

There are, in other words, a few potential revenue models. A cable operator might launch its own mobile virtual network operator service, hoping to wring higher margins by offloading lots of traffic to its own Wi-Fi or small cell network.

A few cable operators might consider a strategy that includes buying or becoming a facilities-based mobile operator, using the offload capability largely for capacity gains at its heavy-traffic areas, or for stationary indoor uses.

Alternatively, the network could support wholesale capacity sales to third parties who need backhaul or access to large Wi-Fi hotspot networks.

Much depends on assumptions about present and future data usage, coverage expectations and use modes. In other words, what apps people want to use, where they want to do so, and what else they are doing makes a big difference.

If “most” data is consumed in homes, at offices or other stationary locations, then a dense small cell network will provide lots of value. Conversely, if devices are used frequently for voice and text messaging, and less often for stationary data consumption, the small network provides less value.

Also, the value of any such network will depend on density, both of the network nodes and potential users routinely near the nodes. The greatest value likely will be obtained in busy urban areas, the least value in rural or suburban areas.

Some might argue the amount of traffic offload to the owned public Wi-Fi networks being built by Comcast and others will never be sufficiently large to provide a robust business case. But that might be workable especially if there are multiple revenue opportunities.

That is the underpinning of the “Wi-Fi first” mobile strategy for contestants who do not own their own mobile networks, but can create an owned small cell network.