How to Monetize Wi-Fi Remains a Key Question

Historically, it has not been clear precisely how most Wi-Fi hotspot networks can create a viable business model. In most cases, the business case relies on indirect drivers.

For consumer or business Wi-Fi applications, the service provider business case relies on indirectly on Wi-Fi, and directly on the revenue stream created by Internet access service.

That is why cable TV companies, fixed network telcos and mobile operators built their own amenity hotspot networks. Doing so provided additional value for subscribers to their respective Internet access services.

A few providers such as Boingo have built businesses serving traveling workers, with direct revenue streams.

Some would argue the business model continues to be challenged. Most Wi-Fi operators spend more money on equipment than they collect in Wi-Fi service revenues, Madden argues.

Mobile operators also face declining average revenue per user, even as they are compelled to keep investing in additional capacity.

So Madden argues roaming partnerships are the obvious answer. There are challenges, to be sure. Wi-Fi interests are not happy about mobile proposals to incorporate Wi-Fi networks into their Long Term Evolution protocols, allowing mobile operators the ability to bond Wi-Fi with mobile capacity.

LTE-Licensed Assured Access (LTE-LAA)and Wi-Fi Link Aggregation (LWA) provide examples, he says.

LTE-LAA drops the cost per bit of LTE services, up to 10 times. In fact an LAA small cell will actually carry more capacity than a macro LTE sector, at a fraction of the cost. Also, LAA, as a matter of billing, looks to the consumer just like consumption wholly on the mobile network. There’s your monetization plan, at least for tier one mobile providers.

LWA, on the other hand, could help smaller mobile operators. Network operators that don’t have strong LTE coverage would not benefit much from LTE-LAA, because they won’t be able to maintain an LTE anchor channel most of the time.

These operators are more likely to select LWA (LTE-Wi-Fi Aggregation), where LTE is used when it’s available, but Wi-Fi is used at other times.

This approach still uses an LTE control channel wherever possible, but allows for wider use of Wi-Fi networks owned by other players. The key benefit of LWA for the mobile operator: LWA avoids the multi-billion dollar expense of building out widespread LTE coverage. The cost-sensitive tier of the mobile market, including prepaid users and many urban users, will go in this direction, Madden argues.

Madden expects many LTE operators will use both approaches, with LTE-LAA where small cells are deployed and LWA in other locations.

“If the big cable companies and wireline Wi-Fi providers are willing to open up a Hotspot 2.0 roaming deal with major mobile operators, then we see a path toward healthy profit for everyone,” Madden argues.