Network planning departments in cellular operators are primarily focussed on lowering the cost of production. If small cells are cheaper than macrocells, they'll consider using them. The primary beneficiary is their end customer, the smartphone user. Some operators look at Carrier Wi-Fi purely from this perspective.
Meanwhile Wi-Fi operators have had to be much more creative and develop a variety of business models to justify deployment. There's a greater focus on the benefits to the venue owner than just the end user (who may be getting the service for free), and on indoor rather than outdoor use.
Andy Baker, who runs BT Wi-Fi, lists five tenets of the Service Provider Wi-Fi business case. More than one often applies in any given scenario, and individually they may not be viable on their own. We've compared these to the current mentality of a mobile operator and considered if they could equally apply for cellular service.
Free access to nationwide and overseas hotspots
This results in more new customers for their home broadband fixed network service, which bundles the free access package. It's worthwhile for BT Broadband to subsidise the service on this basis – only a few percent of their total traffic is handled this way. You could argue that it is simply shifting traffic use from your home when you're not there to another access point rather than generating any additional traffic. Reciprocal roaming deals probably mean there is a net-neutral cost for inbound and outbound roaming traffic.
I think it will be a long time before we can expect free international roaming on cellular networks. The EU regulator has made some strong moves towards making data costs the same at home as elsewhere in Europe, but this doesn't apply to non-European visitors or when travelling further afield. Some multi-national operator groups already offer some good deals, such as Telefonica's 2 Euro ($2) /day package for 25MB when in other European countries. A great examples of free cellular roaming across large regions, where calls and data can be used at local rates throughout, is where Zain (who acquired Celtel)offer the same local rates throughout 12 countries across Africa, covering a population of 400 million people and effectively abolishing roaming surcharges – something European regulators can only dream of.
In many cases, cellular operators have bundled free access to partner Service Provider Wi-Fi hotspots in order to improve the overall service they provide. This has been one justification to build out networks of their own, such as Telefonica O2 in London, AT&T/Verizon in the US, or the much larger ones in Korea, Japan and China. An Informa report indicated that Wi-Fi data in China Mobile was priced at a tiny fraction of the cost (84 times less).
Paid For access through vouchers and subscriptions
Subscriptions, whether prepaid or postpaid, are a staple of cellular service and are easily understood for Wi-Fi too. Casual access using vouchers or paying online by credit card are probably more common. It must be both easy and secure for new and unknown customers to use the system.
On mobile networks when travelling abroad, prepaid SIM cards can often be bought from vending machines or local kiosks. When I was on holiday in Croatia last year, the local price per Mbyte was around 1000x cheaper than roaming data. In France, I couldn't find any prepaid SIM card available over the counter that included a data tariff. Strict regulations being brought in by the European Union may put a stop to what are seen as extortionate data roaming charges. This may increase revenues, where travellers are comparing prices with the sometimes pricey hotel Wi-Fi package.
There has plenty of activity by many startups and other companies attempting to find ways to monetise the captive smartphone audience. Wi-Fi operators adopt a variety of techniques ranging from adding a sponsored (Google) search bar to displaying sponsored content. Ads can also be displayed on the logon pages used to gain access to the system – something that might disappear with the adoption of HotSpot 2.0 seamless authentication.
One extra benefit that Wi-Fi has is that it can locate and track users with quite a short range. This can be done regardless of whether they connect and use Wi-Fi, providing an aggregate view of how users flow through buildings and where they spend most time. The aggregate data is valuable to venue owners in its own right, but can then also be tied to location specific marketing messages.
Small cells could potentially also achieve similar goals. Techniques which use Wi-Fi to provide or refine the user's location whilst using the cellular radio would be even better.
Offload and Sharing
Wi-Fi has been seen by many mobile operators as a low cost way to deliver data to their customers. Wholesale arrangements with Wi-Fi aggregators provide a cheaper solution than building out more of their own network capacity, offloading traffic when and where possible. This provides a good revenue stream for Wi-Fi operators, usually paid on a per Gbyte capacity basis.
One downside is that traffic steering mechanisms (the so-called policy engine on your smartphone) aren't often smart enough to determine when to switch to Wi-Fi and when not to. Entering a busy Starbucks, you might find yourself automatically logged onto their Wi-Fi system, along with the rest of the rush-hour crowd.
Another potential downside is that there may be plenty of spare capacity on the cellular network at off-peak times of day. Simple rules which drive traffic to the nearest Wi-Fi partner hotspot mean that mobile operators can end up paying for wholesale traffic when they could have delivered it themselves at no additional cost.
Partnering with venue owners, including hotels, shops and property companies
Venue owners, be it those catering for members of the public or those primarily serving their own employees, really do care about providing good quality wireless connectivity. They invest considerably in equipment to do so. This extends to considering whether those industrial sized microwave ovens (which inconveniently radiate on the 2.4GHz unlicenced Wi-Fi band) are really necessary, and identifying any other sources of interference.
Hotels of all sizes often recognise that a professional Wi-Fi service isn't their primary expertise and outsource this to specialist companies or organisations. In some cases, this may be outsourced by Enterprises, perhaps alongside outsourcing their IT systems. This package would include telephone helpline and remote monitoring services.
Cellular operators do also partner with venue owners, and even with their competitors. The cost of large and expensive DAS systems may be shared between multiple cellular networks and/or the venue itself. I've heard of property developers spending $100K's to install a shared DAS with operators providing the basestations to connect to it.
Shared revenues with the venue owners don't seem to come into the picture for cellular although they may do for Wi-Fi. Instead, very high site rental charges may be squeezed out by the property owner. Large airports may be a good example, where the cellular service from some operators who aren't prepared to pay such high fees is poor. Whether than then reflects poorly on the airport or the operator is debatable – I'm sure both suffer to some extent.
Small cells, being cheaper to install than DAS, but currently locked to a single network operator, present a different case to Wi-Fi. Potentially, venue owners could pay and install them directly (just like Wi-Fi), outsource their installation and running to an intermediary company (more like a cell tower business model) or directly negotiate with multiple cellular operators.
The mobile industry has something to learn from it's Service Provider Wi-Fi cousins, who have persevered to make a profit in a much more challenging environment. The five tenets of the SP Wi-Fi business case may not all transfer easily across to the traditional cellular world, but there are several lessons to be learned.
I'm sure there is a place for both radio technologies to complement each other in the long term. Perhaps this also applies to their business models.