2013: The year carriers choose whether Wi-Fi is friend or foe

Do you remember when Verizon (s vz) actively disabled Wi-Fi radios on its handsets? Or even when most handsets didn’t have Wi-Fi radios? While it seems imaginable that we might go back to those days, some predict that in 2013 Wi-Fi’s popularity could provoke a fight between users and carriers. According to analyst firm, Informa:

There will be a shift in operator sentiment away from public Wi-Fi as it becomes evident that the growing availability of free-to-end-user Wi-Fi devalues the mobile-broadband business model. Mobile operators will respond by articulating the value of their cellular networks better, but others not affected by this trend will double down on their public Wi-Fi investments to continue to propel the deployment and monetization of Wi-Fi.

As trends go, this is somewhat wishy washy. While it uses strong language like “Wi-Fi devalues the mobile-broadband business model,” it also punts when it suggests that operators will react either by “articulating the value of their cellular networks better,” or double down on public Wi-Fi investments. If Wi-Fi is such a serious threat one would expect that carriers wouldn’t just beef up their marketing campaigns or continue investing in this technology that devalues their existing business model. But I think we will see some subtle changes occurring in Wi-Fi next year related to the conflict between carriers’ cellular networks and public Wi-Fi.

Image 1 for post "Episode VI: Return of the WiFi". AT&T adds hotspot access for iPhones (or not?)( 2008-07-18 12:15:57) Smartphones recently overtook laptops as the top users of Wi-Fi connections according to a study earlier this year by Informa. My colleague Kevin Tofel says this trend is likely driven by the availability of Wi-Fi, a shift to an always-connected society and carriers moving away from unlimited data plans.

But while carriers have been touting Wi-Fi as an offload strategy to help keep customers off overburdened cellular networks, several industry analysts are pointing out that network traffic has stopped growing as fast as it had been in the last five years as data caps take effect and users turn to Wi-Fi. And if users turn too far over to Wi-Fi, which does cost someone money for the backhaul pipe to the internet, carriers may see their revenues decline slightly. After all why pay for 10 GB plan if you can regularly get away with only using 3 GB per month thanks to ubiquitous Wi-Fi?

To avoid that drop in revenue, I wonder if we’ll start seeing Wi-Fi subscriptions offered by carriers. Much like the Boingo (s wifi) or iPass models, customers would pay a set amount (maybe $5 or $10 a month) for access to a worldwide Wi-Fi network from their ISP or their wireless carrier. AT&T (s T) thanks to its ownership of Wayport, might be in the best position to do this, although it’s also a service that a fixed line ISP might also offer. The fact that no one has a fixed monopoly on Wi-Fi makes this a difficult trend for mobile operators to control.

For example Republic Wireless, a mobile virtual network operator, has created a service that primarily relies on Wi-Fi for connectivity and defaults back to the cell network. Republic sells its service for $19 a month, far less than what people pay carriers. Thus, if carriers seek to monetize their Wi-Fi they are going to have to figure out how to create a service that’s better than what most users cobble together on their own day in and day out. Wireless operators can’t put the Wi-Fi genie back in the bottle, but there’s no reason to think they won’t try to control it for as long as they can. Better services and their connection to the handsets might help them keep control a bit longer. I think we’ll see more of that in the year ahead.