The business case for next-generation hotspots

Next-generation hotspot (NGH) is an emerging technology set to redefine how our devices interact with wireless networks

Next-generation hotspot (NGH) is an emerging technology set to redefine how our devices interact with wireless networks.

From the user's perspective, NGH is a significant milestone towards the “always on, always connected” society. Devices will automatically be able to choose the best available Wi-Fi network and they will do so without any interaction from the user – in a similar way to how mobile phones transfer seamlessly from one cell to another.

This certainly seems the holy grail of connectivity; but for this new technology to become truly pervasive, there must be a business case for all parties involved.

Why, for example, would a mobile service provider (MSP) happily hand its traffic over to a third party? And why would a hotspot provider happily accept traffic from an MSP? Fortunately, the business case is strong.

Business case for mobile service providers

Demand for cellular data is rapidly outstripping supply. Cisco’s most recent Visual Networking Index found that global mobile data traffic grew 81% in 2013. This is expected to increase by a further eleven-fold by 2018. The simple fact is that MSPs have no choice but to look for alternative methods for providing connectivity.

The answer comes in the form of small cells – low-powered radio access nodes used to offload traffic from the primary cellular network. Using this technique to balance the load on the network, the question then becomes: which mobile data technology should be employed?

3G is not an efficient way to transport data. The technology's narrow channel widths mean a lower throughput, which, in turn, makes it more expensive to deploy in any meaningful fashion.

4G significantly improves the situation, but it can't hold a candle to the efficacy of Wi-Fi. High throughput, combined with low deployment cost, makes Wi-Fi an ideal data offload solution.

Therefore, Wi-Fi offload strategies have already become commonplace. In 2013, 45% of all data traffic was offloaded to fixed networks using either Wi-Fi or femtocells. Wi-Fi is an effective and cost-efficient data management strategy, which is why MSPs are rapidly expanding the footprint of their hotspot coverage.

However, no matter how quickly MSPs throw up cost-effective hotspot networks, they will never have the same coverage that bespoke Wi-Fi providers have. The Cloud, a UK hotspot provider, has more than 11,000 access points covering pubs, restaurants and cafes across the country.

Fon, a company that has made its name by piggybacking on home broadband connections to offer its members connectivity, has more than eight million hotspots around the world.

It is at this juncture that NGH becomes an attractive proposition. Why spend millions bolstering infrastructure when someone else has already done all the hard work for you?

With this kind of coverage already established, new relationships are likely to emerge. Just as GSM ushered in an era of roaming agreements around the world, NGH will do the same.

This can already be seen in action – last year AT&T and Boingo announced a partnership that opened up Boingo’s considerable airport hotspot network to AT&T customers.

Business case for hotspot providers

From the perspective of hotspot providers, the upside of these new relationships will be obvious. The Wireless Broadband Alliance, the organisation spearheading NGH, has been working to ensure usage can be tracked and billed accurately. Hotspot providers will be able to generate additional revenue simply by entering into agreements with MSPs.

At a top level, this really does seem like a win-win technology. MSPs can expand their global footprint overnight, hotspot providers will have additional revenue streams, and users will have the assurance they will never be far from high-speed connectivity.

Yet this trinity of connective bliss all hinges on one thing: cost. For MSPs to actively forge new relationships with roaming partners, the cost-profit ratio needs to look healthy. And with NGH only just getting off the ground, how does anyone know how cost-effective it will be?

With NGH only just getting off the ground, how does anyone know just how cost-effective it will be?

The most thorough analysis done so far has come from consultancy Senza Fili. The firm built a robust total cost of ownership (TCO) model and applied it to several scenarios.

Its findings were that mobile operators could reduce their per-bit costs by 18% if they carried 20% of their traffic through NGH Wi-Fi.

When used in conjunction with 4G small cells, these savings rose to 38%. Monica Paolini, president of Senza Fili, estimates that by 2018, NGH could represent $150bn in cost savings for MSPs.

The future looks bright

So no matter which way we look at this, the stage seems set for a revolution in mobile connectivity. NGH will enable service providers to neatly sidestep the impending spectrum crunch while dramatically reducing costs. 

Hotspot providers will be able to generate revenue from their established networks; and, last but not least, we customers will be able to move around the globe, confident that our phones and tablets are actively looking for the perfect connection, regardless of whether we are indoors or outdoors.

But many questions remain unanswered. How will MSPs vet hotspot providers? After all, it will be their brand that suffers if consumers have a less-than-perfect experience.

Will independent hotspots, such as those in shops and cafes, get a look in on the action?

Will the savings experienced by MSPs trickle down to customers, or will we pay more for the privilege of being able to connect seamlessly to hotspots around the world? What will the impact be on the traditionally extortionate international data roaming agreements?

These are questions that can be answered only when NGH begins to take off – and, everything considered, it almost certainly will take off. For a long time, Wi-Fi and the cellular network have been competing technologies. NGH has amalgamated the two technologies into one ubiquitous solution.

Nobody can say for sure what impact NGH will have on the mobile data landscape, but one thing is certain: the opportunities are looking increasingly attractive.

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