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6 March 2014

BandwidthX WiFi marketplace will slash MNO capex

A whitepaper and cost model produced with the help of consulting group Wireless 20/20 reaches the clear conclusion that MNOs will end up buying extra WiFi capacity from ISPs on a pay-as-you-go basis. They will be motivated because the cost will be so much less than building the extra capacity themselves. One particular bandwidth exchange, BandwidthX is the focus of the report, as it provides a marketplace to bring what it calls Dark WiFi from ISPs to MNOs.

Companies with access to unused WiFi, usually in the form of homespots or the spare capacity in amenity WiFi hotspots, can use the marketplace to connect with those MNOs who need extra capacity. Both buyer and seller enter a number of criteria for their offering or needs and BandwidthX will automatically connect deals which match.

BandwidthX claims that the service manages billing, QoE and QoS monitoring. The advantages of such a system to MNOs is fairly obvious, as it allows them to avoid capex investment in building a network to handle peak data rates. As a WiFi network already exists (in the example instance of the marketplace) the cellular operator can use the pre-existing WiFi network and does not have to build an overlapping network itself.

The marketplace is cloud-based and its servers require information from both parties about connection and authentication methods. When the pricing for capacity is agreed upon (which happens automatically using pre-entered bid and offered pricing) the servers send connection instructions to the consumer device and WiFi hotspot. The AAA functions (authentication, authorization, accounting) are handled in the cloud via plug-ins on the device browser or on an App.

The plug-in also handles the quality of the connection, checking that the bandwidth, signal strength and latency are adequate for a broadband experience and negotiating another signal source if it is not. The plug-in can then coordinate with the cloud servers to switch traffic back to cellular if the connection is not up to quality of experience targets.

Cisco’s quarterly VNI reports predicts that mobile data consumption will increase at a CAGR of 61%, for an eleven fold increase between 2013 and 2018, with each device growing from 600MB per month in usage to 2.2GB. Around 45% of that data is currently offloaded from cellular to WiFi, and the strain that the predicted increase in offload rates, to 52% of all data, will need to be accommodated by MNOs.

A number of problems stand in the way of coping with the increase. The constraints of the spare capacity in the WiFi network is the most prominent. Cellular can only offload onto WiFi if the WiFi network has the space for it and is not congested. WiFi networks also don’t necessarily match up with areas of high demand for offload, and offload is ‘constrained by cumbersome means of accessing WiFi capacity in public, carrier, amenity and other hotspots.’

Heavy Reading teamed up with Wireless 20/20 to create a cost model for the total cost of ownership that a MNO would face if it decided to add capacity to an existing LTE network. They found that the BandwidthX marketplace would cost the MNO 26% less than building small cells to handle the capacity, and that building carrier-owned WiFi hotspots will only save 5% on the total cost of ownership.

The financial model also shows that in addition to the 26% saving, the MNOs will generate around 24% of the expected TCO as revenue for the ISPs that provide the extra capacity ‘ revenue that has a ‘near zero marginal cost that directly improves the bottom line.’

Faultline published similar numbers in its WiFi Revisited report out a few weeks ago (available for free to Faultline customers). These were also based on Wireless 20/20 models.

The home user typically uses only a fraction of the total radio capacity and backhaul in a home router, even when the homeowner is using the router at the height of their typical maximum usage of ‘only a few percent of the data capacity.’

Most new home gateways come with at least two and sometimes four SSIDs, which allow the hotspots to serve the home user and public users separately. Companies like Spain’s FON specialize in helping ISPs turn their home routers into homespots.

This kind of slow expansion is the driving force behind the growing public WiFi networks, and as the whitepaper notes, the ISPs generate a lot of revenue from providing their homespots to the MNOs who want to increase their WiFi offerings. Operators like Free in France have been able to be as disruptive as they are thanks to the prevalence of dark WiFi, and its entrance to the French mobile market was a wake up call for the incumbent cellular carriers.

In the US, the CableWiFi Alliance (Comcast, Cox, Cablevision, Bright House and Time Warner Cable) provides customers with around 350,000 (Heavy Reading quotes 500,000 which we think is more of a forecast than a fact) public hotspots. Comcast itself has expanded its Xfinity access points from around 100,000 at the beginning of 2013 to around 1 million today ‘ proof that the public WiFi network is growing and shows no real sign of slowing.

BandwidthX’s marketplace should provide MNOs with a pay-for-what-you-use service, broadly similar to internet peering charges, which will allow operators to increase their WiFi offload at the same time as increasing their data revenues. If providing the extra capacity is as simple as the company claims, operators will no doubt hope to benefit from the increased data revenue without the capex hit of building out the WiFi network themselves.