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6 November 2015

Chinese operators go cold on WiFi hotspots

Chinese mobile operators may have the largest WiFi hotspot deployments in the world, but these have failed to deliver return on investment. In July 2014, China Mobile said it would stop rolling out WiFi and redirect the funds to accelerated TD-LTE expansion, Now, according to the country’s Ministry of Industry and IT (MIIT), the three MNOs have decommissioned 87,000 WiFi access points this year.

That still leaves almost 6m in operation, more than the total of cellular base stations, but the latter is growing as the carriers expand 3G and LTE, and densify their networks. They added 680,000 base stations in the first nine months of 2015, according to the Ministry, while further WiFi shrinkage is on the cards.

China Mobile was the most ambitious WiFi supporter in 2011 and 2012, because it had been forced to adopt the under-performing but homegrown TD-SCDMA 3G technology, at a time when data demand was starting to explode and its rivals, China Unicom and China Telecom, were deploying mainstream 3G networks and stealing market share. It responded with its “four-network coordination” strategy, spanning GSM, TD-SCDMA, WiFi and, soon after, TD-LTE and set out plans to install 6m WiFi access points in three years, at a cost of almost $3bn.

By 2013, more than 70% of its data traffic travelled over WiFi, but the company said that WiFi contributed less than 3% of its data revenues, even before it had commercial 4G. Raw ARPU on the hotspots was about $2.58 per month.

It was too early in attempting a roll-out of such scale – carrier-grade WiFi technologies, enhanced security, and seamless access options like Passpoint, are only just emerging, and making multimillion-AP networks more viable. With these advances, they can support a far wider range of business models, many of them, like smart city services, potentially lucrative. But China Mobile had a best effort, consumer data network which suffered from variable user experience and poor integration with cellular, according to local reports, and therefore had little ROI value except to relieve strain on the 3G system.

Once 4G was underway, the offload argument dissolved – unlike MNOs in other countries, China Mobile has the resources, and access to sites and fiber, to build a massively dense LTE network which will not come under severe strain for many years to come.

“They can’t find a way to monetize their WLAN system,” Guang Yang, a senior analyst with Strategy Analytics, told LightReading. “China Mobile has put its focus on 4G.”

China Mobile, and its rivals, will retain some WiFi hotspots but will upgrade some, and refocus the activity on services for government and enterprise.