Carriers Embrace Wifi

Carriers embrace WiFi Sarah Reedy Telephony Online August 6, 2009

As WiFi becomes an expected feature in smartphones and hot spots grow, carriers have been forced to reconsider

In the past year, WiFi has exploded on smartphones and in hot spots across the country. This unlicensed spectrum used to be a pain point for many wireless operators keen on keeping subscribers on their cellular networks, but given the momentum, they have been forced to embrace WiFi and – in some cases – even require it.

According to Ovum’s latest data, out of the 77 smartphone models released by key manufacturers between the second quarter of 2008 and first quarter of 2009, 49 had WiFi built in. It was a feature that spanned nearly all smartphones, not just high-end models, and is moving into the feature-phone market, as well as across operators’ triple-play product lines, according to Edgar Figueroa, executive director of the WiFi Alliance.

Carriers may still be adjusting to the notion that WiFi is increasingly necessary as too much traffic and bandwidth-intensive applications and services tax their network. Ovum said that despite their reluctance, carriers are being forced to include WiFi because consumers’ expect it. In fact, both Sprint and Verizon have pledged to actually require WiFi in their upcoming phones, starting with the next Sprint’s BlackBerry Tour after the recently launched edition was criticized for its lack of WiFi. Verizon’s WiFi-less BlackBerry Storm device was also the subject of criticism when it launched last year, as was Sprint’s BlackBerry Curve and Palm Centro.

Some have postured that the reason for these CDMA carrier’s lack of support is that manufacturing costs for CDMA handsets are higher than for GSM handsets, making WiFi less desirable, but Current Analysis analyst Peter Jarich said it is more likely driven by specific carrier concerns. Verizon, in particular, has a history of condemning WiFi use in its handsets.

“It’s interesting – there is still this belief that we don’t need WiFi,” Jarich said. “It is, to some extent, ingrained in operators.” He pointed out that while Verizon does not have as many WiFi-enabled smartphones in its line up as other carriers, the fact that it is carrying any is significant in showing the acceptance of the technology. “It’s not just that Verizon has five [WiFi] phones, it’s that it’s Verizon, who has long been one of the staunchest opponents or naysayers of WiFi,” he said. “If they have it, it’s coming whether or not you like it.”

Unlike their CDMA competitors, GSM carriers AT&T and T-Mobile extensive WiFi relationships. AT&T has the largest nationwide WiFi network with more than 20,000 hotspots following its 2008 acquisition of WiFi provider Wayport. In the second quarter, AT&T had nearly 15 million WiFi connections on its network – a 41% increase over Q1. Of these, nearly half came from smartphones. Dennis Whiteside, vice president of marketing for AT&T’s WiFi business, said that WiFi is not a specific requirement for handsets on AT&T’s network, but the carrier does requests that some smartphones, as well as emerging devices, do include it so customers have the choice.

“The network is there and it makes it easy for us to put the traffic on the right network,” Whiteside said. “We view it as WiFi and 3G are both wireless broadband, and we’ve brought them together and made them very compatible.”

IS WIFI GROWTH AT THE EXPENSE OF 3G?

As WiFi-enabled smartphones continue to grow, WiFi hot spots are also taking off across the country. AT&T’s strategy has been to expand its WiFi footprint to wherever its customers go, Whiteside said, especially in places where consumers often spend extended periods of times and have high-bandwidth utilization. In addition to its recently announced Barnes & Noble relationship, AT&T provides free WiFi hot spots at college campuses, including a recent launch at the University of South Carolina, expansion in Starbucks, hotels, airports and stadiums. In some cases, as with AT&T Park in San Francisco, the carrier provides content that can only be accessed over WiFi. At AT&T Park, the first professional sports venue to provide WiFi, the Giants deliver instant replays over WiFi that Whiteside said the Major League won’t allow to be transmitted over wireless networks.

The result of these two forces – WiFi-enabled smartphones and hot spot access, compounded by the migration to 4G technologies – could ultimately be that wireless operator’s expensive 3G networks become less necessary. To date, carriers are focusing on making the technologies complementary, as with Sprint’s announcement yesterday that it would begin selling dual-mode WiMax-EV-DO versions of Novatel’s MiFi personal hotspot. But, even Verizon has stated that when LTE comes online, 3G will likely be the first network to get turned off. Jarich said that even if the technologies were to move from complementary to competitive, it would be a long-term phenomenon. That said, while WiFi alone might not be enough to make 3G obsolete, when 4G comes to market, it will be a different playing field.

“In 5 to 10 years, we’ll be in place where there is lots of overlapping 3G networks, 2G networks, femtocells, WiFi, then throw in a bunch of 4G networks as well,” Jarich said. “The question is how do you manage to connection on a user-by-user basis to make sure you maximize the experience for everyone? That is going to be pushing some people into WiFi, some into femtocells, some to 3G or 4G, and it becomes a very complicated solution. But, I argue there is a place for all of it. That is where we end up having to be if we really want to make the most of the spectrum out there and deliver the best experience.”