A recent article appeared in Barron’s financial magazine entitled “What Went Wrong With The Novatel MiFi?” MiFi has been adopted by a number of 3G operators including Verizon, Sprint, MobileOne, Bell Canada, and Vodafone. Despite the enthusiastic adoption by operators and positive product reviews, Barron’s article points out that the expected red-hot sales have faltered.

The 'instant hot spot' type device is a missed opportunity: MiFi, despite being an easy to use way for subscribers to share network connections, is a simple commodity product. While it may drive some subscribers to a particular service, since multiple operators now offer it, there is little to differentiate, for example, Sprint's service compared to Verizon's.

What is the result of offering MiFi: 1) Operators offer this as a 'me too' capability. The impact is to hold on to subscribers rather than gain new converts. ARPU impact is an incremental gain. 2) The use of MiFi or similar mobile hot-spot routers soon to enter the market drives up broadband usage, particularly during peak demand periods during which time enterprise class subscribers are more likely to use it.

The problem with MiFi and similar products is that they quickly become me-too commodities that have negligible stickiness or extension to additional services.
 
What can MiFi and operators do?  1) They could offer MiFi with a package of services that makes collaboration between a set of MiFi hotspot users more beneficial and entertaining. This could include unified communications similar to Motorola's new BLUR, but instead of being arranged for use on a particular handset it would be offered as a package for those who connect via MiFi device.

A look at the success of the iPhone: The Apple iPhone hardware has been criticized on several counts: no physical keyboard, slow processor, limited multi-tasking of programs, and a screen that is easy to scratch. Nonetheless, because Apple packaged the iPhone with a killer icon window human interface and an open apps and content store, the iPhone 'total experience' is more than just the device itself; in fact the rectangular piece of hardware is not what sets it apart.

The MiFi continues on the old theme of operators to offer devices that plug holes: that strategy no longer works. It is not what is driving subscribers to Verizon and AT&T and away from Sprint, T-Mobile and other operators. 

The perception among many players in the market has continued to be that patchwork product solutions will stem the tide of subscriber defections and revitalize markets. That is a basic flaw in the thinking of WiMAX developers: first it was that if they built fixed-nomadic networks that this would drive operators and subscribers to their door. However, by the time WiMAX became widely available the pricing for basic cable, and DSL access had come down, as should have been expected, to diminish the lower cost of deployment. WiMAX has gained some success but the only worthy measure from the suppliers perspective is how well they have done over the past several years: many are out of business or nearly so. Very few have achieved sustainable profits – with the exception of maybe Motorola.

Operators have to approach device sales either as a commodity business, in which case it does less to impact new subscribers than to retain existing ones, or they have to build a package of web-centered applications and services, plus devices that can set them apart from competition. 

Sprint has announced the official opening of 10 new markets for 3G+4G service with unlimited bandwidth (be careful accepting this claim at face value) for US$69/month.  That is very attractive pricing compared to their American rivals.  However, we think the impact is likely to be modest improvement, not a major influx of new subscribers. Probably it will help stem subscriber losses, but we do not expect Sprint to turn the tables and take large numbers of customers away from Verizon and AT&T. The ‘hot’ devices and service model has shifted to the triumvirate web-device plus intuitive interface plus applications development and web store environment. Users are paying up for the higher priced iPhone, HCT and probably the new Motorola Android phone, because the overall package is now what is driving the market.

Devices like the MiFi offer partial solutions that can have a negative impact on bandwidth consumption during peak usage periods.

While the commodity device scenario offers 3.5G operators little more than a stop-gap, Sprint-Clearwire do not face the bandwidth bottlenecks of their competitors.  Therefore, while not likely to turn the tide of Sprint’s fortunes or make the business case for Clearwire, MiFi is a useful addition.

For more information you can contact the author at robert@maravedis-bwa.com

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