The rising importance of WiFi to cable companies is generating new alliances and rivalries .The cable operators are reshaping the US telecoms landscape. They are leveraging their powerful combination of readymade small cell backhaul and economical carrier WiFi access to point to a new model for wireless delivery, in which cellular is still necessary, but just one element in the converged fixed/mobile platform.
However, M&A ideas are sure to continue to circulate in the whirlpool that is US telecoms. Now the theme is the convergence of broadband and video, and the drivers for mergers are about improving the economics of the quad play. That may be by enhancing an operator’s ability to boost margins through content assets. Or it may be about creating a more cost-efficient platform for one’s own, or third party, services, with WiFi playing a key role in that.
The case of TWC
Time Warner Cable began deploying Wi-Fi in 2011 and, as of June 2015, has over 100,000 access points in NYC, LA, Austin, Kansas City, Charlotte, Myrtle Beach, Palm Springs, San Diego and Hawaii. TWC customers also have access to over 400,000 hotspots nationwide through its participation in the Cable WiFi partnership, whose other members are Bright House Networks, Cox Communications, Optimum, and XFINITY.
TWC Wi-Fi is offered as a free service to customers on its higher tiers, while those on lower tiers pay extra. Non-TWC customers can access its Wi-Fi network for $2.95 per hour.
TWC also has a partnership with Boingo that allows Wi-Fi roaming at over 100 Boingo locations, including 25 U.S. airports. Both companies use Hotspot 2.0 and Passpoint to enable seamless roaming, which helps attract and retain customers by minimizing the steps necessary to connect.
Charter plans to expand TWC’s Wi-Fi network once the acquisition is complete but hasn’t provided details about how, where and when. Charter also is acquiring Bright House Networks, which currently has more than 35,000 hotspots. The two acquisitions and subsequent expansion will make Charter a major player in Wi-Fi, including as a potential partner for mobile operators and over-the-top (OTT) providers that want to offer Wi-Fi to their customers. Charter has committed to building 300,000 out-of-home hotspots if the TWC deal goes through.
TWC is upgrading its cable modems in a way that could enable the company to offer “community Wi-Fi,” where a second SSID is available to passers-by who are customers of TWC and/or its business partners. However, TWC hasn’t confirmed plans to offer community Wi-Fi, which some telcos and other cable operators worldwide already do.
This possibility bears watching because it would expand the addressable market for Charter by helping attract customers who otherwise would prefer cellular because they view hotspot service as too geographically limited to be a viable mobile option. Community Wi-Fi also could help Charter attract wholesale customers, particularly “Wi-Fi first” service providers such as Google and Scratch Wireless.
The WiFi element has brought the major cablecos, led by Comcast, into the telco mainstream, and has also emerged as a weapon which foreign MSOs could wield to expand in the US. France’s Iliad failed to acquire TMO, but compatriot Altice has bought smaller cableco Suddenlink and was also apparently approached by Softbank. WiFi has become such a valuable asset because it is rapidly achieving carrier-class capabilities, including SIM-like automatic authentication, and seamless hand-off to cellular (with Hotspot 2.0/Passpoint). That means service providers can support the bulk of their data traffic – and even voice, with WiFi Calling – on the low cost network, keeping more expensive cellular (whether their own LTE network or an MVNO host’s) to support full mobility, wide area coverage and applications requiring premium quality of service or security.
Of course, those type of applications, which include some in the internet of things, may carry the highest ARPUs in the future, so the QoS of cellular is certainly not to be dismissed – and LTE-Unlicensed may add another twist to the saga if it becomes commercially mainstream from 2016. But the economics of data are significantly different when carrier-class WiFi is introduced on a large scale, and make it less impossible to support consumers’ rising YouTube addiction while still making some profit. It also allows the cablecos and major WiFi pure-play providers to take almost as significant a role in the wireless landscape as the MNOs, with a lower cost base, and with broadband and TV assets to add to the mix.