What happens to cable's WiFi-first strategy after mobile mergers?

Monday 26 September 2016 | 14:26 CET | Market Commentary

Cable and mobile operators are leading the consolidation wave in Europe, driven by companies such as Liberty Global and Vodafone. After Germany, Spain and Belgium, the Netherlands is the latest country to see a merger of a major cable player with a leading mobile operator. Cable and mobile have differing views on Wi-Fi, raising the question what happens when companies like Ziggo and Vodafone Netherlands come together. The majority of smartphone traffic runs over Wi-Fi networks now, but cable-mobile mergers could reduce this share in the future. Vodafone is driven to monetise the lucrative smartphone traffic, which will mean a change in Ziggo's WiFi-first strategy.

Wi-Fi vs mobile

Free Wi-Fi creates a potential problem for competing mobile networks. Is it a threat or is there no reason for fear? Market opinions differ:

  • Pro-mobile: Wi-Fi offloads traffic and helps the sector manage its heavy investment requirements. At the same time, LTE can offer the superior experience, with speed, reliability and low latency, making Wi-Fi unnecessary.
  • Pro-WiFi: the standard continues to develop and the number of access points to grow. Even the European Commission has joined the 'muni WiFi' bandwagon and pledged EUR 120 million to support public networks. This holds back growth on the mobile market, as mobile customers buy smaller data bundles in favour of free Wi-Fi.

Time on Wi-Fi

An estimated 80 percent of data traffic on mobile devices runs over Wi-Fi networks (source: Wakoopa). According to a recent Open Signal report, the Netherlands scores the highest in terms of time on Wi-Fi, with traffic going over Wi-Fi rather than mobile networks 70 percent of the time the smartphone is used. China and New Zealand follow at somewhat of a distance, with each at 63 percent.

The figures underline how difficult it is to compete with free. The cost of providing similar local coverage with small cells is also very high. Cable operators have historically been strong supporters of Wi-Fi, which has helped to strengthen their position in the broadband market and avoid the costs of investing in a mobile network. Ziggo is one of many taking a 'WiFi-first' strategy for the mobile market; see also Cablevision's (abandoned) Freewheel service. Ziggo's strategy has meant opening up its customers' modems to shared Wi-Fi access and building a network of public hotspots, in part based on its street cabinets. 

A full merger of a cable and mobile operator has yet to happen in the US, the world's biggest cable market, but in recent days the two largest cable operators, Comcast and Charter, have both said they plan to launch MVNOs next year. This suggests the CableWiFi alliance for the major cable operators to share hotspots may be reaching its limits in the face of the explosive growth of smartphone use and the discounts from AT&T and Verizon for customers who take both fixed and mobile services. Both Comcast and Charter said they will build on their networks of hotspots, but Charter CEO Tom Rutledge admitted that "true mobility" will require MVNOs and "to actually build out a network at some point in the future."

In Europe, cable operators are taking it further and have started to merge with or acquire mobile operators. This is driven by Vodafone's push into the fixed market, and Liberty Global realising the need to bundle fixed and mobile services in order to drive growth and compete with incumbents. For operators like Ziggo that have already embraced a WiFi-first strategy, this means a shift to trying to reduce traffic over Wi-Fi in favour of mobile data, which generates much more revenue.

Of course a large share of mobile traffic over Wi-Fi networks is at home, making it an extension of fixed networks. While in theory Vodafone would probably like to monetise this traffic as well, it will probably focus first on the Wi-Fi traffic away from home. In practice, this may mean an end to Ziggo upgrading street cabinets for public Wi-Fi, as well as new limits put on the use Ziggo homespots. While both mobile and Wi-Fi traffic will no doubt continue to grow, 'free' Wi-Fi may not be quite so common in future. 

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