WiFi Damocles sword dangles over mobile operator strategy

Nokia’s apparent run-in with some of its carrier customers over the out-of-the-box inclusion of Skype on its top-end N97 highlights the on-going concerns carriers have about the possibility of revenue loss to alternative voice services.

It’s not just that the right client software might make free or cheap calls over the 3G broadband channel an attractive option to mobile phone users (especially if they don’t have to fiddle about installing client software to get it), but that they’ll increasingly use WiFi (using Skype or other services) for voice calls as well as data-heavy applications.

The WiFi option could become habit-forming.

The fact is that while the telecoms industry is fixing its attention on the deployment of LTE, the WiFi segment is continuing to grow like a weed. While for most marks and measures in telecoms we’re happy to creep into double digits in these recessionary times, much of the WiFi market is apparently still growing in the 20 to 40 per cent range.

There are both ever more hotspots blanketing the world’s cities and increasing proportions of the world’s gadgets are having WiFi built into them, at ever cheaper prices. Most disturbingly for the world’s operators though, early adopter use of highly interactive gadgets like the iPhone is showing clearly that if you make WiFi easily available, people use it.. a lot.

First the numbers. According to data just released by ABI Research, WiFi is going gang-busters in both the consumer and enterprise segments. It expects access point shipments to pass the 70 million mark by 2010, nearly all of these generated by the small business and consumer markets. It says consumer electronics is also driving growth with TVs, gaming consoles and laptops using WiFi and pushing the process along.

The number of hotspots is also continuing to grow at a rapid clip. A survey released last year by security firm, RSA, showed access points in New York had increased 45 per cent over 2007 to around 9000, Paris grew (from a low base) by 543 per cent to 4,481, while London had grown, at a lower rate, to 12,276 access points.

In other research released last year, ABI pointed to the continuing growth of WiFi-enabled handsets and predicted that volume here would double by the end of 2010, an upward curve that it expects to continue right through to 2013.

It says WiFi has become ‘table stakes’ for smartphone vendors - in other words, a ‘must have’.

But it’s the upsurge in WiFi usage on ‘friendly’ smartphones that has operators most worried, especially where WiFi becomes standard (rather than an option buried deep in the menu system of just a subset of a manufacturer’s range) and therefore has a growing number of applications based on it, such as iTunes on the iPhone.

It turns out that the ‘user experience’ is critical here. Where it’s good the proportion of users using it skyrockets. On the iPhone for instance, up to 75 per cent (a huge proportion) uses the WiFi regularly. On the other hand, HTC only offers WiFi on 80 per cent of its handsets and the interface (arguably) is not as good as the iPhone’s. As a result only 10 per cent of its users regularly use the WiFi.

Significantly Android, which prides itself on a similar ‘user experience’ to that on the iPhone, has also enjoyed a high WiFi usage rate so far and has been rated by AdMob, which measures these things in the US, as already having a 3 per cent share of WiFi access there.

The danger for operators is that, as the proportion of friendly ‘user experience’ phones grows as competitors to the iPhone from RIM, Palm, Android and of course Nokia grow in number and volume, the use of WiFi will grow with it. As will the scope for alternative voice services.

Credits to: TelecomTV One