The customer as infrastructure
The epic increase in cellphone data traffic is prompting some important changes in the way telecoms operators are thinking about infrastructure, particularly in light of the way that cellular connections are becoming increasingly reliant on WiFi.
All over the world, cable and traditional telecoms operators are beginning to position themselves to be better able to take advantage of the infrastructure provided by so-called customer-premises equipment, or CPE: the millions of routers deployed in homes and small businesses.
The pioneer in this area, Fon, already handles an infrastructure network made up of more than 11 millions of access points through deals with telecoms players such as BT, Deutsche Telekon, ZON, Belgacom, KPN, SFR, SoftBank or MTC, deals that many said were unviable when they were struck, but that have lasted over several years and that provide the customers of these telecom operators with a value proposal based on WiFi connectivity outside their homes or workplaces.
Fon’s accumulated experience in the development and management of these types of hyper-distributed infrastructures is beginning to seem like a clear case of an idea ahead of its time, now that some telco companies, around thirty worldwide, have since outlined similar plans.
These companies idea, both those that have reached deals with Fon and those that have come up with their own initiative, is essentially offloading data traffic to the internet. A high level of offloading allows for an optimal use of the infrastructure, a significant reduction of the interconnection cost they have to pay to the incumbent or other telco companies, and generally supposes a lower churn level (some telcos have reported falls of around 10 percent) for clients that see a higher value proposition in terms of availability of access to faster connections outside their home or workplace.
The incentives depend on each telco’s strategy, along with factors such as whether they own a mobile operator or not, but the concept of optimizing the infrastructure the client already has is something that is already being discussed by telecoms operators all over the world.
Thus, while macrocities such as Los Angeles are coming back with plans for their municipal WiFi layout (muniWiFi), other telecom operator such as Portugal Telecom, in the wake of a deal by its competitor ZON with Fon, announced a similar rollout for its customers. In Spain, ONO recently announced blanket coverage in the cities of Alicante and Santander. The idea is simple: set up an infrastructure network combining the WiFi networks of clients in apartments up to first-floor level with a reasonable reach, or with businesses at street level, and with other access points owned by the company to boost coverage.
Customers are then informed how to access the network in exchange for the use of their router. This involves combining the installation or upgrade of their access points (routers able to handle these kind of systems are reflashed remotely, while older models are simply replaced) with increased bandwidth that now has a twofold purpose: the router managed by the client’s domestic network with the agreed speed; and another, with the appropriate security protocols, using the additional broadband to offer open networks to roaming clients.
These clients download an app to their smartphone or tablet that stores their details and allows them to use the company’s network, or if they are not clients, to pay for temporary access that would provide the operator with extra income. In the case of businesses at street level, the deal can also include the use of captive portals for advertising or other promotional services.
Some virtual operators, such as Republic Wireless, have gone a step further and are not just offloading data traffic, but also voice traffic, offering tariffs of 19 dollars for unlimited use, along with data that is transmitted whenever possible via WiFi, and that only uses the cellular network when there is no WiFi available.
WiFi is no longer being seen as a threat by telecos, and instead offers huge potential for the future, a key factor in the redesign of overloaded networks. The use of the client as a part of the distribution network is an option that is infinitely cheaper than rolling out new infrastructure, and with many interesting possibilities, albeit with some limits on location.
The key question here is the balance between operators and users: is a client living on the first floor of a building in the center of town worth the same as one living in a rural area with a low level of traffic? Fon’s idea was based on volunteering, and even on customers earning money from offering bandwidth to the network—even if few people have been able to earn significant amounts. In comparison, most traditional telcos only offer the customer access to the whole network of access points in exchange for using his or her home router.
Will we see the time when clients negotiate with their operator bearing in mind the potential value their access point adds to the infrastructure? Will customers get better deals because the room where their router is located faces a busy street?
Incorporating their clients into their infrastructure could interest the telcos, but it is also possible that these clients, once they understand what is at stake, try to capitalize, giving rise to competitive scenarios in which operators are competing with each other to attract well-located clients.
As a customer myself, I would only be interested in a deal whereby other people used my router if I were given access to the telco in question’s own WiFi network in hotels, airports, and railway stations. Could this possibility shake up the market?
