Wi-Fi Case Analysis

Incumbent telecom operators in the U.S. face a new category of competitors that play by a different set of rules. These alternative network providers aim to disrupt the traditional telecom business model by lowering access costs and improving the user experience. Their motivations differ from incumbent telcos, which focus on monetizing their connectivity solutions. Rather, these alternative network providers view access as a sunk cost necessary to drive their other initiatives, such as digital advertising and e-commerce. The stakes are high because these market dynamics will shift the balance of power, money, and landscape makeup in coming years. Only the strongest and most nimble incumbent operators will survive the coming shakeout. There

The ability to leverage unlicensed (free) spectrum, minimal backhaul requirements and the endemic footprint of hotspots across the U.S. makes Wi-Fi a considerable threat to cellular. Advertising disrupts access model Facebook (via its Internet.org initiative) and Google have taken on the seemingly insurmountable challenge of bringing low-cost Internet access to the world population. This is no small feat, as nearly two-thirds of the world’s population lacks Internet access, particularly in emerging markets. Both companies are investing in and tinkering with new technologies aimed at trying to solve this problem, including using fiber, Wi-Fi and “space furniture,” such as satellites, balloons, drones and blimps, to blanket the planet with wireless coverage. Google is also pursuing becoming a mobile virtual network operator to offer its branded wireless service, piggybacking on the networks of Sprint and T-Mobile to offer service in the U.S.

Alternative network providers realize they need to be proactive to protect their market positions and blaze their own paths to growth. Relying on incumbent telecom operators for business-essential functions, such as providing ubiquitous Internet connectivity and 99.999 percent reliability, is a risky and costly proposition, and these companies are taking more control over the value chain to secure their destinies and ensure they can provide optimal service to their end customers. Incumbent operators are in a precarious situation because the prevalence of alternative network providers is increasing downward pressure on access prices and will continue to shift value-added services to over-the-top players. Incumbent operators will need to accelerate their business transformation to regain their nimbleness and be able to operate profitably at lower access prices. This will require a focus on software-mediated technologies such as NFV and SDN as well as leveraging cloud and analytics to streamline their networks and make them more