October 22, 2013

Smartphone and tablet users consume significant wireless data in nomadic and stationary locations.  Some operators have decided to deliver mobile wireless service using not just cellular but WiFi radio systems.  At the risk of over-generalizing to illustrate this trend, WiFi service is better than most 3G cellular systems for delivery of data. When compared, 3G cellular is better for establishing two-way, low latency services like voice calls.  But the vast majority of mobile traffic is asymmetric and can be satisfied with low-cost WiFi.  However, most service providers that have deployed LTE networks now seem satisfied to significantly reduce investment on WiFi.  LTE is has higher throughout than 3G, but is also better than 802.11n WiFi, so this makes sense.

We have studied the Japanese WiFi capital spending trends over the past few years and find that WiFi spending was significant until the end of 2012, and then tailed off as LTE networks were brought online (see chart below).  Was LTE spending the cause of the slowdown in WiFi spending?  We think it was a major factor, yes.  Other operators in different regions also pushed WiFi spending to a lower priority.  Take for instance AT&T, which has dramatically ramped spending on LTE over the past year and a half, as it works to match LTE coverage with rival Verizon.  At its peak a year ago, AT&T had around 60,000 WiFi hotspots, and has since lost the WiFi footprint at Starbucks to Google, and will soon have as little as half the number of hotspots.

SP WiFi to Selected Japanese Operators chart2

We expect that as LTE usage becomes more widespread amongst the user bases of operators, WiFi deployment will pick back up.  This is because of two primary advancements:

  • Enterprise-class 802.11ac radio technology, which shipped in the month of June 2013, will be more competitive with LTE.
  • Various authentication and prioritization systems are making their way into WiFi and core equipment in calendar 2013.

We are positive on the SP WiFi market and expect as much as half of paying customers’ traffic of both wireless and traditionally wireline operators will be satisfied with WiFi connections in the future.


Chris DePuy

Posted by Chris DePuy on October 22, 2013

About Chris

Chris DePuy is responsible for Dell’Oro Group’s Carrier IP Telephony, Wireless LAN, Wireless Packet Core And Storage Systems market research programs. He has more than 20 years of financial and business analysis, and engineering experience.