White Paper: Making the Most of Cable WiFi

White Paper: Making the Most of Cable WiFi
White Paper
Making the Most of Cable WiFi
Prepared by
Alan Breznick
Contributing Analyst, Heavy Reading
on behalf of
September 2014
Executive Summary
There's no question that WiFi represents a large and swiftly growing market for cable
operators throughout the world. Indeed, in North America alone, Heavy Reading
now estimates that the six largest cable providers have already deployed more
than 5.7 million public and private hotspots across the continent, pouring at least
$350 million into hotspots, access equipment, network upgrades and related capex.
This ambitious wave of deployments is just the beginning of an industry-wide onslaught. Based on the plans revealed by several major U.S. MSOs, Heavy Reading
projects that North American cable operators will deploy up to 10 million hotspots
by the end of 2014, and more than 50 million by the close of 2017. In the process,
they will end up spending billions of dollars on the WiFi expansion program.
Thanks to this ongoing industry-wide drive, cable operators are already extending
their broadband networks far beyond the reach of their hybrid fiber/coax (HFC)
plant. As a result, they are beginning to reap the financial benefits of their WiFi
buildouts. Specifically, operators have begun to lure new wireless subscribers, boost
customer satisfaction rates and cut customer churn rates.
Yet, while all these moves represent major steps for the industry, cable operators
can do so much more with WiFi technology on both the residential and commercial
sides of the business. In particular, Heavy Reading sees great near-term to long-term
potential for cable providers on the commercial side and in mobile data offload.
For example, with tens of thousands of small to midsize businesses (SMBs) signed up
as commercial customers over the past few years, operators have already begun
tying WiFi to their business service bundles by offering hosted WiFi with SSIDs branded
by specific business. With the aid of technological enhancements, such as virtualized architectures, they could build on these relationships by adding hosted WiFi,
guest/casual access and other cloud-enabled services – such as Comcast already
appears to be trying to do with its July 2014 purchase of PowerCloud Systems.
One key enabler for cable operators to move beyond basic access and monetize
innovative new services is network policy. With advanced policy control and intelligent connection capabilities, cable providers can turn their elementary wireless
broadband links into much smarter, more sophisticated WiFi networks.
As cable providers continue to broaden the reach of their WiFi networks and more
cable customers take advantage of WiFi access to increase their mobility beyond
the home, advanced policy control can be leveraged to gain better control over
the user experience and introduce differentiated services that can become significant sources of new revenue. Even more importantly, cable operators can vastly
expand their WiFi market opportunity and sharpen their competitive edge against
such rivals as the large telcos and Google Fiber.
For the past several years, cable operators have grappled with a fundamental
quandary: How do they, as traditional wireline service providers, compete and prosper in the newer wireless service environment? Indeed, time after time, cable providers have sought to compete in the wireless broadband market, only to fall short.
Now, after much trial and error, the cable industry seems to have finally found the
winning formula by embracing WiFi technology. In fact, cable operators are making
significant progress in the swiftly evolving mobile market by adopting WiFi and starting to pursue the myriad new opportunities that it offers.
First, cable operators are embracing WiFi to extend their network reach to a wide
range of consumer electronics gear, including laptops, tablets, game consoles,
smartphones and other mobile devices both inside and outside the home or office.
In turn, this expanded reach is driving a raft of innovation – including such potential
offerings as parental controls within the home and ways to measure media consumption and enforce usage caps.
Similarly, cable providers are taking advantage of WiFi to extend their broadband
capabilities to more services, enabling them to deliver video, data, voice and other
services to multiple screens. With these capabilities, they can then begin to customize different services for different subscribers on different screens, or let customers
shift their services to different screens as they move throughout the day, such as a
premium WiFi service that follows them around from device to device.
Further, cable providers are leveraging WiFi to establish public and private hotspots
throughout their service footprints. This capability allows them to deliver free or discounted service to customers and non-customers alike.
Finally, cable operators are teaming up to offer group WiFi coverage. In the U.S., for
example, five large MSOs are participating in the CableLabs-driven CableWiFi consortium, which integrates WiFi service across cable footprints. As a result, cable customers can now access WiFi in more than 250,000 hotspots throughout the nation.
Thanks to these aggressive efforts, cable operators have now established millions of
public and private WiFi hotspots around the world. In North America alone, cable
providers have set up more than 5.7 million hotpots across the continent.
As impressive as these hotspot deployments may sound, they are just the beginning
of what promises to be an all-out industry-wide onslaught. Based on the plans that
have been revealed by several major U.S. MSOs, Heavy Reading projects that North
American cable operators will deploy up to 10 million hotspots by the end of 2014,
and more than 50 million by the close of 2017. Such activity will undoubtedly raise
the ultimate WiFi price tag to several billions of dollars for the industry.
Yet, even with this progress, cable operators have not really found ways to monetize
their growing investments in WiFi technology yet. That's mainly because they have
not yet shifted their business model to encompass the expansion of their footprint
outside the home. While carriers are already monetizing through data caps, prepaid, tiered services and upsell based on speed – and are starting to explore roaming and location-based services – cable operators are largely offering the service
for free to existing broadband customers and, in some cases, to non-customers as
well. Nor are they making money by selling advertising, charging transaction fees,
or providing data offload services to wireless carriers, among other options.
In other words, WiFi technology is not producing many of the direct financial benefits to the cable industry that it could produce, due to the monetization challenges
that the industry must still overcome.
This white paper will explore the cable industry's WiFi ambitions, its progress in fulfilling
those ambitions so far and its projected growth. The paper will highlight the market
opportunities that WiFi offers to the industry and examine the challenges that cable
operators face. It will also explain the strategic role that policy can play in enabling
operators to overcome those challenges, enhance their WiFi networks and monetize their wireless investments. And finally, the paper will recommend key areas of
focus for cable operators seeking greater WiFi control and monetization.
Figure 1: U.S. Cable WiFi Growth Projections, 2013-2017
Source: Heavy Reading
Cable's Budding WiFi Bounty
The cable industry initially stumbled and bumbled in its zeal to branch out into the
wireless broadband space. Early efforts by cable operators to buy Advanced Wireless Spectrum (AWS), launch their own 3G or 4G wireless networks, or team up with
wireless operators such as Sprint and Clearwire led to either financial disappointments or spectrum selloffs to other wireless providers (such as Verizon Wireless).
But all that began to change once cable providers started investing in WiFi. Led by
Cablevision Systems in the greater New York metro area, U.S. and Canadian providers started investing heavily in WiFi networks and hotspot deployments several
years ago, as they began to realize the technology's potential to easily and efficiently extend their broadband reach beyond their wired networks. They also
started to see some direct financial benefits from their investments, as they began
to recruit new wireless subscribers and reduce customer churn.
In a landmark move two years ago, five of the six largest U.S. MSOs – Comcast, Time
Warner Cable, Cox Communications, Cablevision Systems and Bright House Networks – joined forces to launch the CableWiFi consortium. Acting under the auspices
of CableLabs, the loosely structured group allows each partner's wireless subscribers
to roam freely on the WiFi networks of the other alliance members, using a common
SSID. As a result, each operator can now offer access to more than 250,000 hotspots
to its WiFi customers nationwide.
Then, in an even bigger game-changing move, Comcast launched its innovative
home hotspots program in the summer of 2013. Under this program, known as Xfinity
WiFi, North America's largest MSO is installing a new generation of powerful dualsignal wireless gateways in the homes of its subscribers. These dual-signal gateways
essentially create an accessible public wireless network that all subscribers can tap
into, while keeping each household's wireless traffic separate on the home's existing
private network.
Thanks largely to this program, Comcast quickly topped 1 million hotspots in the
spring of 2014. Most recently, the MSO reported reaching 4.6 million hotspots
throughout the U.S. – more than halfway to its goal of 8 million by the end of 2014.
Delighted with its performance so far, Comcast is now offering similar dual-signal
wireless gateways to its commercial subscribers, as well.
Other major MSOs are taking note. For instance, Cablevision Systems, the industry's
WiFi pioneer, has started installing similar dual-signal gateways in its wireless subscribers' homes. The New York cable operator recently reported that it has deployed 1
million Optimum WiFi hotspots, largely because of this program, reaching its yearend target five months ahead of schedule.
Due in good part to initiatives such as these, the cable industry's hotspot portfolio is
now growing exponentially. Starting from a base of 150,000 hotspots in the summer
of 2012, the industry roared past the 1 million mark earlier this year, as Comcast's
home hotspots program took off. Now, with both the Comcast and Cablevision programs in full stride, the industry should reach as many as 10 million hotspots by the
close of 2014.
Thanks to these aggressive efforts, cable operators have now established millions of
public and private WiFi hotspots around the world. In North America alone, cable
providers have set up more than 5.7 million hotpots across the continent, according
to company reports and Heavy Reading research, as shown in Figure 2.
Figure 2: Major U.S. MSO WiFi Deployments
4.6 million
Time Warner Cable
Cox Communications
Charter Communications
Cablevision Systems
1 million
Bright House Networks
5.7 million
Sources: Company reports, Heavy Reading research
So far, cable's initial WiFi investment seems to be paying off. In a series of interviews,
cable executives have told Heavy Reading they are already seeing signs that their
WiFi rollouts are boosting consumer perceptions of cable's value and helping them
retain customers. They also say that WiFi deployments are helping them attract and
retain business customers – a huge, swiftly growing market for the industry.
In a June 2014 conference call with financial analysts, Shaw Communications CEO
Brad Shaw confirmed this anecdotal evidence. Shaw said the large Canadian MSO
found that the year-to-date churn rate for its Internet services came in 35 percent
lower for customers who had signed up for its WiFi service than for those who hadn't.
As other MSOs adopt similar dual-signal wireless gateways, Heavy Reading projects
that every North American cable broadband household will have a public hotspot
available within the next few years – totaling more than 50 million hotspots by 2017
as shown in Figure 3. Plus, with Comcast and presumably other MSOs installing similar
gateways in offices and other commercial locations, this estimate could well prove
too conservative.
Figure 3: U.S. Cable WiFi Growth Projections, 2013-2017
10 million
20 million
35 million
50 million
Source: Heavy Reading
However, it's less clear how cable operators intend to monetize their swiftly growing
WiFi assets. While they are busily developing and deploying hotspots by leaps and
bounds, they have not developed nor deployed business models for monetizing
these services effectively. Nor, with the notable exception of Time Warner Cable's
recent adoption of the Passpoint program, have they availed themselves of the
advanced technologies and standards that would enable them to make more
money off their WiFi networks. The following section will address the main barriers
and challenges to the cable industry's monetization of its WiFi assets.
Challenges to WiFi Monetization
With millions of WiFi hotspots now spread throughout the North American continent
and millions more soon on the way, it might seem like a relatively simple matter for
U.S. and Canadian cable operators to start making money off their new wireless
services. Unfortunately, it is not. As it turns out, several major barriers and challenges
are conspiring to hamper the industry's monetization of WiFi.
This section will focus on two of those major hurdles: the industry's glaring lack of a
solid business model for offering its plethora of existing and proposed WiFi services;
and the pressing need to implement more advanced technologies and standards
that would ease the path toward monetization.
First, consider the industry's lack of a business model for WiFi. Although there are
many possible models for making money off WiFi services – including subscription
fees, advertising rates, transaction charges and pay-as-you-go fees – cable operators have largely avoided trying any of them so far. Instead, they have generally
treated wireless broadband as a loss-leader, using it as a free, added incentive to
entice new broadband prospects to sign up or existing subscribers to stay on board.
While it could be argued that free WiFi has now become table stakes in the highly
competitive wireless arena, that was not always so. Plus, plenty of service providers
still charge for WiFi, as airport travelers can easily attest. So it's far from a given that
cable operators could not afford to charge at least nominal amounts for WiFi.
But even if the cable industry had a solid business model for monetizing WiFi, it would
not really have a way to implement and leverage that model right now. That's because cable operators, for the most part, also lack the advanced network policy
tools and intelligent connection capabilities for enhancing their WiFi networks and
making the most of those enhancements.
Why? It's not so much that cable operators lack the technical and operational ability to manage quality of service (QoS) and quality of experience (QoE) on their WiFi
networks, and to prioritize service on the networks for both residential and commercial customers; it's that they have generally not begun to explore and prioritize these
capabilities. So they can't offer different levels of service, speed tiers, or other kinds
of differentiated service experiences. They also can't upsell customers from one service level to the next, or sell various kinds of location-based or roaming packages.
Likewise, without advanced policy tools and connection capabilities, cable providers lack the ability to manage mobile data offloads and onloads nearly as well as
they could. Nor can they quickly and easily gather and use WiFi data analytics from
customer locations and behavioral patterns to target offers, develop partner promotions and create loyalty programs, among other things.
As a result, cable operators cannot derive nearly as much revenue from WiFi as they
should. While they can rightfully boast about the higher customer satisfaction
scores, greater subscriber retention rates and lower customer churn losses that WiFi
has produced for them, they are still leaving a lot of money on the table.
In other words, WiFi technology is not producing many of the direct financial benefits to the cable industry that it could produce, due to the monetization challenges
that the industry must still overcome. As Figure 4 details, these challenges include
the lack of solid business models for monetizing WiFi and the need for more advanced technologies.
Figure 4: Major Challenges to Cable WiFi Monetization
Lack of solid
business model
Cable operators have largely treated WiFi as a loss leader, using it
as a free or added incentive for new broadband prospects to sign
up or existing subscribers to stay.
Lack of QoS and
QoE capabilities
Although cable providers may have the technical and operational
capabilities to offer WiFi QoS and QoE guarantees, they haven't
prioritized these capabilities yet.
Need for advanced
policy tools and other
Without such policy tools, cable providers can't manage mobile
data offloads and onloads easily or gather and use WiFi data
analytics from customer locations and behavioral patterns.
Source: Heavy Reading
Fortunately, the prime hurdles discussed in this section can be overcome today. The
next section of the paper will explain how.
Promise of Advanced Technologies
Although the barriers to WiFi monetization may seem daunting, they need not be
so. Cable operators can overcome these hurdles by taking advantage of various
advanced technologies that allow them to exercise much greater control over their
wireless broadband networks, track and prioritize service levels over those networks,
and monitor and manage the customer experience. With these capabilities, operators can then more easily monetize their existing WiFi services and develop and
monetize new ones.
One such advanced technology is the Next-Generation Hotspot/Wi-Fi Certified
Passpoint program mentioned earlier. Developed by the Wi-Fi Alliance, Passpoint
technology enables operators to deliver secure, automatic WiFi network discovery,
selection and authentication to their customers. As a result, subscribers can roam
freely and seamlessly from one hotspot to another, no matter which service provider
is running the network. Figure 5 shows a diagram of the basic Passpoint architecture.
Figure 5: Passpoint's Network Architecture
Source: Wi-Fi Alliance
Another promising wireless broadband technology is Voice over WiFi. Once called
"the great disrupter" by MIT Technology Review, VoWiFi aims to deliver cheap, highquality phone calls over the Internet, rather than cellular networks. Industry experts
consider this key to putting together a "WiFi First" strategy, in which WiFi replaces the
cellular network as the predominant means of wireless communications.
Long Term Evolution (LTE) Advanced in unlicensed spectrum (LTE-U) is another innovative technology now under consideration in the mobile space. LTE-U is designed
to deliver LTE with small cells using unlicensed 5GHz spectrum. In theory at least, it
could let cable operators offer very fast speeds by tapping into the vast spectrum
of the 5GHz band and supplement WiFi coverage.
What all these advanced technologies have in common is that they raise the need
for managing service quality over the wireless networks. They also increase the need
for monitoring and improving both QoS and QoE levels on the networks and tying
these service delivery levels to different tiers of service.
That's where the last set of advanced technologies – policy control and QoE management capabilities – can play a crucial role. With dynamic policy control, cable
operators can make the most of these advancements. Specifically, operators can
proactively manage QoS on WiFi networks, tie QoE and QoS to service tiers and
available networks, offer metering for premium speeds and QoS, and manage data
onloads/offloads with new wholesale partners – or, in the case of LTE-U, over their
own LTE networks. Operators can also use QoE profiling tools to monitor both historical and unpredicted network congestion on available WiFi and mobile networks
and seamlessly manage connections that can be both network- and subscriberaware by linking back to BSS systems.
Thus, advanced policy solutions can help operators manage the customer experience more effectively and efficiently than before, leading to higher subscriber satisfaction and reduced churn rates. The right policy solutions can also make it much
easier and simpler for operators to monetize existing WiFi products and services, as
well as create new business models to monetize their networks through partnerships
with OTT providers and advertisers.
Moreover, cable providers can leverage policy solutions to deliver managed services and virtualized services from the cloud. These solutions should support multitenancy and automated orchestration, so that providers can target differentiated
services for multiple verticals and regions. The solutions should also give providers
greater service agility, without compromising service reliability and performance.
What kinds of new, paying WiFi services can cable operators create with these
greater capabilities? The next section will run through many of them.
WiFi Monetization Options
As alluded to earlier, the possibilities for monetizing WiFi technology are numerous
and growing. While cable operators may not be making much money off WiFi now,
their options could greatly increase once they have the right technological tools at
their disposal. Likewise, the potential business models for monetizing WiFi are quite
plentiful. Once again, this is largely a question of having the proper technological
tools in place. Consider the following possibilities for both new WiFi services and business models with the aid of smart policy control solutions:
Data Speed Tiers: As they already do with wireline broadband, cable operators could develop wireless broadband service tiers based on data transmission speeds. Higher-speed tiers would naturally command higher daily,
weekly or monthly subscription fees, just as they do over HFC networks.
QoS Tiers: But why stop at just speed tiers? Cable operators could craft
other types of service tiers as well, charging higher subscription fees for
higher QoS and QoE levels. Or operators could charge extra for service prioritization guarantees or temporary speed bursts.
Smart Tiers & Zones: Besides developing service tiers based on transmission
speeds and QoS levels, operators could also create service levels based on
other criteria, including usage time, location and volume. Or they could
charge more for WiFi usage during peak traffic periods or roaming between
different partner network zones. With advanced policy, they can also gain
increased visibility and control over all zones – including in the home, where
it would be possible to track the number and type of connected devices.
They could also track how often these devices were connected, as well as
the kinds of services and content that are viewed on them. (See Figure 6.)
Figure 6: Policy Enables the Creation of Subscriber Zones, With Increased Control & Visibility Over Access & Usage
Source: Amdocs
Premium Upselling: If there's one thing cable operators know how to do, it's
upselling. In fact, as they have proven time and again on the video side of
the business, cable operators are the master of the upsell. With the above
WiFi service tiers in place, operators could easily upsell premium packages
of wireless broadband products, as well. They could also use real-time notifications to push out special offers for higher data usage limits and speed
boosts based on subscriber plans, applications and preferences.
SMB Managed Services: Similar to the residential size of the business, cable
providers could offer a crop of managed service tiers for commercial customers. Providers could offer differentiated levels of service based on data
transmission speeds, the ability to do temporary speed bursts, QoS and QoE,
service prioritization guarantees, locations, roaming and the like, charging
more for higher levels of service or offering special promotions. For example,
retail customers could participate in programs that tie in-store buying behavior to premium-speed WiFi service. MSOs could also charge extra for
higher levels of security or redundancy, for more sensitive communications.
Wholesale Partnerships: Cable operators could leverage their budding WiFi
assets to form new kinds of wholesale partnerships with traditional mobile
operators. As they now do in the mobile backhaul space, MSOs could strike
deals to offload data from heavily strained mobile networks at critical junctures. Similarly, they could onload data onto the mobile networks where
coverage is limited, or at other junctures where it makes sense, thanks to
their heightened intelligence about and ability to manage their networks.
Wholesale Service Tiers: Just as they could with their residential and commercial customers, cable providers could offer various levels of service to
their wholesale customers for different prices. Similar to the SMB case, cable
providers could offer a range of speed and QoS tiers and charge higher
fees for higher service levels. They could also charge more for greater levels
of security, redundancy and the like.
Premium & OTT Content: Cable MSOs can also provide premium speeds
and QoS for mobile HD content, high-value services such as sports and
movie packages, or popular OTT services. Operators can apply zero ratings
for data usage and premium speeds from public hotspots through highertier accounts, or they can use upsell offers as part of "try and buy" or other
time-limited programs.
Big Data: The possibilities for collecting and culling WiFi data analytics are
also compelling. Similar to what they can now do with set-top data, cable
operators could gather and leverage WiFi analytics from user location and
behavior to target product offers, push partner promotions and create loyalty programs, among other things. For example, take customer loyalty programs: A preferred WiFi subscriber could sign up for a loyalty program and
then go to the mall to shop at a favorite store. That retailer would then be
an MSO partner, giving the subscriber an ad for a discount that could be
used at the store that day. Based on the subscriber's previous shopping patterns, the retailer could also use the data collected to offer other products
the subscriber would like.
Dynamic Ad Insertion: The advertising world offers potential WiFi revenue
for cable providers, as well. Just as they are now starting to do with ondemand programming on TVs and other video screens, cable operators
could dynamically insert ads in online data feeds and browser searches.
Many WiFi customers would likely accept such ad insertions in exchange for
heavily discounted or free subscription fees.
QoE: With the right tools in place, cable operators will be able to manage
the customer's WiFi experience by leveraging a broad set of data from the
network and the subscriber to make the best end-to-end decisions about
connectivity. Extensions for dynamic network selection, BSS integration and
adaptive QoE profiling enable a wide range of use cases for improving the
customer experience. In turn, these solutions create new monetization options such as:
Real-time responses to unexpected connection events and temporary
blacklisting of underperforming access points
Network connections based on service tiers and QoE thresholds
Switching to cellular in designated locations where WiFi coverage is poor
Preference for premium WiFi when accessing bandwidth content
Context-aware promotions based on preferences and locations
The cable WiFi growth trends are inescapable. Despite its humble beginnings a few
years ago, WiFi is now well on its way to becoming a huge new product for the North
American cable industry. With more than 5.7 million hotspots now deployed in the
U.S. alone, and another 4 million or so hotspots expected to be deployed by the
end of 2014, WiFi has suddenly emerged as the fastest-growing broadband service
for cable operators.
Moreover, these growth trends will likely continue for years to come. In fact, in a
new market forecast developed for this paper, Heavy Reading projects that U.S.
cable providers will double their number of WiFi hotspots to 20 million by the end of
2015 and quintuple their number to 50 million by the close of 2017, due largely to
the success of the home hotspot initiatives that Comcast and Cablevision Systems
are currently championing.
Now that so many hotspots have been deployed and so many more are on the
way, the big question is, how will cable providers monetize their burgeoning investments in wireless broadband networks? While providers have begun to capitalize
on these investments by boosting customer satisfaction and reducing subscriber
churn rates, they could be doing so much more. But, hamstrung by major barriers
such as a lack of solid business models and the need for more advanced technologies, they have not been able to take the next steps yet.
Fortunately for cable operators, there are some steps they can start taking immediately to generate much more significant revenue. As this paper suggests, operators
can begin experimenting with a wide range of business models for a large and
growing variety of new services, including residential, commercial and wholesale
offerings. Indeed, the embrace of WiFi opens the door to all sorts of possible new
products for the cable industry.
Even more importantly, cable providers can begin adopting the new, advanced
technologies that will enable them to deliver these new services and implement the
proposed business models. With such advanced technologies as dynamic policy
control solutions in place, cable operators can manage and enhance both network
and device performance, vastly improving both their own QoS and the customer's
corresponding QoE. In the process, they can start offering a raft of new services and
begin making substantial returns on their WiFi investments.
The key is to act right now. If cable operators wait too long to take these recommended steps, they risk losing the wireless broadband race to fleeter competitors.
But if they move ahead swiftly, the market could be theirs to own.
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