How Big a Threat Is VoWi-Fi to the LTE Operator?

For years Wi-Fi was looked upon as the off-load network. MNOs were glad to off load massive amounts of data traffic onto these low-end, best effort, “free” networks, providing, of course, that their LTE networks were at or near capacity. Priority one, keep the billing meter running and only off load once the meter is maxed out. How could these $100 access points running off consumer-grade best-effort broadband become a threat? After all, MNOs have spent 10s of billions on a carrier-class LTE infrastructure.

The cable operators realized that they have a near ubiquitous high-capacity network and adding Wi-Fi access points was an opportunity. As we have seen numerous times in the past, when cable companies see they have an opportunity they quickly take advantage of it. Today, Comcast claims to have more than four million access points, which will grow to eight million by the end of the year. Yes, about half of these are in subscribers’ homes where (unbeknownst to them) they are a public access point for their neighbors.

Now, along comes voice over Wi-Fi (VoWi-Fi). This solves one of the age-old industry dilemmas: Great mobile voice outside OR great mobile data inside. Small cells and DAS are solving the indoor voice problem today; however, they are starting from an installed base near zero, and deployments are nontrivial and customized per venue. Outdoor small cells also face the added challenges of power and backhaul.

Wi-Fi is as close to a ubiquitous technology you will find. Enterprises, small business and residential consumers all have become accustomed to having access to Wi-Fi everywhere. There are clearly technical challenges to deploying quality carrier-class VoWi-Fi, but these are all solvable. After all they have been solved in the LTE market. Examples include MIMO antennas, seamless roaming and improved Doppler tolerances.

Thus, one can assume that VoWi-Fi will work and will “off-load” a significant percentage of indoor voice calls from the LTE network. Should MNOs be concerned? Let’s do some simple math to try to answer this question. It’s widely reported that approximately 80% of mobile traffic originates indoors. In five years what percentage of indoor voice traffic will be on the Vo-Wi-Fi network and not on the LTE network? Let’s assume 50%. This is reasonable because iPhone and Samsung smart phones support VoWi-Fi calling, and mobile subscribers are very aware of the cost of exceeding their mobile data caps. Therefore, the MNO will see a 40% reduction in voice traffic over the RAN and EPC. The BIG question is what the impact on revenue will be. If we assume that the revenue impact is only 5%, a $20 billion/year MNO would see a $1 billion reduction in cash flow. If the cable companies only see 25% of that amount, that’s $250 million in cash to them. The difference is assumed to be lost to price reductions. 

MNOs, MSOs and service providers looking at offering VoWi-Fi services will need help to address this threat and opportunity and develop winning deployment and go-to-market strategies. Likewise, vendors in this ecosystem need to be cognizant of the multidimensional dynamics of the VoWi-Fi opportunity. ACG Research can help develop your business and marketing strategies.  We can provide a range of services from complete strategy development to creating high-impact differentiated messaging to product launch support. 

How big a threat is VoWi-Fi to the LTE operator? Today, the answer is not much. Tomorrow, the answer is simply when is tomorrow. 

Contact ACG for more information as to what we can do to help you at successfully offering VoWi-Fi services.

Greg Whelan

gwhelan@acgcc.com

acgcc.com