Feature Article

January 16, 2014

How Big Might "Use Wi-Fi First" Mobile Market Grow?

It remains to be seen how much impact Scratch Wireless or Republic Wireless will have in the “use Wi-Fi first” segment of the mobile communications business, or how much traction

FreedomPop might get in the low-cost Internet access and mobile phone business.

Compared to strategic challenges a decade ago, much might be different. Not only is Wi-Fi much more widespread, in both private and public settings, but much of the actual “Internet data consumption” already occurs in public and private Wi-Fi zones.

In other words, both the supply and the demand for Wi-Fi connections are qualitatively different. People know how to use Wi-Fi hotspots, especially when consuming Internet content.

By some estimates, at least 66 percent of all Internet activity on smartphones is conducted over a Wi-Fi connection.

That illustrates a change in the use of the mobile device, which now is a multi-purpose device. Sometimes it is used for voice, sometimes for texting and sometimes as a content consumption device.

And that arguably creates a new and more-compelling value proposition for services that are “lower cost” because they rely heavily on Wi-Fi for bandwidth-intensive Internet content consumption activities while using the bandwidth-efficient voice and texting features of mobile networks.

That allows both Scratch Wireless and Republic Wireless to create traction by relying first on Wi-Fi connections, and then defaulting to mobile network access only when it is not possible to get a Wi-Fi signal, offering lower prices to their customers.

Ignore for the moment that such commercial efforts suffer from some of the same “go to market” issues as do prepaid specialists: the handset selection necessarily will be limited, and distribution has to rely on “Internet” fulfillment and marketing.

Basically, that means Scratch Wireless and Republic Wireless will, to a great extent, not be able to sell to market segments that value particular devices, such as the Apple iPhone. One might therefore suppose that both service providers will compete with other prepaid providers, not so much the postpaid national carriers.

But that part of the market is growing, and might reach $26 billion in 2014. How much of that is addressable by the “use Wi-Fi first” providers and FreedomPoP is the issue.

Edited by Blaise McNamee

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