China Mobile leading the way as emerging market operators embrace Wi-Fi

Operators in both mature and developing markets are now looking to Wi-Fi as a tool for data offloading and service differentiation, says Matt Ablott of Wireless Intelligence

Mobile data offload onto Wi-Fi is a strategy usually associated with operators in mature markets as a tactic to ease congestion on their networks. But as mobile markets mature across the globe, there are signs that many operators in developing economies are also now looking at Wi-Fi as a way to keep pace with mobile data demand.

Wireless Intelligence classifies developing countries and economies as defined by the World Bank, and that still includes China – despite the country’s mobile sector showing increasing signs of maturity. Last week, China Mobile, the country’s (and world’s) largest mobile operator, attributed slowing growth to increased domestic competition and a rapidly evolving telecoms market.

Although Chinese 4G licences are not due to be issued until later this year (at the earliest), mobile data volume and revenue has already reached the levels seen in many developed markets. China Mobile’s total data service revenue (including SMS) grew 19% year-on-year to CNY166.3 billion in 2012, now accounting for nearly 30% of overall sales, up from 26% a year earlier. Within that, wireless data traffic is now bigger than SMS in revenue terms, growing 54% year-on-year to CNY68.3 billion, representing 12.2% of the total.

Interestingly, Wi-Fi accounted for just a fraction of China Mobile’s wireless data revenue and yet shouldered almost two-thirds of wireless data traffic (see chart), implying that its offload strategy has been highly effective. The operator had 3.83 million Wi-Fi access points in place at year-end.

These numbers are beginning to reflect the Wi-Fi trends seen in highly advanced markets such as the US, South Korea and Japan where Wi-Fi offloading is common.

Japan’s KDDI is targeting half of its mobile data traffic being offloaded onto its Wi-Fi networks by this month, up from 43% at year-end 2012. Its strategy is based on supplying subscribers with hotspots for the home to handle peak residential traffic in the mornings and evenings; and installing hotspots in public areas such as stations, airports, business districts and universities where demand is highest during the day. By year-end, KDDI had sold 1.65 million ‘Home Spot’ Wi-Fi units (following launch in February 2012) and had 220,000 public Wi-Fi access points.

Meanwhile, AT&T – which operates 32,000 of its own hotspots across the US – recently published statistics showing that connections to its Wi-Fi network more than doubled year-on-year in 2012. This was primarily due to the increase in Wi-Fi traffic via mobile devices, which increased threefold during the year, as more and more AT&T subscribers adopt smartphones and tablets.

Operators in these advanced markets are also leading the global migration to 4G-LTE; according to our data, the US, South Korea and Japan currently account for almost 90% of the world’s LTE connections – Verizon Wireless alone accounts for nearly 30%. There is some evidence in these markets that the volume of mobile data passed onto Wi-Fi may be plateauing due to the higher-capacity LTE networks being able to take much of the load. A recent study by Mobidia noted “a decrease in Wi-Fi usage in relative and absolute terms” in the three markets mentioned above, which it attributed in part to attractive 4G pricing by local operators.

By contrast, the reliance on Wi-Fi in developing markets is growing as operators look to meet mobile broadband demand, particularly in urban areas.

In Thailand, for example, both the country’s private and state-owned operators are involved in a consortium to install a combined 250,000 Wi-Fi hotspots nationwide this year, and 400,000 by 2015. There are also major Wi-Fi investments currently underway by Bharti Airtel across all of its 17 African markets (starting in Niger); by Ooredoo’s Indosat in Indonesia, by TIM in Brazil, and by Axiata in Malaysia, among others.

A recent study by Amdocs found that 89% of all service providers surveyed (including fixed, mobile and cable) have either already deployed, or plan to deploy, Wi-Fi – suggesting it is now a ubiquitous global trend. And the study notes that Wi-Fi is increasingly being offered by operators as a service in its own right, rather than simply used as an offloading tool.

As the operator Wi-Fi market matures, other issues now need to be addressed, notably with regards to interoperability and roaming. Work is already underway to enable Wi-Fi to function in a similarly seamless way to the global mobile standards. In the meantime, operators are teaming up to provide compatible Wi-Fi roaming, as evidenced by the recent partnership between China Mobile, Japan’s Docomo and South Korea’s KT.