KNOCKING

SOME SENSE

INTO THE
SMARTPHONE
ALAN BERREY | CEO of Scratch Wireless
foreword by mark lowenstein

TABLE OF CONTENTS

4
7
10
13
17
20
24
30
33
35
38
41
43
44
45
46

Foreword
Introduction
What is Wi-Fi First?
Wi-Fi First & the MSO
Wi-Fi First & the MNO
Fixed-Mobile Convergence
Lessons Learned from Muhammad Ali & Joe Frazier
Licensed vs. Unlicensed Spectrum
Wi-Fi Offloading
Devices
The Financials of Wi-Fi
Should Wi-Fi be Cellular-like?
Conclusion
About the Author
About Scratch Wireless
Sources

FOREWORD

Wi-Fi is a huge part of peoples digital lives. Some 50% of

smartphone data use already occurs over Wi-Fi networks, due
in part to its often faster-than-cellular speeds, and also as a way
of saving money on usage-based cellular data plans. Consumers
have also become accustomed to using Wi-Fi for voice, mainly
for international calling, through popular apps such as Skype
and FaceTime.
But Wi-Fi is poised to become an even bigger part of the mobile
revolution. The average U.S. household spends some $5,000
per year for their combination of cable, telephone, broadband,
and cellular services. The typical family wireless bill often
exceeds $200 per month. Given the growth in pre-paid wireless
services and the beginnings of more serious price competition
in the U.S. wireless market, it is clear that consumers are looking
to save money on their communications costs.
Enter the concept of Wi-Fi First mobile services, which use
Wi-Fi as the default for voice, text, and data services, and the
cellular network as the backup, when in an area not covered by
Wi-Fi. The idea of Wi-Fi Calling has been around for some time,
but these early stage Wi-Fi services have had significant feature
and quality gaps, were not aggressively marketed by operators,
and have consequently not really caught on with subscribers.
More recently, operators such as Sprint and T-Mobile have
expanded and enhanced their Wi-Fi calling services, aimed at
budget-conscious subscribers or for situations where there is
poor cellular coverage. An increasing number of devices are
now being sold with some level of native Wi-Fi calling capability.

4 | Wi-Fi First

As this book outlines, the key ingredients of market

demand, mature infrastructure, and a viable business
model are falling into place to create a real opportunity
for vendors and service providers to build a Wi-Fi First
market. From the perspective of the customer, there are
four critical requirements for the Wi-Fi First concept to
become a viable option.
First, consumers need the ability to connect to a WiFi hotspot throughout a large portion of their day.
Wi-Fi access points (APs) are now nearly ubiquitous in
homes and offices. There is also continued expansion
of publicly available hotspots, in retail establishments,
airports, hotels, convention centers, and through the
aggressive roll out of public and neighborhood APs by
the Cable-Wi-Fi consortium, among other initiatives.
Second, voice and text services on Wi-Fi must be
seamless and cellular-like, from a quality and usability
perspective. This means that Wi-Fi is automatically
selected for voice calls when within range of a
hotspot, and that voice quality is as good as, or
better than cellular. Another critical component is
that text messaging and other value-added services,
such as voicemail, are fully supported when on WiFi. Companies working on Wi-Fi First services and
infrastructure are also making progress on the tricky
challenge of providing seamless handoff between
cellular and Wi-Fi networks.
Third, there must be a relationship with nationwide
cellular operators, on reasonable terms to the user
and the wholesaler, so that voice and data services are
available when not within range of a Wi-Fi hotspot. In
a competitive market with the improved economics of
LTE and additional spectrum coming on-line, we believe

5 | Wi-Fi First

mobile network operators will be more open to

favorable resale arrangements.
Fourth, Wi-Fi First must offer a solid user experience. It
cannot be a poor mans cellular service. There cant
be any major usability or feature compromises. And the
monthly average bill, including the occasional cellular
use, must be at least 50% less than the average wireless
bill typically paid by the consumer.
All these elements are coming together quickly. As
Alan Berrey outlines in this book, there is a terrific
opportunity for the creation of exciting new business
models for mobile services, competition from new
entrants, substantial savings for consumers, and
enhanced revenue opportunities and cost savings for
mobile network operators. As this book details, WiFi is going to be an increasingly important element
of mobile, and consumers will benefit from better
coverage, lower prices, and enhanced features enabled
by the concept of Wi-Fi First.
Mark Lowenstein, Managing Director of Mobile
Ecosystem, is a leading mobile industry analyst,
consultant, and commentator. He founded and led
the Yankee Groups global wireless practices, was VP
of Market Strategy at Verizon Wireless, and advises
companies across the mobile and digital media value
chains on product and market strategy.

6 | Wi-Fi First

INTRODUCTION

Guglielmo Marconi
1874 1937

In 1844, Samuel Morse sent his first telegraph message

from Washington, D.C. to Baltimore, Maryland. The
transmission occurred via fixed wirelines strung
between the two cities on the first publicly sanctioned
set of utility poles. This led to the founding of a plethora
of new companies that took advantage of the new
telegraph system, including Western Union in 1855.
While Western Union dominated communications for
decades, the industry underwent a number of changes
to its infrastructure that paved the way for modern-day
communications.
Not to be outdone by the wireline industry titan,
Western Union, wireless services were also under
development during the same period. In 1895, amid
a flurry of wireless inventions, a 21-year-old Italian
named Guglielmo Marconi successfully transmitted a
message one and a half miles. Even though Marconi
pioneered broadcast radio and television services, it
was the telegraph, or the idea of person-to-person
communication, that truly inspired him. He pursued
radio as an alternative to what Western Union was doing
and founded Marconis Wireless Telegraph Company,
which bore that name until 1963.

7 | Wi-Fi First

In spite of his best efforts, Marconi did not make a

dent in the telegraph industry. Western Union was too
large, too entrenched, and too efficient for a wireless
contender to change the landscape. Indeed, Western
Union may have been Americas first true monopoly,
making it very difficult for Marconi, or even the U.S.
Congress, to do anything about its dominant position. It
wasnt until Alexander Graham Bell invented the
telephone that Western Unions supremacy in the
communications industry saw its eventual demise.
Today, we see an accelerated conflict between wireless
and wireline service providers. There are two primary
types of telecommunication services: the wireless
mobile network operators (hereafter MNOs) and the
cable companies (otherwise known as multiple-service
operators, hereafter MSOs). Even though the two
types of companies have many differences, they are
both in the digital delivery business. They move digital
packagesstreams of bitsif you will, from one
location to another as quickly and efficiently as possible.
MSOs typically sell their services in the form of
telephone, television, and high-speed Internet.
MNOs, on the other hand, sell their services as voice,
messaging, and data. Regardless of how the services
are segmented, named, and sold or the size of the
communication, the MNOs and MSOs are all just
delivering bits, and offerings increasingly overlap and
conflict.
Because what they are delivering is all just bits, the
MSOs and MNOs are on a collision course that will
eventually lead to the growth and dominance of some
companies and the degradation or demise of many
others. What started over 100 years ago as a battle
between wireless and wireline is now accelerating and
building momentum.
8 | Wi-Fi First

A BRIEF
HISTORY
OF
COMMUNICATIONS:

1844: Samuel Morse

sent the first telegraph
1855: Western Union is
born
1876: The invention
of the telephone by
Alexander Graham Bell
1879: Western Union
leaves the telephone
business
1889: Almon Strowger
patents the direct dial
telephone
1925: John Logie Baird
transmits the first
television signal
1983: The development
of cellular phones,
making mobile
communications
possible

For the past twenty years, the MSOs and MNOs each
had their place. In many ways their networks are
still complementary. From a customers perspective,
however, the two networks will eventually be seen
as being completely redundant. Consequently, either
the MSOs or the MNOs will be perceived as dominant.
That perception will lead to economic advantage
and eventually real, long-term control over the entire
telecommunications industry.
Today, it is impossible to know if the MSOs or the MNOs
will win the imminent battle. But the battle is underway,
and there is a new, emerging technology that will
hasten the conflict and shape the battleground. In this
book, I outline how this one simple technology will
help define the difference between success and failure
in the telecommunications industry. The technology
is Wi-Fi First. Wi-Fi First must be an integral part of
the corporate strategies of MSOs and MNOs alike. If
embraced, Wi-Fi First will enable victory. If ignored,
Wi-Fi First will hasten defeat.
In the chapters that follow, I define Wi-Fi First
technology, outline its influence in the MNO and MSO
ecosystems, and recommend a course of action for
the MSOs and MNOs, as well as the suppliers, partners,
and customers who will all have a stake in the outcome
of the fixed-mobile convergence. There is, as you will
discover, a lot at stake.

1992: Neil Papworth

sends the first text
message

9 | Wi-Fi First

WHAT IS WI-FI FIRST?

Most electronic devices, including tablets, laptops,

cameras, and gaming consoles, are Wi-Fi enabled. We
purchase the equipment at the store or online, connect
it to the Internet through Wi-Fi, and use it freely. In
many cases, if you have access to high-speed Internet
you can enjoy the full benefits of the device without any
mandatory monthly cost.
The typical mobile phone, on the other hand, operates
much differently. When you purchase a mobile device,
it must be connected to a mobile network. And usage
of the mobile network is expensive. You cannot enjoy
the full benefits of an Android smartphone or an iPhone
without paying a monthly fee to a mobile operator, even
if the phone is connected to Wi-Fi most (or in some
cases, all) of the time.

The term Wi-Fi was introduced

commercially in the year 2000 and has
become one of the most recognized
brands in the world.

The requirement that a mobile telephone be

permanently connected to a mobile operators network
is fundamentally flawed. If implemented correctly, a
smartphone could operate over Wi-Fi just as effectively
and completely as it does over cellular networks.
The device itself does not need an expensive mobile
network behind it. It could function flawlessly over
Wi-Fi alone. In fact, many consumers connect their

10 | Wi-Fi First

smartphones to Wi-Fi to save money by reducing

the amount of data used over the expensive mobile
network. This process of Wi-Fi offloading is helpful
for saving money, but current devices still artificially
require access to a mobile network. Consequently, no
matter how much data you offload to Wi-Fi and how
much time you spend connected to Wi-Fi, you are still
required to pay a mobile operator for the benefits of
using the device.
Wi-Fi First takes a different approach from the
traditional cellular solution. With Wi-Fi First the
smartphone uses Wi-Fi as the primary network and
does not require any mobile network access. If the
device is connected to Wi-Fi, then all the services on
the device are fully functional. Voice services, text
messaging, social media, location-based services, etc.
are all available through the Wi-Fi connection. As a
result, the mobile network becomes non-essential, as
with other Wi-Fi enabled electronic devices. Of course
there are times people are away from Wi-Fi, and this is
where the power of a mobile network is evident. With
Wi-Fi First, the device uses Wi-Fi as the primary network
and mobile networks to fill in the gaps.
Wi-Fi First provides two important benefits over the
traditional mobile solutions. First, Wi-Fi First is the
most cost-effective form of mobile communications
technology available. Period. Hands down. No other
option even comes close. By using the lowest-cost
network whenever possible, namely Wi-Fi, consumers
experience a dramatic reduction in the amount of
cellular data consumed. Furthermore, if a device is
always used within range of Wi-Fi, the cost of the
service can be zero. As Scratch Wireless demonstrates,
mobile should be free because it can be free.

11 | Wi-Fi First

The second benefit of Wi-Fi First is control. There are

many locations where cellular networks are insufficient.
Getting a signal from the basement of a home or from
a poorly covered area in an office building can be
problematic. And if you dont have good coverage, it
can be very difficult to add capacity. Good luck asking
Verizon Wireless or AT&T to erect a new cell tower in
your neighborhood to improve your coverage. WiFi, however, is much more manageable. If you need
coverage in an office or home, you can simply add it.
Due to its intrinsic value, Wi-Fi First will disrupt
the traditional mobile operators. It will increase
the value of broadband Internet connections and
force innovation in devices and equipment. It will
accelerate entrepreneurial innovation and broaden
consumer options. Wi-Fi First will create new billiondollar businesses and destroy existing billion-dollar
businesses. In short, Wi-Fi First will change the mobile
landscape forever.

WI-FI IS LIKE TAP WATER

Our consumption of telecommunication services is analogous to our consumption of water. Most
of the time, we have access to clean, drinkable water. Even though water is plentiful, a 1-liter
bottle of water can cost as much as $3 or $4. The same amount of tap water costs just fractions
of a cent. On average, bottled water is 1,000 times more expensive than tap water. In spite of the
abundance of tap water, however, we often pay vastly different prices for the commodity based
upon location and convenience. Many of us are willing to pay a huge premium for a bottle of
water under certain circumstance. Few of us, however, would wash our clothes or sprinkle our
garden with bottled water. To do so would be foolish. So why pay for expensive cellular service
when free Wi-Fi is readily available? There may be times and places when Wi-Fi is not available,
and in those circumstances cellular access may be worth paying a premium. But the vast majority
of our data consumption is within range of Wi-Fi, and Wi-Fi should be our first way of getting it.

12 | Wi-Fi First

WI-FI FIRST & THE MSO

As outlined in the previous chapter, Wi-Fi First

technology is set to dramatically impact the wireless
and cable industry, but MSOs in particular have the
most to gain. If they fully embrace Wi-Fi First, MSOs can
attract millions of customers to new and compelling
services with strong profit margins. They can reach
more customers, reduce churn, and revitalize a
languishing part of their businesstelephony. Just as
important, however, the MSOs can also fend off the
aggressive encroachment of the MNOs in their markets.
Simply put, Wi-Fi First is the MSOs answer to MNO
competition.
If MSOs ignore Wi-Fi First, they will suffer at the hands
of their MNO nemeses. MSOs are living in precarious
circumstances. As outlined in the chapters that follow,
the fixed-mobile convergence is heating up, which
means MNOs and MSOs are competing more than ever.
Alternatives are proliferating for high-speed Internet,
over-the-top television, and telephone services. Rarely
does a simple technology emerge that fully leverages
the benefits of the MSOs strengths while also providing
a mechanism to completely turn the tables in a highly
competitive market landscape.

13 | Wi-Fi First

The greatest asset of the MSOs is their physical

network. For the past two decades, the MSOs have
created physical connections between locations. Once
connected, the MSOs networks can provide fast but
extremely low-cost services (low cost, that is, on a per
GB basis). As soon as a cable operator connects service
in a specific location, there is virtually no limit to the
amount of data that can flow through it.
Of course, as is often the case, the MSOs biggest
strength is also their biggest weakness. Due to the
nature of the technology, cable and fiber are connected
to specific physical locations. Cable service is provided
to a home or business that is anchored to a physical
address. Obviously, physical connections limit mobility,
and mobility is increasingly essential in a highly fluid
world. The fiber line may make sense for large-screen
televisions, home entertainment systems, or bulky
desktop computerswhich are fixed in physical
locationsbut because they are anchored, fixed-wire
networks simply do not work for handheld devices,
tablets, laptop computers, or many other consumer
electronic devices.
As a result of the limitations that are associated with
MSO service, Wi-Fi has become an essential end point
for almost all cable connections. Wi-Fi brings mobility,
albeit with limited range, to the end points of most
high-speed Internet access points. Over time, Wi-Fi
has become the end point connection protocol of
choice, through which cable companies maximize their
relevancy. According to Cisco, nearly half (46.2%) of the
worlds data will flow through Wi-Fi in 2015.[1]
Wi-Fi First takes full advantage of the MSOs high-speed
Internet connections, maximizes the value of Wi-Fi,
and provides the MSOs with a compelling new service

14 | Wi-Fi First

that their customers want. In 2014, the average cost of

a smartphone was $83 per month. Through Wi-Fi First,
MSOs can offer smartphone service at a fraction of the
cost of traditional mobile operators, and they can do so
very profitably.
At Scratch Wireless, we have found Wi-Fi First
technology ensures that the vast majority of voice,
text, and data services occur on Wi-Fi. Even before
including the Cable Wi-Fi initiative, the roll out of public
access points, Wi-Fi 2.0, and other complimentary
technologies, Scratch Wireless discovered that 75% of
data and 85% of voice services occur over Wi-Fi.
Consequently, the MSO that offers a Wi-Fi First
smartphone service will experience the following
financial results:

Average revenue per user (ARPU)

per month: $30.00
Voice cost per user:

Messaging cost per sub:

Data cost per sub:

Gross margin per sub:

$2.60 (500 minutes per month, 85% via

Wi-Fi at $0.004 per minute, and 15% via
cellular at $0.012 per minute.)
$0.30 (1,000 messages at $0.0003 per
message.)
$6.00 (2 GB of data, 75% via Wi-Fi at
$0.00 per GB, and 25% via cellular at
$12 per GB.)
$21.10 (70%)

[2]

15 | Wi-Fi First

So Wi-Fi First should be a no-brainer for the MSOs. They

know their customers want (and need) smartphone
service. They also know that the MNOs are eating
their lunch in telephony services. MNOs are collecting
around $150 per household, and that number is
growing. Wi-Fi First can help the MSOs reverse that
trend and exploit their competitive advantage. Wi-Fi
First increases the value of public Wi-Fi access points
and allows the MSO to retain customer relationships
rather than forfeiting them to the MNOs. In short,
Wi-Fi First could prove to be the single most positive
technology development for the MSOs in the past
decade, and possibly ever.
Side Note: Consider for a moment the January 2013
article[i] at www.optics.org, where a team of researchers
from NEC Corporation and Corning Inc. achieved a data
throughput speed of 1.05 petabits per second through
one line of optical fiber. This is enough data capacity to
serve the communications needs of every cellular device
in the world in 2015, one hundred times over.[3]

16 | Wi-Fi First

WI-FI FIRST & THE MNO

Unlike the MSOs, the MNOs have recognized the value

and have been investing for years in their own variation
of Wi-Fi First, albeit a watered-down version. The MNOs
started their implementation of Wi-Fi First by enabling
and encouraging data offloading, the simplest type
of Wi-Fi First service. Heres how it works: if Internet
service is available via Wi-Fi, the device should use it. If a
satisfactory Wi-Fi connection is not available, the device
should use cellular. For all other services, like calling,
text messaging, and picture messaging, the device
should continue to use the cellular network at all times.
Data offloading has become so successful and
beneficial to MNOs that they are actively expanding
Wi-Fi First services to Wi-Fi calling. The MNOs have
seen Wi-Fi as an opportunity to improve coverage area,
increase quality of service, and reduce operating costs.
Many devices on multiple mobile networks are now
offering Wi-Fi calling, which provides a superior
experience at a fraction of the cost.

17 | Wi-Fi First

The MNOs adoption of Wi-Fi First service is the

by-product of their unique approach to service delivery.
For more than 30 years, the MNOs have aggressively
focused on building tightly controlled networks with the
broadest possible coverage maps. They have erected
thousands of cellular towers in densely populated
metropolitan areas and along the roadways that
connect them. The MNOs secure licensed spectrum
from the FCC for billions of dollars and build out
networks that they manage. All aspects of the network
are important to the MNO, including the end device. As
a result, all devices they sell are tested and authorized
for access to their networks.
Due to the cost of building vast networks and validating
devices and equipment, the operators have limited
service delivery capacity. It is simply not economical for
MNOs to build massive quantities of excess capacity.
Hence, the MNOs are often operating on the edge
of their networks capabilities. LTE has temporarily
eliminated some bottlenecks, but consumer demand
is expected to soon outpace supply for the foreseeable
future.
By definition, mobile networks are designed to
dynamically support devices that are not fixed in
specific geographic locations. Voice and data sessions
must be supported from any location and must be
automatically transitioned from one cellular tower
to another as devices move. Session continuity and
dynamic handoff is embedded in the DNA of mobile
networks. This level of mobile support does not exist
in the MSO network, at least not nearly to the same
degree.
These factors (network cost, capacity constraints,
device control, and session management) set the

18 | Wi-Fi First

stage for the MNOs to take full advantage of Wi-Fi

First services. Network costs and capacity constraints
necessitate Wi-Fi First services. Device control and
session management are key enablers.
As we have already seen, MNOs are in a better position
technologically than MSOs to implement Wi-Fi First
services. Some people in the MNO executive ranks feel
that Wi-Fi is simply a gap filler. They think Wi-Fi may
be embraced only temporarily to solve a bandwidth
challenge, but that any long-term strategy should
not include Wi-Fi. Eventually, they believe they will be
able to supply all telecommunication services without
it. They also believe that Wi-Fi First technology puts
the MNOs into a position of vulnerability. With WiFi First, the MNO does not fully control the network
and therefore cannot fully guarantee the services (or
continue to reap all of its benefits).
Contrary to these beliefs, Wi-Fi First has the capacity
to dramatically benefit MNOs, in both the short and
long terms. Without leveraging Wi-Fi, it is unlikely that
MNOs will be able to supply sufficient capacity to fill
the increasing demand during the next decade. It is
also unlikely that MNOs alone will be able to remain
competitive on price without Wi-Fi First.
MNOs should continue to pursue Wi-Fi First technology
for their own benefits and should push the concept to
its natural extreme. When they do, they will find that WiFi First naturally concludes with unlimited capacity and
a near-zero cost structure.
A holistic Wi-Fi First solution is best implemented
by partners rather than directly through retail MNO
brands. Like the prepaid services that launched more
than a decade ago, Wi-Fi First will most certainly

19 | Wi-Fi First

place downward pressure on all cellular services. It

is unreasonable to expect major mobile operators to
implement a solution that would drastically cut their
retail revenue rates. It is possible, however, for the
MNOs to benefit from the incremental services and
subscribers that Wi-Fi brings without cheapening
the existing brands. Wholesale partners, like Scratch
Wireless, are highly tuned for offering Wi-Fi First as
differentiated product.

FIXED-MOBILE CONVERGENCE

Unless they change course, all cable operators in

America, and many elsewhere in the world, are
facing two grim prospects in the next decade or
two. Based upon current trends, the MSOs will either
face extinction through an onslaught of high-speed
mobile alternatives, or they will be relegated into
insignificance by the mobile operators that push them
into a diminished role of providing commoditized data
offloading.
Fortunately, there are options available for the cable
companies to change the current trajectory. The
balance of power that currently favors the mobile
operators can be forcefully changed. It turns out that
the cable operators can indeed take actions now to
retain a permanent place in the telecommunications
industry and in the consumer wallet. More important,
however, they have the opportunity to completely
turn the tables and change the direction of the entire
industry. The consumer relationships that are currently
held by mobile network operators can be targeted and
seized by cable.

20 | Wi-Fi First

Years ago, industry analysts predicted the impending

movement toward common cable and mobile services
and formally classified it fixed-mobile convergence. In
2004, a group of carriers formed a global alliance to raise
awareness about fixed-mobile convergence, and their
goal was to remove the distinctions between fixed and
mobile networks. While the alliances mission sounded
noble, positive, and cooperative, in reality, it did little to
move the needle, and the group disbanded in 2010. Since
then, there have been more industry foes than friends
as cable and mobile operators refused to work together.
It turns out the technology convergence is real, but the
business cooperation is not.
The conflict between MNOs and MSOs started back in
1983, when MNOs introduced mobile services. While
mobile services werent immediately a threat to landlines,
in 2004 MNOs took over the telephone industry
when they reported that the number of active cellular
contracts in America exceeded the number of landlines.
Now, there are over 330 million cellular contracts
in America, and that number continues to grow. By
contrast, there are now less than 100 million
landlines remaining in America, down from almost
200 millionand that number continues to decline.
According to the U.S. Census Bureau, less than 30% of all
1529-year-old Americans have access to a landline.[4]

FIXED

MOBILE

In addition to the sheer quantity of telephone accounts

transitioning into mobile, the innovation curve is telling
as well. In the past ten years, there has been almost zero
innovation on landlines. Yet during the same decade, the
MNOs have completely transformed telephony services.
The difference between a landline phone in 2004 and a
landline phone in 2014 is indiscernible. But the difference
between a mobile phone in 2004 and a mobile phone in
2014 is colossal.

21 | Wi-Fi First

Now that the mobile industry dominates the voice

communications channel, the battle has shifted to
data. Mobile operators are bringing high-speed Internet
service to homes via mobile broadband solutions.
LTE has enabled the MNOs to disrupt the traditional
broadband Internet services offered by MSOs.
LTE hotspots are no longer niche services. Instead,
they represent a real threat to MSOs. In 2014, 30% of
U.S. cable subscribers reported that they expected they
would cut the cord to cable and replace the service with
high-speed mobile data within three years.[5]
Finally, television services, which many consider the
bread and butter of the cable companies, are at risk
as well. Hundreds of HD channels and DVRs are not
enough to convince many customers to retain their TV
subscriptions through the cable companies. Instead,
people are consuming television via Internet and
cutting the cable cord. In many cases, 25% or more of
the MSOs subscribers do not want TV.
In an effort to retain footings during the past decade,
many cable operators have pursued various mobile
strategies. In 2006, for example, Comcast, Time Warner,
and Cox acquired 137 wireless spectrum licenses
covering 250 million people at a cost of $2.37 billion.
Five years later the spectrum was sold to Verizon for
$3.6 billion, confirming that cable companies had no
appetite for implementing wireless on their own.[6]
Now most of the cable operators have some form of
partnership agreements with the mobile companies
to sell each others services. Time Warner and Verizon
say they are better together. Sprint, Clearwire, and
many others have been involved in wirelesscable
partnerships as well. None of these efforts, however,
have shifted the balance of power in favor of MSOs.
Much to the contrarymost of the programs have
actually heavily benefitted the mobile operators who

22 | Wi-Fi First

continue to chip away at cables turf. It is the mobile

companies who are attracting new net subscribers,
operating on the edge of their capacity, and leading the
technology innovation curve.
So if prevailing winds favor the mobile operators, what
must the cable companies do to retain their position
in the marketor better yetgain the upper hand? Are
cable companies doomed to a commoditized highspeed Internet business model? Fortunately, there
are still options for the cable operators, although the
window is closing. It turns out that the biggest source of
leverage available to the cable operators is Wi-Fi First
mobile service. As previously mentioned, Wi-Fi First
ensures that communications solutions use Wi-Fi as
the primary network whenever possible and only use
cellular to fill the gaps. With Wi-Fi First, cable companies
can fully leverage their current assets, change the
industry dynamics, and introduce a shift in power. And
they can do it with very little incremental cost. With
Wi-Fi First, the cable companies can also exert influence
on the manufacturers of consumer electronics and
ensure that new equipment fully exploits Wi-Fi with
even greater success. Finally, cable companies can
leverage Wi-Fi First to maximize revenue and deliver on
the needs of individual customers, as well as the needs
of entire homes and businesses. With Wi-Fi First, the
MSOs can completely upend the mobile industry.
Cable companies can and must take actions now to
shift the center of gravity and win the battle that is
currently at their doorstep. It may take time for mobile
operators to replicate the speed and cost of fiber
connections that the MSOs already have in place, but
betting that they never will is a recipe for dwindling
influence, loss of customers, commoditized services, or
death. The MSOs must take clear and concise actions
now if they are to win.

HOME

SCHOOL

OFFICE

SHOPS

CAFES

PLANES

CELLULAR NETWORKS

23 | Wi-Fi First

LESSONS LEARNED FROM

MUHAMMAD ALI & JOE FRAZIER
On March 8, 1971, two men squared off in a boxing
match in New Yorks Madison Square Garden in what
was called The Fight of the Century. The Fight,
as others called it, was between Joe Frazier and
Muhammad Alitwo of the most famous boxers to ever
live, and it was one of the most anticipated moments in
sports history.
Ali was 29 years old and had a professional record of 31
wins, 0 losses. He was the 1960 winner of the Olympic
Gold Medal in boxing and world renowned for his
light feet, powerful punch, quick wit, and confidence.
Im not the greatest, he once said, Im the double
greatest!
Frazier, on the other hand, was sure-footed, steady,
and merciless. He could simply absorb punishment
and seemingly never tire of it. He won the Olympic
Gold in 1964, even though he was fighting his bouts
with a broken thumb. In 1971, Frazier was 27 and the
undisputed heavyweight boxing champion of the world.
He, too, was undefeated and had a professional record
of 270.
That night the fight was everything fans hoped for,
except one thingthere was no knockout. For a full
hour the two men punched each other relentlessly.
In the 15th and final round, Frazier knocked Ali to the
canvas, but Ali recovered and finished the fight. At
the end of the fight, the judges unanimously crowned
Frazier the victor and handed Ali the first defeat of his
professional career.

24 | Wi-Fi First

The pair met two more timesonce in 1974 and again

in 1975. In their second matchup, they fought 15 hard
rounds without a knockout, and Ali was named the
winner, much to the dismay of many sports writers. The
third and final fight, which occurred in the Philippines,
was dubbed The Thrilla in Manila, and is arguably one
of the greatest fights in boxing history. It was, in the
words of Ali, the closest thing to dying that I know of.
At the end of the 14th round, Fraziers trainer wouldnt
let his fighter return to the ring. Given this, the fight
ended as a technical knockout in favor of Ali.
In retrospect, Ali and Frazier were two balanced
fighters. There was no single punch, no single round,
and no single bout that defined their rivalry. Instead, it
was an ongoing contest that lasted for years. During
the intervals between fights, the contests continued
through taunts and ridicule. Some people argue that
each fighter benefited economically from the high
profile drama inside and outside the ring. While the
financial analysts may quibble about the theoretical
lifetime economic value of a boxing rivalry, the fighters
themselves would have preferred to have knocked the
other man out, decisively, once and for all.
The battle between Americas MSOs and MNOs may not
be as riveting as Ali vs. Frazier, but make no mistakea
heavyweight rivalry is afoot. Two titans are battling for
the title of communications champion. Like Ali and
Frazier, both have their strengths, and both have their
weaknesses. The fight is underway now, and the winner
will reap the benefit of ongoing trillion-dollar revenues
for multiple decades to follow.
In one corner we have the MNOs, which include Verizon
Wireless, AT&T, and others. In the other corner are the
MSOs, which include Comcast, Time Warner Cable, Cox

25 | Wi-Fi First

Communications, Charter, and others. Right now, MNOs

appear to have the edge on their competition. As MSOs
contemplate strategy for this ongoing contest, there are
three lessons that cable operators can learn from Ali vs.
Frazier:
Lesson #1: The Fight Is Real and the Stakes Are High
From the beginning to the end of each bout, it was clear
that Ali and Frazier had stepped into the bright lights to
fight. They did not exchange pleasantries or try to share
the ring. All their training and preparation was focused
on one single objective: to knock the other man out.
In contrast, the MSOs and MNOs often pretend that
their battle is not raging. There is a sense that all of the
MNOs and MSOs can share the ring together. Publicly,
they get along nicely with one another. On one side
of the ring, the MSOs dont even fight much between
themselves. Just like other utilities, the MSOs have
individually staked out their geographic positions and
have only occasionally gotten into modest
squeamishness with other MSOs.
On the other side of the ring, the MNOs behave much
differently. The MNOs are constantly hitting and being
hit by each other. They push one another and challenge
one another. They punish each other relentlessly and
are always looking for weaknesses they can exploit. The
MNOs are accustomed to seeing players being
pushed out of the way or eviscerated entirely. In short,
the MNOs are conditioned for competition, fierce
competition.
Of course one of the big differences between
professional boxing and the telecommunications
industry is the size of the ring. While Ali and Frazier were

26 | Wi-Fi First

constrained to a fixed ring that was roped off at 2020

feet, the communications industry is huge. According
to Plunket Research, the total telecommunications
industry in the U.S. is $1.2 trillion annually. Even though
the ring is large and growing, every organization within
it should be keenly aware that the battle is raging.
The MSOs, in particular, should be fully aware that the
battle-tested MNOs are already planning to take over
their entire revenue streamand they will do so unless
the MSOs relentlessly fight back.[7]
Lesson #2: Fight from a Position of Strength
When Ali lost his first fight with Frazier, he learned that
he should not have fought Frazier on Fraziers terms.
Ali needed to stay away from the inside game and
especially away from Fraziers brutal left hook. Instead,
Ali should have stuck with the fighting style that made
him so great. He needed to movea lotand attack
from the outside. Ali needed to fight the way Ali fights.
When he did, he won.
In their contests with the MSOs, the MNOs have tried
to set the time, place, and rules for the contests. Take
data offloading as a case in point. For many years,
mobile devices did not include Wi-Fi radios. You could
not connect a mobile device to any Wi-Fi access point,
period. When a few manufacturers tried to introduce
mobile devices that included Wi-Fi radios, the MNOs
revolted. They simply would not allow devices on their
networks that had the potential to connect to another
network outside of their own.
It was not until the advent of the smartphone that
MNOs started to play nicely with Wi-Fi. Even then, it was
only because the MNOs could see that Wi-Fi could be a
benefit to them.

27 | Wi-Fi First

When smartphones gained popularity, the MNOs

experienced spectrum and network capacity limitations,
and they saw Wi-Fi as a solution to their problems.
By supporting Wi-Fi on devices, the MNOs enabled
customers to use Wi-Fi for data services when cellular
networks were unavailable, too slow, or too expensive.
Data offloading has served the MNOs very well. And up
until now, the MSOs have willingly moved data for the
MNOs for free.
When the roles are reversed, however, the MNOs
change the rules in their favor. Take the new LTE-based
Wi-Fi access points as one example. Verizon Wireless
calls their LTE Wi-Fi solution Jetpack. On a per MB
basis, Jetpacks are 5 to 10 times more expensive than
a wired MSO alternative. Even though the Jetpack is far
more expensive, it is configured to limit the type and
amount of data used, unlike the services MSOs provide.
Jetpack, for example, does not allow VoIP. So you can
take your Verizon Wireless mobile device and obtain
almost any data service via Wi-Fi, but you cannot use
any VoIP device with a Verizon Jetpack.
As a result of these efforts, MNOs currently have the
upper hand in the contest of fixed-mobile convergence.
So far, it appears that the MNOs are fighting from a
position of strength, while few examples exist of MSOs
doing the same.
Lesson #3: A Single Punch Can Make a Difference
All three fights between Ali and Frazier were long.
The victors were selected because of endurance and
determination. A closer look at the fights, however,
reveals that there were a few hits that made a
difference. In the first fight Ali was knocked to the
ground. He recovered and finished the fight, but the

28 | Wi-Fi First

hit had an effect. All fighters know they can win or lose
with just one punch.
The communications industry is no different. Most
of the time, competitive battles are protracted and
grueling, but it only takes one hit to change everything.
For example, the introduction of the mobile device
decimated the landline business. It took several years
for the full impact of the mobile phone to be realized,
but the damage was done as soon as the mobile
phone was invented. Similarly, when Apple launched
the iPhone in 2007, that one punch eviscerated both
Nokia and Blackberry. The two device titans have never
recovered. In the case of the MNOs vs. MSOs, Wi-Fi First
might be the one hit that changes it all. If the MSOs can
truly leverage the power of Wi-Fi First, it will cause the
MNOs to stumble, falter, and possibly lose the battle.
Many other lessons could be learned from Ali and
Frazier, but these three are sufficient for our point here:
Fight to win, fight from a position of strength, and
remember that one punch can make a big difference.
Indeed, one punch may be the only difference between
winning and losing the battle. And Wi-Fi First may be
the one punch that the MSOs need to retain their turf or
even turn the tables altogether.

29 | Wi-Fi First

LICENSED VS. UNLICENSED

SPECTRUM
History of Wi-Fi
Ive spent a lot of time talking about Wi-Fi,
but where does it come from? Wi-Fi, as we
know it, was brought to the world through
a combination of inventors, corporate
researchers, global government agencies,
and armies of attorneys. The Australian
Commonwealth Scientific and Industrial
Research Organization own several key
patents that enable Wi-Fi. Their ownership
of those patents gives credit to the claim
that Wi-Fi was invented in Australia. Other
patents have been combined into the
current Wi-Fi standards, but Australias role
remains significant.
The technologys origins started in 1985.
Now many organizations are involved in
its success. No single entity fully controls
Wi-Fi. The IEEE manages the standards,
formally known as 802.11. If a device is
compliant with 802.11 standards, then it
can bear the Wi-Fi brand. Even though IEEE
manages the standards of Wi-Fi, it does not
certify compliance. In 1999, the non-profit
Wi-Fi Alliance was formed to establish and
enforce standards for Wi-Fi. As of 2010, the
Wi-Fi Alliance consisted of more than 375
companies around the world.

In the face-off between cellular and Wi-Fi, which

comes out on top? Depending upon whom you ask,
you will likely get different answers to this question.
Some industry experts argue that cellular, or licensed
spectrum, is better than Wi-Fi because billions of people
now carry cellular devices every day, and it has long
been the standard for mobile needs. Others say that
Wi-Fi, or unlicensed spectrum, is better than cellular
because Wi-Fi has enabled a plethora of product
innovations. There are tens of thousands of consumer
electronic products that leverage Wi-Fimost of which
do not use cellular. Another camp might argue that
Wi-Fi and cellular are like apples and oranges and cant
be compared at all. In truth, all three of these answers
could be simultaneously correct.
For many reasons, cellular and Wi-Fi services are
difficult to compare. It would be impossible for this
short chapter to provide an exhaustive contrast
between the two. There are endless factors that could
be considered. So lets focus on a few questions that
can be answered definitively and are worthy of more
thoughtful consideration.
Which does more work?
There is no question that Wi-Fi moves more volume
of Internet data than any other wireless technology.
Worldwide, there is currently more than one zettabyte
(one trillion gigabytes) of Internet traffic per year. Half
of that data is delivered to the end users via Wi-Fi. In
contrast, only about 3% of the global Internet traffic is
moved via cellular networks.

30 | Wi-Fi First

In addition to the sheer volume of data moved, it is also

worth noting that Wi-Fi is very efficient. The federal
government has allocated 200 MHz of spectrum for WiFi transmissions. This small slice of spectrum is carrying
5060% of the worlds Internet traffic. Mobile operators,
on the other hand, have been allocated 600 MHz of
spectrum collectively and move only a tiny portion (3%)
of traffic. So Wi-Fi moves 15 times as much data, with
one-third of the spectral space. That means Wi-Fi is
about 45 times more efficient than cellular in spectrum
usage.[8]
Which is faster?
Since Wi-Fi is more efficient, its no surprise that Wi-Fi
speeds, even the ones users receive from local Wi-Fi
hotspots, are significantly faster than cellular. According
to a 2014 report from OpenSignal, a typical U.S.
smartphone connects to a Wi-Fi hotspot at 8.77 Mbps,
while LTE speeds, on average, are around 6.52 Mbps.
Smartphone users that have mobile devices connected
to Wi-Fi can therefore load websites, stream videos,
and send messages faster than on their regular mobile
network.[9]
Which offers higher economic value?
Both Wi-Fi and cellular technologies provide
tremendous economic value to the global economy.
There have been many studies of this subject, and while
none of them have been entirely comprehensive, it
appears the scales are tipped in the favor of Wi-Fi. Take,
for example, the February 2014 report from Telecom
Advisory Services, which concludes, the technologies
operating in unlicensed spectrum bands in the United
States generated a total economic value of $222 billion
in 2013.[10]

31 | Wi-Fi First

The question of economic value is a vital one because

the FCC is the sole arbitrator of spectrum allocation.
While licensed spectrum produces huge amounts
of revenue for the FCC, the allocation of unlicensed
spectrum produces none. Consequently, if the
government agency focused solely on generating
revenue, more spectrum would be licensed. However,
the FCC is a steward for the public good, and the
public good clearly favors Wi-Fi. So the FCC should
significantly increase the allocation of unlicensed
spectrum in America. Similarly, other global government
agencies should increase allocation of unlicensed
spectrum in their jurisdictions.
Of course the total societal benefits of unlicensed
spectrum are simply the summation of many individual
benefits. Any honest consideration of the mobile
industry quickly leads to the conclusion that Wi-Fi is a
huge benefit to the industry, consumers, and the many
companies that include Wi-Fi in their market strategies.
As data consumption increases, Wi-Fi will increase in
importance and value. No serious effort to provide
telecommunications service should be considered if
it does not include a generous portion of unlicensed
spectrum and Wi-Fi technology.

32 | Wi-Fi First

WI-FI OFFLOADING

In Mark Twains book The Adventures of Tom Sawyer,

we find the boy Tom, who as punishment for poor
behavior is compelled to paint a long, tall fence. As
Tom begins to despair, he is visited by another boy, Jim,
who is on an errand to fetch a pail of water. After some
negotiations, the two boys agree to exchange their
chores briefly, but only after Tom pays Jim the generous
sum of one marble.
Toms respite from painting is short-lived, however, and
within minutes he finds himself back at the fence with
brush in hand. The thought of employing other boys to
paint the fence is attractive, but Tom quickly realizes he
does not have the means to pay them. It is in this dark
and hopeless moment that Tom has a revelation:
Nothing less than a great, magnificent inspiration.
Rather than paying the neighborhood boys to paint the
fence for him, Tom will get them to do it for free. And
better yet, he may even convince them that they should
pay Tom for the privilege of doing it. What a brilliant
plan.
This story, written over 100 years ago, is legend in
Western culture. It encapsulates several attributes of
human nature and concepts of capitalism. A key lesson
in the story is the notion that you neednt always pay
people to extract a measure of labor. All we need
to do is make the labor a thing of privilege. Twain
summarized, Work consists of whatever a body is

33 | Wi-Fi First

obliged to do, and that Play consists of whatever a body

is not obliged to do. Toms adventure might be thought
preposterous if it was not so common. Time and again
we see people and organizations contribute free labor.
One obvious example is the entire universe of free, usergenerated online content led by Wikipedia, the largest
user-contributed encyclopedia in the world.
So the fact that free service is present in the
telecommunications industry in the form of
offloading is not surprising. What is unique about WiFi offloading, however, is the competitive nature of
the companies involved. More than 50% of all mobile
data traffic is delivered to the device via Wi-Fi rather
than through the cellular network. Many people in
the telecommunications industry, including people in
both the MSOs and the MNOs, believe that this default
arrangement is perfectly legitimate and appropriate.
Some even argue that data offloading is mutually
beneficial. Mobile devices are simply using Wi-Fi and
the high-speed Internet services provided by the MSOs
for offloading as any other consumer electronic device
does. From a technology perspective this may be true,
but as a consumer I pay the mobile operator to provide
mobile service. I do not pay the cable operator for
mobile services. At least not yet. Hypothetically, I could
offload all of the services of my smartphone to Wi-Fi.
And if all of the mobile services are delivered via Wi-Fi,
what exactly am I paying the mobile operator to do?[11]
No one can argue that the MNOs are not getting a great
deal in the current offloading arrangement. Indeed,
Tom Sawyer got a good deal as well. Some MSOs
may say publicly that offloading is good for them, but
make no mistake, the MSOs are currently painting Tom
Sawyers fence for him. And just like Tom, the MNOs are
sitting in the shade, dangling their legs, munching an
apple, and planning the slaughter of more innocents.
34 | Wi-Fi First

DEVICES

One of the biggest differences between the services

provided by cable and mobile operators is their
approach to consumer electronic (CE) devices. Few
people pay attention to this difference, but it will
play a huge factor in the convergence between fixed
and mobile operators in the years to come. Neither
the MSO nor the MNO approach is perfect. Each has
strengths and weaknesses. Each approach will be
difficult to change, but it turns out, each must change
in order for their companies to continue to prosper in
the increasingly overlapping world of fixed and mobile
services.
On one hand, the MSOs have little or nothing to do with
CE. When you sign up for a triple play from your local
cable company, they provide a set-top box and probably
nothing else. It is up to you to purchase all your own
electronic devices. The MSOs avoid association with
CE devices and CE original equipment manufacturers
(OEMs) to the extreme. Comcast Xfinity, for example,
provides the standard triple-play services of Internet,
television, and telephone, but they dont give any
suggestions or even the slightest hint about which
tablet, which 4K TV, or which cordless phone you
should purchase to optimize your experience.
The consumer electronics industry is highly competitive
and rapidly changing. What is hot today is not
tomorrow. Where Apple and Samsung are leading today
in mobile devices, Motorola and Nokia led yesterday,
and it is difficult to reliably predict who will be leading
five years from now. So rather than getting caught
by the fickle changes in the market place, the MSOs

35 | Wi-Fi First

individually and collectively have decided they will

maximize their value by embracing industry-leading
CE standards and by avoiding direct alignment with
any individual CE company or product. This approach
has served the MSOs well. All of the MSOs have
benefitted from CE product innovation. If a company,
large or small, domestic or international, can dream
up an idea and build a device that is compliant with
communications standards, then that device can be
used anywhere and on any MSO service.
When you sign up for mobile services in the United
States, on the other hand, the experience is completely
different. MNOs in the U.S. have aligned heavily with
specific CE devices. Not only do MNOs take interest in
CE, they test them, certify them, and associate with the
devices. Where the websites of the MSOs are void of
any reference to branded CE, the MNOs websites lead
with specific CE devices. The MNOs actually ban more
devices from their networks than they allow. There are
hundreds or thousands of devices that could be sold
in the U.S. if they were granted access to the mobile
networks. Most of these devices, however, are denied
access.
There are many reasons for the MNOs acute interest
in the devices that run on their networks. Key among
the reasons is the MNOs commitment to geographic
coverage and network reliability. By controlling the
devices, in conjunction with their networks, MNOs
have a higher level of confidence that they can deliver
the quality of service they hope for. By controlling the
devices, they believe they can maximize network range
as well as reliability. It is worth noting, however, that
most mobile operators throughout the world do not
impose the same level of device controls. The American
mobile operators performance is unique. It is also

36 | Wi-Fi First

worth noting that for many years, mobile operators in

America followed different networks technologies and
standards. AT&T, for example, used GSM technology,
and Verizon Wireless used CDMA. Consequently, a
device that worked on AT&T was incompatible with the
Verizon Wireless network.
Again, there are no perfectly right or wrong answers to
the differences between fixed and mobile operators.
Moving forward, however, in the next 510 years both
sides must change. It is counterintuitive, but with
respect to devices, MNOs must become more like
MSOs, and MSOs must become more like MNOs. Each
will benefit from using the others approach. The ideal
end point is something between the current positions of
both.
The MSOs need to implement Wi-Fi First mobile devices
that take full advantage of their fixed networks. In order
for Wi-Fi First to be successful, however, they need
access to mobile networks. As such, they need to offer
some level of assurance that the Wi-Fi First devices they
offer will work with the mobile operators networks.
Eventually, the MNOs will discover that efforts to
protect their networks by controlling the devices will
negatively impact innovation. With product innovations
like wearables and the Internet of Things, there will be
a divergence of new devices. Unless processes change,
it will be difficult for a single MNO to test and certify
every possible device that needs access to a mobile
network. If the MNOs do not create ways to support
hundreds or thousands of devices on their networks,
then innovation will naturally shift away from MNOs and
toward MSO networks.

37 | Wi-Fi First

THE FINANCIALS OF WI-FI

Wi-Fi First technology can provide large financial

benefits to MSOs and MNOs alike. At the core of these
benefits, of course, is cost. Mobile data service is
approximately 4,000% more expensive than high-speed
cable connection and Wi-Fi on a per gigabyte basis. On
average, American consumers pay less than $0.50 for
one gigabyte of data when provided via cable and Wi-Fi.
On the mobile networks, however, we pay more than

COST OF DATA
SERVICE

$20.00 per gigabyte.[12]

This price difference, of course, invites the obvious
question: If the mobile operators can charge over
$20.00 per gigabyte for data services, why do they
allowand even promotefree Wi-Fi? Half of all
mobile data is currently flowing through Wi-Fi, and the
percentage is climbing. In 2013, if the mobile operators
had kept all data on their networks, disallowed the use
of Wi-Fi on mobile devices, and charged the prevailing
rate for cellular data, they would have collected an
additional $66 billion in revenue. So again, why are the
mobile operators embracing Wi-Fi, especially when it
dampens revenue? The only logical answer is that they
must. The MNOs simply do not have sufficient capacity
in their networks to satisfy consumer demand on their
own. If the MNOs disallowed Wi-Fi today, service
quality would degrade, customers would be upset, and
alternatives to cellular would proliferate. So for now,
Wi-Fi will remain a frenemy to the MNOs. And as
outlined in previous chapters, the contest between
Wi-Fi and mobile will only intensify.

MSOs

MNOs

$0.50/GB

$20.00/GB

For the obvious reason of cost, we consume far more

data via Wi-Fi than we do mobile. According to CTIA, at

38 | Wi-Fi First

the end of 2013, mobile networks were delivering a total

of 269 petabytes of data per month. Fixed residential
high-speed Internet services, on the other hand,
delivered 7,474 petabytes per month, half of which
was via Wi-Fi (according to Cisco).[13] That is nearly a
28:1 fixed-versus-mobile ratio. The average American
household consumes 100 gigabytes of data per month
at a cost of $30 to $80. According to a report from The
Wall Street Journal, the average mobile phone user, on
the other hand, consumes less than 1 gigabyte of data
per month over the mobile network.[14]
Not only is traffic volume remarkably different between
Wi-Fi and cellular, but capacity is also much different.
By their own confession, cellular operators frequently
operate on the edge of their capacity to deliver. Cable
operators, on the other hand, have virtually boundless
capacity. The pricing models of the two industry
segments reflect the capacity constraints. MNOs, for
example, sell data by the gigabyte per month.
Consumers often purchase bundles with 1, 2, or 4
gigabytes of data per month. If users exceed the
artificial cap, they are charged extra. But MSOs sell
high-speed Internet service by the speed of the
connection. Often MSOs price high-speed Internet
service at 5, 10, 20, or even 50 megabits per second.
Most of the MSO connections have no data cap and
only control the speed of the data connection as a
mechanism for pricing differentiation. American
consumers watch an average of 5 hours of video per
day. Streaming that content over cable or cellular
networks produces vastly different costs:
Amount of data:
Cost on basic MSO service:

450 GB (150 hours 3 GB per hour)

[15]

$30 to $80

Cost on cellular: $4,500 to $9,000

39 | Wi-Fi First

Obviously, the cost benefit of fixed-line Internet service

paired with Wi-Fi is enormous. Every gigabyte of data
consumed over Wi-Fi rather than cellular is dollars
consumers save. Mobile costs are so high, in fact, that
video streaming is prohibitively expensive. Even when
you ignore the big-volume consumption services like
streaming video and focus on the benign email and
social tools, MSOs still have the upper hand. Consider,
for example, the cost analysis developed by New Street
Research of a traditional mobile offering versus the
same services delivered via Wi-Fi First:[16]

Cost(s)
Voice Costs:
Messaging Costs:
Data Costs:
SG&A:
Other:
Total Costs:

Mobile Cost

Wi-Fi First Cost

$7.74
$3.05

$3.87
$1.53

$20.00
$6.50
$1.97
$39.26

$2.73
$3.00
$1.97
$13.26

Of course, the gap between traditional mobile costs

and Wi-Fi will only increase as the quantity of data
increases. According to Cisco, Internet data usage on
mobile devices will continue to grow by 61% per year
for the foreseeable future. That means 1 gigabyte of
data consumed on the mobile device today will grow to
10 gigabytes of data by the year 2018.[17]
The time for Wi-Fi First is now, and the benefits of Wi-Fi
First will only grow with time.

40 | Wi-Fi First

SHOULD WI-FI BE CELLULAR-LIKE?

We often hear industry experts say that Wi-Fi

must become more cellular-like. In so saying, the
implication is that cellular-like is good, and Wi-Fi
networks should be changed to function similarly.
Indeed, there are several aspects of cellular technology
that Wi-Fi would benefit by emulating. Heres a list of
pros and cons:
PROS
1) Easy and automatic login: Mobile devices are
programmed to automatically identify and connect to a
network without any user actions. No user ID, password,
PIN, or any other user credentials. Cellular networks
hide all of the complexity of identifying an access point,
gaining connection, and authenticating the device. WiFi landing pages and custom firewalls make this nearly
impossible to emulate.
2) Continuous service: Similarly, if cellular-like means
Wi-Fi should provide service continuity, then yes,
cellular-like is good. A mobile device can easily move
from one cellular tower to another without losing
service. Wi-Fi, on the other hand, can make no such
claim. Wi-Fi service rarely passes from one access point
to another without interruption.

41 | Wi-Fi First

CONS
1) Different mobile operators in every country:
Cellular networks are highly restricted by international
boundaries and numbering plans. Almost every
mobile operator in the world, and therefore almost
every cellular network, is constrained by the country
boundaries where it operates. But Wi-Fi knows no
boundaries.
2) No universal devices per operator: Mobile operators
are highly restrictive to the types, makes, and models of
devices that can communicate over their networks. For
many valid reasons (and a few invalid reasons), mobile
operators constrain the device options. If a device has
Wi-Fi, that device can gain access to any Wi-Fi hotspot.
3) Licensed spectrum is not shared: If Verizon or AT&T
or T-Mobile obtains the license to a particular band in a
particular geographic location, then no other operator
can use that spectrum. If Wi-Fi became cellular-like in
regards to its spectrum efficiency, Internet usage would
be decimated globally.
Hence, cellular-like is a great aspiration for some
aspects of Wi-Fi. MSOs should identify and enable
the strengths of cellular that are worthy of emulation.
They should not, however, pursue cellular-like
implementation if it degrades the value or efficiency of
Wi-Fi in any way.

42 | Wi-Fi First

CONCLUSION

Visit any consumer electronics store and youll see

thousands of devices like laptops, tablets, cameras, and
gaming consoles that connect to Wi-Fi for free. You buy
the device, take it to your home or office, connect it to
Wi-Fi and all incremental usage is free. Smartphones,
on the other hand, are affixed to an expensive monthly
service fee. This makes no sense. Why cant a
smartphone act like any other consumer electric device?
Just because the telecommunications industry has
been operating for over 100 years on the concept that
services cost money doesnt mean it has to remain that
way. With Wi-Fi First, the rules completely change. The
consumer is liberated and the telecommunications
industry is turned upside down.
Wi-Fi First can be a threat or an opportunity. It can
be a friend or foe to both the MNOs and the MSOs
throughout the world. To the MNOs, Wi-Fi First is a
mechanism for saving operating cost and increasing
service area. For the MSOs, Wi-Fi First provides an
avenue for competing and winning in the
fixed-mobile convergence. There is no question about
the inevitability of Wi-Fi Firstthere are only questions
about which entities will use Wi-Fi First to their
advantage and which entities will be damaged in its
wake.

43 | Wi-Fi First

ABOUT THE AUTHOR

Alan Berrey is a serial entrepreneur, constantly

searching for ways to disrupt the mobile landscape. He
currently serves as the president and CEO of Scratch
Wireless, Inc., a Wi-Fi FirstSM mobile operator and the
worlds first free mobile service for text, data, and
voice. Previously, Alan was the vice president of market
development at SoundBite Communications, a cloudbased management company with expertise in mobile
marketing, proactive customer service, and collections/
payments solutions. Prior to that role, he founded
Mobile Collect Inc., which offered an SaaS solution for
text messaging and wireless solutions for businesses.
Mobile Collect was acquired by SoundBite in 2008.
In addition to his role at Scratch, Alan is a prolific
thought leader on the Wi-Fi FirstSM approach to
communications. His writings and insight on the
topic have been featured in outlets such as WIRED,
Bloomberg Businessweek, GigaOM, FierceWireless,
Light Reading, and Multichannel News.

44 | Wi-Fi First

ABOUT SCRATCH WIRELESS

In light of Wi-Fis popularity and availability, at Scratch

Wireless we backed up and rethought everything.
We reconsidered the voice and messaging services
that people want and expect. We evaluated network
operations that enable telephone service. We thought
about cellular services and their complementary
position to Wi-Fi. We evaluated the phone landscape
and the evolution of the devices consumers value. And
we rethought customer support. We dissected every
monetization option and evaluated what customers love
and hate about their existing service.
We then built a Wi-Fi First solution from the ground
upfrom scratch, if you will. We identified the
ingredients that we believe will attract a large audience
and change the industry for decades to come. We are
now knocking some sense into the entire industry. Our
technology operates as a stand-alone cloud-based
solution for consumers and enterprises. It also has
licensed technology alternatives that enable MSOs
and MNOs to rapidly integrate Wi-Fi First solutions
into existing technology infrastructures. It could not
be cheaper or faster to deploy Wi-Fi First services with
Scratch Wireless as your partner.
Championing a Wi-Fi First approach to mobile
communications, Scratch Wireless is changing the way
people think about mobile service forever.

45 | Wi-Fi First

SOURCES

[1]
Cisco Visual
Networking Index:
Global Mobile Data
Traffic Forecast
Update, 20122017

[2]
New Street Research,
Telecommunications
Services: Cables
Entry Into Wireless,
June 2014

[5]
Consumer Reports,
May 2014

[6]
FierceWireless.com,
Verizon to Buy
SpectrumCos
AWS Spectrum for
$3.6B, 2011

[7]
WifiForward.org,
Value of
Unlicensed
Spectrum to the US
Economy, 2014

[9]
OpenSignal

[10]
Telecom Advisory
Services, Feb 2014

[11]
Cisco Visual
Networking Index:
Global Mobile Data
Traffic Forecast
Update,
20122017

[13]
Cisco

[14]
Wall Street Journal

[15]
eMarketer

[17]
Cisco

[3]
Optics.org,
January 22, 2013

[4]
US Census Bureau

[8]
fcc.gov

[12]
CTIA and annual
reports of AT&T
and Comcast

[16]
New Street Research,
Telecommunications
Services: Cables
Entry Into Wireless,
June 2014

46 | Wi-Fi First