While most of the attention on Hotspot 2.0 has centered on the technology and how it works, the really compelling “feature”(that has received nearly no attention) is the ability for the technology to generate money, and lots of it.
What’s Hotspot 2.0 All About?
Hotspot_2.0 is a specification developed by Wi-Fi Alliance (WFA) members (watch this) to radically simplify the user process of securely connecting to a Wi-Fi network and roaming between different Wi-Fi networks by effectively duplicating the cellular phone experience through secure connectivivity that can be automated while conforming to user and operator policy. The development has considerable multi-industry muscle behind it from the Wi-Fi Alliance for certification under the Passpoint™ program and organizations such as the Wireless Broadband Alliance (WBA) for interoperability.
Simply put, Hotspot 2.0 is focused on enabling Hotspot 2.0-capable mobile devices to automatically “discover” Hotspot 2.0-capable access points (APs) connected to wireless LANs (WLANs) and their owners that have roaming arrangements with or a path to the user’s home network. After that, the technology securely connects the user to that WLAN with no human intervention.
With Hotspot 2.0, a massive network of Wi-Fi access points is made possible through a web of interconnections. Consequently, users enjoy a seamless experience as they move between Wi-Fi networks from almost any location. It achieves this through an overhaul of the Wi-Fi connection procedure. Hotspot 2.0 automates the connection process and it provides airlink encryption using the Advanced Encryption Standard (AES).
Hotspot 2.0 (so called Passpoint-certified) access points and controllers have now been shipping for over a year from all the major infrastructure vendors. Coupled with new Hotspot 2.0-capable smartphones recently introduced by Samsung, Apple, and many others, the proverbial planets are now aligned for monetization– directly addressing the concerns many operators have had about how to actually make money with Wi-Fi when so many networks are free.
Given that approximately 90 percent of all tablets in the U.S. relied on Wi-Fi over 3G mobile broadband last year, according to industry analyst Chetan Sharma, there’s some major money to be made by establishing Hotspot roaming consortiums that bring together what is today disparate high-speed Wi-Fi data access into a unified high-speed network that people would be willing to pay for. Hotspot 2.0 is the key to making this happen.
Hotspot 2.0 Brings Together Unlikely Roaming Partners
Enabling Wi-Fi roaming and roaming consortiums looks to be every bit as financially lucrative for service providers as cellular roaming. But unlike cellular roaming, Wi-Fi roaming can be done between hotels and MSOs (cable), convention centers, department stores and mobile network operators (MNOs), football stadiums, coffee shops, and basically anyone else with a Wi-Fi infrastructure.
With these roaming consortiums in place, users will be able to easily roam across the street, across town, or on the other side of the world. Because the potential exists for a huge number of possible roaming partners both domestically and internationally, it is possible to build roaming consortiums with thousands of partners and millions of access points.
The larger the Wi-Fi footprint, the greater the utility of the service offering, and the greater the utility of an offering the more that people will pay for such a service. Just look at the history of cellular services as a valid and useful proof point.
The formation of roaming consortiums opens up tremendous new wireless revenue opportunities for first movers and should make for some interesting and unusual partnerships to say the least. Ironically, these first movers can include a myriad of service providers that don’t even offer a pervasive wireless service today such as over the top (OTT) providers like Google or Facebook, cable TV companies (MSOs), credit card companies, and anyone else with identity information.
One of the first to establish a Hotspot 2.0 roaming consortium, AT&T's international roaming program for its mobile subscribers has been viewed as the first to automatically connect customers to Wi-Fi Hotspots authenticating users roaming abroad using the SIM card in their phones. This has set the stage for future business models based on Hotspot 2.0, Passpoint, and Next Generation Hotspots (NGH).
AT&T is using ACCURIS, a roaming hub, and its AccuRoam technology authenticates Wi-Fi roamers in a manner similar to the authentication process that enables mobile users roam to a new cellular network. These new roaming hub companies such as Accuris and Syniverse can make money with Hotspot 2.0 by routing authentication requests to hotspot 2.0 operators as well by facilitating the cumbersome billing and settlement process.
Hotspot 2.0 roaming consortiums are the beginning of a big trend of mobile operators leveraging Wi-Fi not just for domestic offload to ease congestion but to also give end users give better roaming rate along with a simpler and more secure experience when connecting to different Wi-Fi networks.
Meanwhile OTT providers will be particularly interested in this Hotspot 2.0 opportunity because it lets them get location information on users by authenticating the user to a coffee shop in Seattle or at a train station in Frankfurt. This is something that is of great value in today's ad driven mobile world.
Keys To Hotspot 2.0 Monetization: Automating Connectivity and Secure Roaming
With Hotspot 2.0, operators can make money by developing a huge web of business relationships, despite the fact that many of the underlying Wi-Fi networks that will be part of any roaming consortium may actually be "free.”
Also, users will no longer always be required to navigate through a landing page at an airport to get to the "free" service. User security concerns are also diminished in public places because Hotspot 2.0 connections support airlink encryption. This is required by the standard and is supported on all Hotspot 2.0-capable devices and access points.
When traveling, the user no longer needs to involve themselves in the tedious process of selecting from available APs when they, for instance, get off a plane, as it is all automatic. Some of the roaming partners will be operating networks for which payment is expected and the Hotspot 2.0 operator will need to work out settlements with those partners. For enterprises, the Hotspot 2.0 monetization puzzle is a little harder to put together.
The most popular example here are hotels, which often charge for Internet access, but most of the roaming partners will operate “free” networks. In these cases, the network is being put in for some reason having nothing to do with the direct monetization of the service. Instead, they are using it sell their guests more lattes or in-room movies while wholesaling much desired Wi-Fi capacity under their control to the highest bidder. How much can be made remains an open question but there’s no debate that wireless capacity in whatever form is a desired and valuable asset, no matter if you are a university, hotel, hospital, or train station.
Where From Here?
Though it’s impossible to definitively determine just how much money carriers will be able to make from Hotspot 2.0 roaming arrangements its fair to speculate that subscribers could be willing to spend anywhere from $1-5 per month on top of their existing wireless or broadband subscription plans for the ability to connect automatically via Wi-Fi, if the pervasiveness of the connectivity is compelling enough. Wi-Fi roaming, as a value-added service, will undoubtedly have the potential to increase carriers’ average revenue per user, so called ARPU.
The signing up of roaming partners should be fairly straightforward as most installed network infrastructure is capable of supporting Hotspot 2.0, and it is fairly easy to configure the more popular smartphones to work in an HS2.0 network. The main value for the roaming partner is that HS2.0 provides Wi-Fi security, which is really important in a public place. It could also enable the HS2.0 operator to, in some instances, feed information back to the roaming partner about who is in their building. This is a side benefit of having identity information on the user.
The obvious focus area is to start by establishing roaming relationships with the most heavily trafficked Wi-Fi APs and then spread out from there. These include convention centers, airports, stadiums, shopping malls, etc. The roaming partners will need a AAA server to route authentication requests back to the HS2.0 operator that heads up the roaming consortium, but this can easily be outsourced to third party roaming hub partners.
So what is it worth to the subscriber to have access to a network with several thousand roaming partners and several million access points, all capable of providing automatic and secure connectivity? The great value in cellular, and the reason we pay so much for service, is that we can get connected almost anywhere. Wi-Fi will never be quite that ubiquitous, but it certainly hits all the heavily trafficked areas like hotels, coffee shops, airports, etc. The average user doesn’t typically hesitate to pay $10 at a hotel or even $20 on an airplane so there is clearly great value here and those examples are one-off events with limited shelf lives. And yes the underlying network is often free, but there is the hassle factor in getting connected. A premium of 10 to 15% on the user's cellphone bill might work if the operator can plug into a million or more APs through roaming relationships.
With Hotspot 2.0, now is the time is for operators to start moving down this path, with significant first mover advantages to those who do, as many venues will limit the number of roaming consortiums they join. Likewise, users will flock to those consortiums with the largest footprint, paying a premium to do so, which will only make them grow even larger and faster, forever changing the wireless world as we know it.