Wi-Fi Hand-Off Service Will Save T-Mobile ‘Billions,’ Analyst Says
T-Mobile may be onto something with HotSpot@Home, a service that lets users switch voice calls seamlessly between Wi-Fi and the T-Mobile network, analysts said. Using Wi-Fi increases T-Mobile’s reach to homes and will save the company “billions” long term, said ThinkEquity analyst Anton Wahlman. He called it the “exact right architectural approach” and “one of the most genius moves of all time in cellular.” Jupiter Research analyst Julie Ask agreed that the service is a “good fit” for 3G-less T-Mobile, but said it may not make sense for rival carriers.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Among the four major carriers, it was most logical for T-Mobile to implement voice-based Wi-Fi capabilities, Ask said. T-Mobile is the only carrier without a 3G network, though one is on the way using spectrum the company bought in last year’s advanced wireless services auction. Wi-Fi will provide its customers with high speeds without an infrastructure upgrade.
T-Mobile in-home coverage has also been less robust than the other major carriers, Ask said. HotSpot@Home is a great way to boost coverage without building wireless towers, she said. The Wi-Fi service will save T-Mobile a great deal of money by reducing the need for wireless towers and reducing strain on the network, Wahlman said.
When it comes to Wi-Fi, T-Mobile’s rivals offer users few options. Verizon offers a Wi-Fi phone and AT&T and Sprint Nextel each offer two, all aimed at business users. Only AT&T’s Wi-Fi-enabled iPhone is meant for personal use. And rival Wi-Fi services are limited to data-based uses, such as Web access. Sprint’s and Verizon’s Wi-Fi enabled phones support only data communication, and AT&T’s contracts preclude Wi-Fi-based voice. Verizon’s customers haven’t demanded Wi-Fi capabilities, a spokesman said.
Carrier reluctance to offer Wi-Fi harms “innovation and price competition,” Skype said in a February Carterfone filing (CD Feb. 22 p6). Before becoming AT&T, Cingular stripped Wi-Fi functionality from the Nokia E61, rebranding it Nokia E62 for sale in the United States, Skype said. Until gutted of Wi-Fi, the E61, well-reviewed in Europe, was hyped as a BlackBerry and Palm Treo killer. And that’s only one example, the filing said. “Unfortunately, all carriers appear to engage in such restrictive practices to varying degrees.”
Carriers have hesitated to offer voice-based Wi-Fi service for technical and business reasons, analysts said. Wi-Fi chips historically have been expensive and a drain on cellphone batteries, Ask said. It has also been difficult to develop a working protocol for switching between carrier and Wi-Fi networks, she said. But those technical limitations have been overcome, Wahlman said. All that remains for T- Mobile’s rivals is faith in their coverage’s quality, and fear that if they let users connect to Wi-Fi rather than the carrier networks they will lose money, he said.
Carriers are not that greedy, Ask said. Carriers worry more about providing a “high-quality experience,” and more likely haven’t released their own Wi-Fi services because they cannot ensure effective service over Wi-Fi networks they do not control, she said. Lack of end-to-end control could mean security problems, a big reason Verizon is slow to offer Wi- Fi, said a company spokesman. Security can vary Wi-Fi network by Wi-Fi network, so such a capability could leave handsets vulnerable to viruses, hackers and other malicious attacks. That’s not so much a problem for T-Mobile, since it has its own extensive Wi-Fi hotspot network, Ask said.
Some carriers may pick an alternate hand-off technology, “femtocell” to extend coverage as HotSpot@Home does, but without Wi-Fi, Wahlman said. A carrier using femtocell would give customers cellular base stations for their residences that connect to DSL, cable, fiber or WiMAX and act as home antenna-sized versions of wireless towers. Such a technology would have the short-term benefit of supporting all phones now sold, but lacks Wi-Fi’s economies, since it would not reduce the strain on carrier wireless networks, he said. And while T-Mobile is disadvantaged by a dearth of handsets able to connect to HotSpot@Home, that gap will not last long, he said, predicting that by next year the “vast majority” of phones will support Wi-Fi. In particular, three new BlackBerry models that support Wi-Fi and set for September release will tempt users to switch to T-Mobile, he added.
Sprint is eyeing femtocell, but has not unveiled plans or timing for the technology, a company spokeswoman said. AT&T and Verizon are unlikely to start a service like HotSpot@Home unless T-Mobile succeeds so grandly that the market demands it, Wahlman said.