Insight Constellations, Part Three

Wi-Fi and the Inverted Offload

As the CCS Insight Predictions for 2016 and Beyond event approaches, we’re looking back at some recurring themes from Daily Insights in the past year or so. Here’s the third part of a list that highlights some clear patterns.

There have been notable disruptions to network operators’ venerable two-year contracts, with new connectivity options and device purchase plans having the potential to dilute the classic relationship between service provider and customer. Subscriber identities have shifted even further to over-the-top services as Internet connectivity has become the core product. It’s a big change in the market’s chemistry.

Wi-Fi and the inverted offload

Wi-Fi is no longer about supplemental access, but has become a cellular service substitute of sorts.

In January, we wrote about Cablevision’s new Wi-Fi-based mobility service, Freewheel (see Daily Insight: Wi-Fi’s Going Prime Time). The company is a US cable operator providing pay-TV, broadband and fixed-line voice services in the New York City region. Its lack of a cellular facility left it as a triple-play competitor in a quad-play environment, but it competes against AT&T and Verizon by stitching together a mobility service using its network of Wi-Fi access points. Freewheel costs current Cablevision customers $10 per month for all-you-can-eat access, and is compatible with only one handset: a customised version of the Moto G.

As part of our predictions for 2015, we said that a US cable operator would launch such a service during 2015 (see CCS Insight Predictions for 2015 and Beyond). This quickly came to fruition, with cable operators needing to offer a continuum of connectivity to prevent subscriber losses.

In early 2015, we noted the emergence of several “freemium” mobility services (see Daily Insight: It’s All in the Application). Several start-ups have been offering free wireless services, described by at least one entrepreneur as the “Ryanair model” of the mobile world. Subscribers can pay a little extra each month for additional megabytes and minutes.

FreedomPop, for example, has been rolling out its free wireless services in several countries. Subscribers get a suite of 200 voice minutes, 200 texts and 200 megabytes of data. The bits go through Wi-Fi connections whenever possible, offloading to cellular connections when needed. It’s an inverted offload model, and one that’s catching on. Republic Wireless, a company based out of North Carolina, offers a similar $10-per-month Wi-Fi–cellular combo plan.

In April, Google introduced Project Fi, a service the company calls a fresh approach to wireless. Fi, like FreedomPop, uses a combination of Wi-Fi and rented 4G cellular when needed. Even voice has become an over-the-top service, diluting the subscriber’s relationship to the brand of connectivity. End-user identification is increasingly less about traditional phone numbers, weakening one of the bonds between consumers and mobile operators. The Wi-Fi trend is worth following.

The classic two-year contract is breaking down

The reliable pattern of two-year contracts and corresponding subsidised device upgrades is changing (see Daily Insight: US Carriers Disrupt the Subsidy Pattern). There have been mutual moves, particularly in the US, from operators and device manufacturers to deviate from long-term contracts to month-by-month agreements.

The constant rhythm of device upgrades has led to a certain consistency in the industry. However, CCS Insight doesn’t believe that the separation of phone from service will lead to a less robust market for hardware, but rather a shift in the balance of power.

The growing availability of equipment instalment plans from operators and smartphone makers is changing attitudes toward SIM-locked devices and the need to stay with a particular service provider (see Daily Insight: Unlocked and Loaded). Subscriber loyalties are migrating to mobile platforms and apps.

The smartphone industry has reached a level of maturity in which financing plans are altering the dynamics of the industry as much as new technology features already do. We believe that 2016 will be particularly dynamic in this regard, as key players compete for attention with new business models.

To learn more about our thoughts on the future direction of the industry, sign up for CCS Insight’s Predictions for 2016 and Beyond event on 18 November 2015.

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