This article originally appeared on the BillingViews blog
What would possess a leading tier one telco to roll out a massive national Wi-Fi network that would clearly reduce customer dependence on the existing 3G/4G/LTE infrastructure and, subsequently, revenues?
It’s a valid question, especially when it is Australia’s leading mobile and fixed line operator Telstra, a company that invests heavily in the latest technology, undertakes massive transformation programs and continuously defies industry trends by increasing profits. Telstra seems adept at breaking the mold and it may be worth taking a closer look to see what logic lies behind this latest Wi-Fi move.
If you even been remotely keeping up with what has been happening in that far off land you will know that the previous government undertook an incredibly ambitious plan to roll out a national broadband network (NBN) and, in the process, acquire Telstra’s existing copper network. This meant that Telstra’s dwindling fixed line business would be switched, eventually, to the NBN and it would simply act as a reseller on an even playing ground with all the others.
Long before this, led by its far-sighted and very affable CEO David Thodey, Telstra embarked on a massive mobile network upgrade from one of the fastest HSDPA 3G networks to a fully-fledged 4G/LTE setup. This was achieved in record time and now covers more than 2.3 million square kilometres and services over 87% of the nation’s far-flung population.
Not one for discounting a good product for the sake of market share, Thodey set the scene for capped data plans and minimal handset subsidization opting for quality and consistency, not only at the network level but throughout the whole customer service organization, and national surveys confirm the dramatic turnaround.
In May, Telstra unveiled an A$100 million ($87.6 million) strategy to create one of the world’s largest Wi-Fi networks over five years. Now Australia’s largest Wi-Fi network is a step closer with the first 1,000 hotspots going live before Christmas. So, why risk existing mobile network business by adding ‘free’ Wi-Fi to the mix.
For a start, if Telstra doesn’t somebody else will and that could be an even riskier strategy. An effective Wi-Fi rollout can also complement the switched network with the effective handoff technology now available. This free spectrum, utilized carefully can also alleviate loads at peak times.
Speaking of Free, that mobile network operator in France uses Wi-Fi both extensively and effectively to reduce its usage of the Orange 3G network that it piggybacks as an MVNO until it competes the rollout of its own 4G network.
For Telstra though, there is a far more logical reason for its Wi-Fi investment. In preparation for the rollout of the NBN and the potential loss of subscribers it will likely cause, it will offer its broadband customers free access to Wi-Fi wherever they may be using Fon technology so effectively utilized in Europe.
Telstra home broadband customers with a compatible gateway who join the Wi-Fi community can use their home broadband allowance via domestic hotspots and connect to more than 13 million Fon-enabled hotspots globally.
Non Telstra customers and those customers who have not joined the Wi-Fi community will be able to connect to Fon-enabled Telstra Wi-Fi hotspots for a small charge using guest passes.
It would be fair to assume that such a magnanimous gesture on Telstra’s part is actually a very clever plan not only for the points raised above but to also add stickiness to its broadband and bundled mobile plans. Oh, and the fourth play is content offered through its investment in FOXTEL. It has also been making selective investments in new technologies, particularly around healthcare, pharmaceuticals and patient managements.
Other telcos fearing the future and stakeholders of non-performing networks may wish to take a closer look at the Telstra model and why it is constantly returning good results in a mature, highly dispersed and very competitive market.