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Mobile Communications June 2014 Viewpoints

Technology Analyst: Frederick Dopfel

Terrestrial ISPs as Potential MVNOs?

Why is this topic significant?

Terrestrial broadband internet-service providers in the United States are building out large Wi-Fi networks, particularly in cities. In some cases, subscribers' own routers broadcast a Wi-Fi network for all subscribers to share. Wi-Fi Hotspot 2.0 technology, in combination with citywide Wi-Fi networks, could enable ISPs to leverage their Wi-Fi networks to compete against incumbent cellular-service providers as mobile virtual-network operators.

Description

Hotspot 2.0 technology allows authentication of secure Wi-Fi networks via a variety of methods, including SIM card, and allows for handoff between Wi-Fi hotspots and cell towers. Time Warner has already enabled Hotspot 2.0 on its network, and Comcast has announced plans to do the same. A combined Comcast and Time Warner will be able to use its existing hotspot network to provide mobile voice and data to mobile phones in a way that is completely invisible to the user and will substantially alleviate network congestion. In France, Free Mobile leverages its network of Wi-Fi hotspots to offload congestion from mobile users in heavily trafficked areas. However, the offloading takes place without Hotspot 2.0 (and without handoff), making the process more apparent to the user. Comcast and Time Warner Cable sold their AWS spectrum to Verizon Wireless, so they cannot create their own cellular network, as Free did, without licensing new spectrum. However, they still could become mobile virtual-network operators (MVNOs) or lease their Wi-Fi networks to cellular-service providers. Republic Wireless, for example, is a low-cost MVNO that connects to a network of public Wi-Fi hotspots to reduce data use on Sprint's network, passing reduced costs on to the customer.

Implications

If the Comcast–Time Warner Cable merger receives regulatory approval, the companies would together possess a large nationwide Wi-Fi network that covers most US cities and that enjoys extensive indoor coverage in multiunit dwellings. Internet-service providers (ISPs) such as Time Warner, Comcast, and Google Fiber could operate a MVNO on an incumbent cellular-service provider's network, offloading data to their Wi-Fi networks (using Hotspot 2.0) whenever possible to reduce the fees they pay to the cellular company. Alternatively, ISPs could lease out bandwidth on their Wi-Fi networks to mobile-service providers for a fee, benefiting the ISP, which gains additional revenue, and the mobile-service provider, which increases capacity and can delay cell-network-capacity upgrades.

Impacts/Disruptions

If ISPs become MVNOs, they could offer quadruple-play plans (combined home phone, cell phone, TV, and internet) at a discount, which might attract large numbers of customers away from cell-only services. If ISPs lease access to their Wi-Fi networks to a mobile operator, that operator can delay capacity upgrades on its network, saving money and providing subscribers a faster connection to the internet.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 5 Years

Opportunitites in the following industry areas:

Municipal Wi-Fi

Relevant to the following Explorer Technology Areas:

Smartphones for the Security Conscious

Why is this topic significant?

Recent revelations about government surveillance and the growth of cybercrime have driven demand for more secure (and therefore private) smartphones. Some devices are specifically for privacy-conscious customers who wish to protect their data from companies such as Google and spy agencies such as the US National Security Agency, whereas other secure phones are for high-security organizations such as defense contractors and the military.

Description

Recent months have seen the announcement of a number of security-centric smartphones. Freedompop offers subscribers a modified Samsung Galaxy S2—"The Snowden Phone"—on its mobile network. The Snowden Phone routes all data, including voice calls, through FreedomPop's secure virtual private network (VPN), regardless of whether the user is connected to the cellular network or to Wi-Fi. Data on the phone itself are encrypted as well. FreedomPop allows customers to pay for the phone and phone service with Bitcoin, an anonymous digital currency. Blackphone is a consumer-oriented secure phone manufactured by Silent Circle and Geeksphone. Blackphone runs on a forked version of Android: PrivatOS. The phone anonymizes web traffic through a VPN and enables granular app permission controls so users can disable location-collecting or contact-list-uploading parts of apps. The Blackphone comes with peer-to-peer encrypted calling and messaging applications but requires the user on the other end also to install the application. Aircraft manufacturer Boeing has created its own secure phone: Black. Black erases data when it detects its case is opened or otherwise being tampered with. Black offers encrypted transmission and storage of data and is customizable for the client by use case. Black can disable features by network or location (such as disabling the camera in secure areas).

Implications

The existence of secure phones such as the models here demonstrates a growing commercial interest in data privacy. Although the security on the Snowden Phone is questionable (the US government could subpoena FreedomPop's VPN exit, and many ways exist to collect data from the phone itself), Blackphone supports more advanced features such as P2P encrypted calls and texts and granular application control, which should satisfy more privacy-conscious users. Boeing's Black phone, however, will not be for sale to the public and will run only a limited set of applications.

Impacts/Disruptions

Concerns about privacy and government spying could eventually hurt the bottom line of big-data companies such as Google. Customers may choose to disable data-collection capabilities of most smartphone apps, making it harder for advertisers to target ads. Users may also become less inclined to use cloud services, prompting manufacturers to provide more onboard storage in phones. However, whether secure phones become a mainstream phenomenon or remain a niche for security-conscious users and privacy advocates remains a question.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Low

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now

Opportunitites in the following industry areas:

Encryption (hardware and software), phone OEMs, security

Relevant to the following Explorer Technology Areas: