Posted: September 2, 2013

By Claus Hetting, CEO & Founder, The Offload Club

Every once in a blue moon someone in the telecoms industry comes up with a really bright idea – something so obvious and simple that it seems unlikely that it could have been overlooked. Such an idea came to mind of Pertti Visuri, founder and CEO of the San Diego-based startup BandwidthX. His approach is this: “I believe wealth is created primarily by commerce. And that’s what we do. We remove friction from bandwidth commerce,” says Pertti.

This is the dead simple concept: Wireless data traffic demand is going through the roof and cellular networks are expensive to build. At a time where many mobile carriers are under severe cost pressure, forking over hundreds of millions of dollars on network capacity CAPEX is a hard sell. On the other hand, a lot of inexpensive wireless capacity is already available from a growing base of millions of Wi-Fi hotspots across the globe. So Pertti Visuri connected the dots and created an open market for the buying and selling of wireless capacity between mobile carriers and Wi-Fi service providers. It is a compelling idea. But will it work?

On the technical side it appears as if BandwidthX is barking up exactly the right tree, so to speak. The company has created a Cloud-based system that lets a Wi-Fi service provider (WISP) connect their network to the exchange without any changes to their own infrastructure. Each WISP is in control of its own dynamic policies and prices for selling capacity. Mobile carriers hook up to the same exchange to bid for and buy the capacity they need from whatever WISPs may be selling at the right time and place. Data-hungry smartphone users can then access a suitable Wi-Fi service when their mobile carrier allows it. And it costs nothing to join the exchange, explains Pertti.

“We have removed as many barriers as possible so there is no up front cost for service providers to join BandwidthX. We have been testing the system live in real world operation since beginning of this year. We’ve recorded millions of test, and we’re already generating tens of thousands of transactions each month in more than 20 countries. For now we’re still testing the system, but we will be in commercial operation before the end of the year,” he says.

On the supply side Wi-Fi capacity need not be limited to coming from WISPs but could easily include cable companies or other fixed service providers with an installed base of home Wi-Fi APs – such schemes for offering public access to private Wi-Fi APs has already been proven to work technically by for example FON, and a growing number are already in commercial operation. The concern that home Wi-Fi APs may not provide enough range or quality to attract users and deliver traffic does not seem to worry iconoclast FREE of France nor established players such as KDDI in Japan. The ‘homespot approach’ is no doubt here to stay and is growing in popularity across the globe.

What may complicate the matter somewhat is the fact that devices using BandwidthX’s services will need a client or app. But the company realizes that zero user interaction with the device is paramount to mass-market success and has designed the client accordingly. Still, the client has to be either pre-installed or pushed to the device somehow without the user having to worry about it – otherwise there will be a take-up barrier to overcome. Pertti says that BandwidthX has that covered, too.

But will mobile carriers buy into this idea? By his own admission, Pertti agrees that the mobile industry is fiercely tradition-bound. It will require a host of convincing arguments, technical finesse and not least tenacity to convince risk-averse mobile carriers that they have little to lose and everything to win with BandwidthX. And it seems that they are – at least for the time being – responding with a great deal of interest.

“The response has been overwhelming. We are in ongoing discussion with tier one and tier two carriers right now. Our message is that they have everything to win even if for starters they only need to buy a few percent of additional bandwidth with Wi-Fi here and there to supplement what they’ve already got. Every little bit helps,” says Pertti.

Gazing into the grey fog of the mobile industry’s future, I believe that if BandwidthX can get the technology to work smoothly and seamlessly, then they’ve got a real shot at being successful. Given the fact that Wi-Fi is taking more and more traffic away from mobile carriers, it is obvious to me that carriers will sooner or later have little choice but embrace Wi-Fi to stay competitive and to escape the henchmen of disruption. The question is then if there are options other than BandwidthX.

And of course there are alternatives but how these measure up in terms of practicalities and not least profitability is also an open question. Companies like iPass and Boingo do an excellent job of aggregating big footprints Wi-Fi hotspots to serve these up for mobile carriers and enterprises, although few MNO deals are yet in place.  Devicescape is another example of a one-stop-shop for instant mobile carrier access to a huge ‘curated’ footprint of Wi-Fi hotspots and the company already conducts millions of transactions. Such aggregators are in my view real competitors to BandwidthX and are already running well-established businesses.

Or carriers could choose to enter into bilateral agreements with one or several Wi-Fi service providers or aggregators or even acquire WISPs or build their own carrier-grade Wi-Fi networks. And indeed, some are. But why would they when someone has already done the work for them? And more than this, BandwidthX open-market approach to trading wireless capacity is for the time being unique to the mobile world. Conceptually, the dynamic open market exchange is – frankly – a brilliant idea. Bilateral agreements are also likely to suffer from getting hung up on a single price unless someone decides to replicate BandwidthX’s idea.

To be fair, BandwidthX is wisely keeping all avenues open and does not consider Wi-Fi aggregators competition but rather part of the ecosystem that the company wishes to serve. And perhaps there is some chance that BandwidthX’s services will be perceived and used in this manner. It speaks widely to the company’s benefit that BandwidthX is keeping their app open to third parties through an API.

Another question is when carriers are likely to embrace a proposition such as that of BandwidthX. If they can be convinced of the technical merits of the service – meaning its quality and ability to keep their discerning, data-hungry smartphone users happy – then it could happen over the next year or two. If there are serious quality concerns, these may weigh heavily on the minds of many a mobile carrier executive. After all, fierce control of services and subscribers is the mainstay of the mobile carrier’s paradigm. In the end, the transformation of this deeply rooted mindset may well be BandwidthX’s biggest short-term challenge.

And I shall wish them luck. That mindset is long overdue for a radical change.

 

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