Discussion Papers

Peter Stamm, Franz Büllingen

Importance and market developments of public and private Wi-Fi networks facing the rising demand for nomadic and mobile broadband data

No. 391/October 2014

(Full version only available in German)

Summary

Today there is hardly any place within urban areas without at least one Wi-Fi network. Wi-Fi has reached an enormous penetration rate during the last decade and gained special importance for smartphone and tablet PC users to connect to broadband networks. Most of the data traffic to and from those mobile devices is transported via Wi-Fi networks. The majority of Wi-Fi usage takes place in private home and non-public company networks. However, private and business users also drive the demand for public Wi-Fi access. At the moment, the estimated total number of Wi-Fi networks in Germany reached about 50 million. Out of this number, about half a million offer public access.

The supply side of public Wi-Fi access shows a great variety of different operation and business models. Among them are non-commercial or professional communities, commercial Wi-Fi access providers, companies, that offer Wi-Fi as a free extra service to their customers as well as providers of ad-sponsored Wi-Fi services. This supply side diversity is supposed to last for the next years to come. Nevertheless, there will be an increasing bias towards community based as well as indirectly financed Wi-Fi operation models.

With mobile data traffic continuing to increase rapidly for the next years, private Wi-Fi, public Wi-Fi and mobile Networks show a strong complementarity. Mobile networks alone would not be able to deal with the enormous growth in mobile data, caused by smartphones and tablet devices. Even the multi-billion investments of mobile operators in new LTE networks could not be sufficient to manage this growth. Instead of further expanding their LTE investments it is more economical for telecommunication companies to increase the Wi-Fi coverage and to enable their customers to log into the ubiquitously existing Wi-Fi networks automatically and safely.

The focus of this report is on analysing the German public Wi-Fi access market, in order to anticipate the further development of its drivers and the manifold provider landscape. First, the technical basics of wireless LAN systems, the most important variants of the IEEE 802.11 standard and its performances, the typical applications and the relevant aspects of wireless IT security are described. Based on the generic value chain for Wi-Fi services, typical operation and business models are outlined and illustrated by examples. Furthermore, the motivation for Wi-Fi usage is shown from the users’ perspective and the relation between Wi-Fi and mobile networks is discussed from the mobile operators’ point of view. Finally the report concludes in an estimation of the further development and future significance of private and public Wi-Fi networks.

Discussion Paper is available for download.

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