A Carrier Roadmap for Monetizing Next Generation Wi-Fi

A Carrier Roadmap for Monetizing Next Generation Wi-Fi

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A Carrier Roadmap for Monetizing Next Generation Wi-Fi Page 2 iPass Whitepaper | May 2, 2012 © 2012 iPass Inc.

A Carrier Roadmap for Monetizing Next Generation Wi-Fi

Table of Contents

A renewed interest in Wi-Fi 3

The importance of having a Wi-Fi strategy 4

Looking forward 6

Industry groups seek to meet the needs of network operators ................................................ 6

The transition to next generation hotspots ............................................................................... 7

Increasing complexity in roaming .............................................................................................. 7

How to engage today ................................................................................................................. 8

Roam-out scenarios 8

1) Mitigating fear of bill shock .............................................................................................. 8

2) Expanding data roaming options for non-GSM/UMTS network operators ..................... 9

3) Making international data roaming affordable ............................................................... 9

4) Responding to changing European regulations ............................................................... 9

iPass infrastructure to support roam-out 10

iPass services fabric enables 802.1x authentication ................................................................ 12

iPass directory updates enable coexistence of disparate Wi-Fi networks............................... 13

iPass portal facilitates delivery of access policies .................................................................... 15

A phased approach protects the network operator’s investment .......................................... 16

Footnotes 17

About The Author 17


A renewed interest in Wi-Fi

The Wi-Fi market is continuing to see tremendous growth - it has become the de facto wireless technology in our homes, businesses, retail establishments and other commercial venues around the world. However, what has surprised many industry analysts is the propensity for mobile subscribers to connect to Wi-Fi networks even when 3G and 4G services are available. Industry statistics show that on a global basis over 70 percent of wireless data on smart phones is originated on Wi-Fi networks.1 Additionally, Wi-Fi-only connections have grown over recent months such that 65 percent of tablet users are now connecting to mobile networks via Wi-Fi.2 Furthermore, in countries that benchmark high in terms of in-home Wi-Fi penetration, and where mobile operators have highly-evolved carrier Wi-Fi strategies, cellular data usage on smartphones is dwarfed by Wi-Fi.2 This is causing mobile network operators to rethink their Wi-Fi strategy. Operators that recognized these trends early invested heavily in Wi-Fi networks, and are leveraging Wi-Fi in high-density areas such hotels, cafes and stadiums. This has contributed to the rapid growth of iPass commercially available Wi-Fi hotspots shown in Figure 1. In the past 18 months, iPass has experienced greater than 5 times growth in the number of hotspots connected to its network.

Figure 1: iPass Wi-Fi Hotspot Growth, January 2008 – March 2012


In response to renewed interest in Wi-Fi - what iPass has termed the “2nd Wave of Wi-Fi” - the Wireless Broadband Alliance developed Next Generation Hotspot (NGH) specifications and supporting operator guidelines. The overarching goal of this work is to improve the user experience by defining a process to connect to public Wi-Fi networks without user intervention. To achieve this goal, the NGH specification is focused on meeting three requirements. First, improve the network selection process and minimize user intervention when users attempt to access the Internet at a hotspot. Second, provide a mechanism that enables operators to use Wi-Fi hotspots as a primary access network for data offloading. Lastly, create a standardized user experience for Wi-Fi hotspot network access. Founded in 1996, iPass (NASDAQ: IPAS) provides the world’s largest commercial Wi-Fi network. iPass has been aggregating commercial Wi-Fi hotspots and providing clearinghouse and settlement services to network operators for over 11 years, making iPass a key industry resource to comment on both the benefits and challenges of deploying carrier-grade hotspots and solving the operational and interworking issues. As such, iPass is a trusted industry partner that is working closely with the Wireless Broadband Alliance, the Wi-Fi Alliance, and network operators worldwide to deliver on the promise of NGH. This white paper describes how iPass views the evolution of the carrier Wi-Fi market over the next few years and explains why legacy and next generation hotspots will coexist for the foreseeable future. It discusses the importance of supporting access to both legacy and next generation hotspots.

The importance of having a Wi-Fi strategy

The emergence of the iPhone and the Apple Store changed the wireless data market almost overnight. The recent adoption of tablet computing among consumers and business users has once again surprised many industry players. What we know today is that there is an insatiable demand for affordable wireless data, and that most of this wireless data is generated when users are stationary and indoors. We also know that in the past five years the global penetration of Wi-Fi in smartphones has nearly quadrupled3 and that 100 percent of tablet devices are shipped with Wi-Fi chipsets. iPass believes that it is critical for network operators to engage in delivering carrier-facilitated Wi-Fi connectivity services for their subscribers – today – and not to follow a wait-and-see strategy. Engaging today is essential for the reasons listed in Table 1.


Network Operator Benefits End-User Benefits

› Augment cellular network capacity and reach quickly and cost-effectively through Wi-Fi, maximizing infrastructure investment.

› More options to connect to network increases perceived value. Improved user connectivity experience, especially indoors.

› Extend data roaming beyond 3G networks to provide access where otherwise cost-prohibitive or unavailable.

› Greater reach and coverage increases the value to business travellers. Ease of access to world’s largest commercial Wi-Fi network.

› Leverage lower-cost Wi-Fi networks for international data roaming. Affordable data roaming creates elasticity effect, driving increased usage.

› Affordable data roaming services increases the value to business travellers, helps mitigate ‘bill shock’ and increases customer satisfaction.

› Capitalize on rapid growth of Wi-Fi devices; increase addressable market size and share-of-wallet by expanding service portfolio to include Wi-Fi devices.

› Connecting multiple devices under a single data plan (smartphones and tablets) creates convenience, simplicity and increases perceived value.

› Drive customer acquisition and retention through ‘sticky services’; bundling smartphones and tablets onto a single plan.

› Connecting multiple devices to a single data plan helps reduce cost (per MB) and increase consumption of allocated quota.

› Create loyalty by facilitating Wi-Fi connectivity, maintaining vital relationships with users on a global scale.

› Consistent user experience and global relationship with service provider increases reliability, ease-of-use and perceived value.

Table 1: Reasons why network operators should engage today

Network operators that engage early have two major competitive advantages: first, they are actively securing prime hotspot locations, and second they are gaining key insights into the Wi-Fi user market. These advantages are essential in a market where network operators are pursuing diverse strategies. For example: in North America, Wi-Fi access is provided as a complimentary service for high-value subscribers; whereas in Europe, Wi-Fi is largely a chargeable add-on service. There is also innovation in some countries around a shared Wi-Fi access model where the network operator deploys a hotspot in a subscriber’s home location and it is made available for members to use.


Looking forward

iPass is a strong advocate of the NGH initiative and is highly active in driving the implementation guidelines currently being defined within the Wireless Broadband Alliance. In the following section, iPass offers its perspective on how the industry will adopt the NGH specification and its impacts to mobile service providers.

Industry groups seek to meet the needs of network operators

Over the past few years, the 3GPP and 3GPP2 have incorporated standards to facilitate the handover from cellular networks to Wi-Fi networks. In a similar fashion, the Wi-Fi industry has also responded to meet the needs of mobile network operators. In 2011, the IEEE approved the 802.11u specification, which defined new mechanisms for improving the interworking between cellular and Wi-Fi architectures. In many ways, it defined several attributes that cellular network architectures have today. These included network address identifiers to distinguish between different network operators, and advertisement messages that enable subscribers to see the Wi-Fi network service offerings before they connect to the network. In support of these standardizing efforts, the Wi-Fi Alliance has developed the Passpoint program that certifies devices meeting these new specifications. The first Passpoint certified access points are expected to be available in the July/August timeframe, with the first commercial trials anticipated before the end of 2012. Wi-Fi locations that deploy Passpoint certified equipment are referred to as next generation hotspots. In parallel with the IEEE standards and Wi-Fi Alliance certification efforts, network operators have been working with the Wireless Broadband Alliance to define operational recommendations and guidelines. In some respects, the operational challenges are more complex than the interworking standards. The issues range from how a device can access either legacy or next generation equipment, to the procedures for updating and maintaining a generic advertisement service (GAS) defined in IEEE 802.11u specification. At the same time, network operators require flexibility to bundle services, implement subscriber policies and alter pricing models in unique and varied ways. The Wireless Broadband Alliance is developing operator guidelines and recommendations, which are expected to be published in 2013. iPass is a major participant in these workgroups.


The transition to next generation hotspots

iPass expects that over the next two to three years, mobile network operators will continue to build out their Wi-Fi footprint at an accelerated pace. The replacement of Wi-Fi access points with Passpoint certified equipment and new 802.11u features will occur in areas that make economic and financial sense. The initial deployments of these next generation hotspots will be in high traffic areas that are currently owned and managed by mobile network operators to facilitate mobile data offloading to Wi-Fi. iPass believes that many existing Wi-Fi network operators may defer upgrading their equipment until the return on investment proposition is clearer. Therefore, it may take several years before we see legacy Wi-Fi hotspots upgraded to next generation hotspots. Manufacturers of end-user devices plan out their feature roadmaps 18 to 24 months in advance, and are cautious to add features that could increase the cost of the device. Therefore, iPass foresees a limited set of devices incorporating a subset of 802.11u capabilities during the ‘early adopter’ stage, and that it could take a couple of years before the 802.11u capabilities are integrated into a wide array of popular devices. Collectively, these factors mean that the transition to next generation hotspots will take time. During this transition time, next generation and legacy hotspots will coexist. Network operators will need to support subscriber connectivity of both 802.11u enabled and non 802.11u enabled devices. Additionally, network operators will need to enable their subscribers to roam between legacy and next generation hotspots in order to maximize coverage.

Increasing complexity in roaming

The wireless industry is highly price sensitive. iPass believes that policies and pricing models will continue to diversify as mobile network operators analyze usage patterns and seek new ways to distinguish their product offerings. Today, mobile network operators are implementing Wi-Fi with fundamentally different strategic goals. Some offer Wi-Fi as a free or low-cost addition to their subscriber’s mobile service, while others are moving to a tiered Wi-Fi offering that promises a high data rate and secure connection at a premium cost. The iPass services fabric handles the complexity of negotiating roaming agreements and different hotspot pricing models for network operators around the world. As network operators look to incorporate cellular-like service options and new pricing models, the iPass services fabric will become increasingly relevant.


How to engage today

While some network operators are aggressively pursuing the deployment of Wi-Fi hotspots, others are undecided and waiting to see how the market and the Wi-Fi-to-cellular network integration standards will evolve. Early adopters are reaping the benefits. These benefits include securing prime hotspot locations, analyzing subscriber traffic and usage patterns, and understanding subscriber reaction to various pricing models. One of the easiest and lowest risk ways that network operators can engage today is by providing their subscribers with Wi-Fi connectivity when they roam ‘off-net’, or outside of the operator’s local or domestic serving area. iPass refers to this service as ‘roam-out’.

Roam-out scenarios

The following four scenarios illustrate real-life experiences of network operators that are currently adopting Wi-Fi as part of their roam-out strategy.

1) Mitigating fear of bill shock

Many network operators worldwide have moved to a cost per megabyte pricing model. This has increased the consumer awareness and sensitivity to data consumption, with many subscribers now consciously switching to Wi-Fi to minimize their cellular data charges. However, many subscribers that check their email or upload pictures to Facebook while traveling overseas have found themselves facing data roaming charges of hundreds, and in some cases thousands, of dollars. While international cellular data roaming packages do exist, the data usage limits are low and data overage charges are high. With international data roaming charges for North American subscribers being higher than their European or Asian counterparts, North American network operators are looking to Wi-Fi as a way to combat the fear and uncertainty associated with international data roaming. The iPass network, which is indicative of commercial hotspot deployments worldwide, has greater than 95% of its hotspots located outside of the USA. Therefore, this exceptionally dense Wi-Fi footprint in other world regions, such as Asia and Europe, makes Wi-Fi roam-out appealing to North American network operators. Their subscribers can easily locate and access Wi-Fi hotspots without being concerned about the volume of data usage, which results in increased customer satisfaction and reduced churn rate.


2) Expanding data roaming options for non-GSM/UMTS network operators

Network operators with CDMA2000 or TD-SCDMA networks have limited international roaming partners versus their GSM/WCDMA counterparts. Today, subscribers can buy world phones that include a GSM and or WCDMA radio. However, many CDMA2000 and TD-SCDMA network operators are now looking to support international roaming through Wi-Fi. There are two primary reasons for non-GSM network operator’s to have interest in Wi-Fi. First, over 95 percent of today’s smart phones include Wi-Fi3. This means that subscribers who travel internationally no longer need to incur the cost of a world phone or be restricted to the limited selection of world phones. Second, and perhaps most critical, the network operator can to attract premium business subscribers by significantly expanding the number of countries that subscribers can roam within.

3) Making international data roaming affordable

Subscribers in several Asian countries have domestic data plans that are considerably cheaper than rates in Europe and North America. For these subscribers, the cost of international cellular data roaming outside of Asia is particularly onerous since they are accustomed to such low pricing at home in their domestic market. Therefore, Asian subscribers have the highest propensity to SIM-swap, which is where subscribers buy and use a different SIM card when they travel to a different market, or when a network operator offers a lower data rate plan. A recent report from Informa Telecoms & Media1 shows that in Thailand, for example, over 25% of subscribers swap their SIM cards. SIM-swapping can be problematic for network operators for two key reasons. First, the network operators are losing potential roaming revenue. Second, and of greater significance, is that these subscribers probably have a lower sense of loyalty to their current network operator, which means there is a higher risk that they will churn. Wi-Fi roam-out enables Asian network operators to offer a price-point for international data roaming that is more closely aligned to their local, in-country data rate plans. Wi-Fi roam-out can therefore become a valuable tool in enabling Asian network operators to create loyalty and reducing SIM-swapping.

4) Responding to changing European regulations

The European Union has proposed lowering the caps on charges that network operators can impose on European subscribers while they are roaming within Europe. These regulations apply to all data roaming, whether roaming to cellular networks or to Wi-Fi networks. Since the cost of sending data on Wi-Fi networks is lower than sending data on cellular networks, the iPass


roam-out service provides European network operators with the means to rebalance their roaming charges. The NGH specifications add the capability to automatically handover connections between cellular and Wi-Fi networks. Therefore, European network operators that have seen their roaming revenues significantly reduced by this new regulation are looking to move to Wi-Fi in the immediate future. For these network operators, they are looking to leverage the existing iPass capability to find legacy hotspots today and then seamlessly add new next generation hotspots as they are deployed. In many countries within the EU, over 80% of data traffic is originated via Wi-Fi1, meaning that Wi-Fi traffic exceeds cellular data traffic by a factor of more than 4:1. For European network operators, capitalizing on the ability to connect their subscribers via Wi-Fi today is more important than waiting for new capabilities provided in the next generation of access points. Additionally, by engaging today, they are identifying usage patterns and perfecting how to package Wi-Fi and cellular services together to address the needs to a variety of user profiles.

iPass infrastructure to support roam-out

Next generation hotspots provide support for device-based authentication and improve the user’s ability to connect to preferred networks. This is a major enhancement that brings transparency to the way a subscriber connects to the network; however, it is not a complete solution. There are several additional requirements that network operators need to deliver a robust Wi-Fi solution to their subscribers. These requirements include the capability to integrate and coexist with legacy equipment; the delivery, retrieval and management of service agreements; the implementation of different subscriber pricing policies; and the monitoring and management of network performance. Figure 2 provides an architectural overview of the iPass mobile network. It interconnects four domains: the subscriber device, the network operator’s access network, the iPass Exchange network, and the mobile network operator’s network. These domains are connected using open industry standards that are shown in the bulleted list.


Figure 2: iPass mobile network

The iPass services fabric provides the back office transaction and administrative services. These services include secure subscriber authentication, enforcement of network operator policies, and the clearing and settlement of billing transactions. The iPass policy enforcement and clearinghouse is perhaps of most benefit to network operators. Today, network operators have a range of different usage, charging and billing policies. For example, some network operators offer the service for free, some charge per hour, and others have a flat rate fee. iPass takes the complexity out of handling the different usage and price policies from different Wi-Fi network operators. At the same time, iPass ensures that the operator-specific policies are applied, and ensures that the large volume and diverse range of financial transactions are appropriated correctly. The iPass services fabric consists of transaction centers that support different regions of the world. In addition to these transaction centers, the iPass services fabric includes NetServers and RoamServers that are deployed in the operator’s network. Communications between the NetServers and RoamServers to/from the iPass transaction centers is secured with industry standard Secure Sockets Layer (SSL) cryptographic protocols.


NetServers are a pair of network appliances that iPass provides to its Wi-Fi roaming partners. They provide gateway functionality to securely route control traffic to/from the iPass transaction center. These gateways interconnect more than 140 network operators to iPass Transaction Centers in the Americas, Asia and EMEA regions. iPass interconnects Wi-Fi network operators using the iPass RoamServer. The RoamServer is a software application that is installed in the context of the operator’s authentication environment. It provides gateway functionality to securely receive authentication and accounting traffic from the iPass Transaction Centers.

iPass services fabric enables 802.1x authentication

The iPass services fabric currently supports the 802.1x port authentication and the EAP encapsulation protocols. As the EAP authentication mechanisms run over the 802.1x and EAP protocols, it is straightforward to incorporate the cellular EAP-AKA and EAP-SIM authentication mechanisms preferred by GSM, UMTS and LTE network operators, or the EAP-TLS and EAP-TTLS preferred by cdma2000 network operators. Devices that connect to next generation hotspots will also need to have a protocol stack that supports 802.1x, EAP and the various EAP authentication methods. Figure 3 illustrates that how iPass services fabric can support the authentication of 802.1x/EAP enabled devices as they become available. iPass envision that the subscriber authentication and authorization details will be sent directly between the iPass transaction center and the 3GPP/3GPP2 network. This new 3GPP/3GPP2 interface allows the iPass network to act like a visitor location register (VLR). This interface is defined in the 3GPP/3GPP2 specifications and is currently implemented by mobile network operators around the world to facilitate global roaming between cellular networks. In this way, the subscriber can be authenticated and authorization by the network operator without requiring changes to their network. Wi-Fi network operators that work with iPass have the advantage of incrementally upgrading to next generation hotspots without developing new back office infrastructure. The decision to upgrade an existing Wi-Fi hotspot is not only a technical issue; it is a question of whether the business justification exists. The Wi-Fi network operator needs to protect their existing roaming revenues and see the ROI on upgrading their existing hardware to next generation equipment. The advantage of the iPass solution is that it enables Wi-Fi network operators to upgrade individual hotspot locations where it makes economic sense, while providing transparency across their legacy and next generation hotspots.


Figure 3: iPass service fabric supports 802.1x/EAP enabled devices

Network operators that are leveraging the roam-out iPass services have similar advantages. They can take advantage of the next generation hotspots as they become available without having to change their network.

iPass directory updates enable coexistence of disparate Wi-Fi networks

The next generation hotspots include generic advertisement service (GAS) messages in the beacon. These messages broadcast the hotspot services that are available. New 802.11u devices will be able to understand these messages and query the GAS server in the operator’s network using the Advanced Network Query Protocol (ANQP). These capabilities are illustrated in Figure 4, and they provide a more robust mechanism for the device to automatically select their preferred network operator than available today. The iPass update service maintains a directory list of all the available hotspots in the world and the associated connection policy; network operators maintain their available hotspots on the


iPass portal, and iPass updates the subscriber device on a periodic basis. In this way the subscriber can take advantage of new hotspots as they are added to the iPass service.

Figure 4: iPass supports coexistence of legacy and next generation hotspots

For next generation hotspots, there is no longer a need for iPass to update the subscriber device. However, for legacy devices that need to connect to both next generation hotspots and other Wi-Fi networks, such as legacy hotspots, or home and enterprise Wi-Fi access points, these devices will continue to need the iPass update service that is installed on the subscriber’s device. Just like today, this update service will detect and help the subscriber decide which network to connect to. In this way, the iPass update service can play an invaluable role in facilitating coexistence and a seamless transition to next generation hotspots. In addition, the iPass directory can become a valuable tool for tracking the adoption and location of next generation hotspots. Today the iPass update service lists hotspots worldwide. Tomorrow the iPass update service can be expanded to distinguish between legacy and next generation hotspots.


iPass portal facilitates delivery of access policies

The iPass portal provides network operators the ability to analyze and query information on hotspot usage. This information can be invaluable in enabling operators to track trends, and to analyze and assess the impact of service policy changes. Today the portal provides operators with three essential capabilities: The capability to see the different subscriber connection policy definitions, to download and analyze operational metric of subscriber usage, and to generate commercial reports that assist with financial and traffic forecasts. iPass envisions that the iPass portal can be expanded to include the GAS/ANQP information service. Network operators will be able to go to the portal and update their service policies. The iPass update service will serve as a resource to next generation hotspots that can pull ANQP data from the information service in response to specific device queries and return that information to the device via the GAS service. These capabilities are illustrated in Figure 5.

Figure 5: iPass portal enhances to support policy updates


By incorporating the new 802.11u Generic Access Service (GAS) and Access Network Query Protocol (ANQP) capabilities, iPass will be able to capture mobile network operator policies and make them available to the Wi-Fi network operators worldwide. Incorporating GAS capabilities in the iPass portal enable network operators to be able to set up their hotspot subscriber roaming policies in one location. This removes the complexity of having to form agreements with every international network operator and to deal with multiple different interfaces. It also gives them seamless access to both legacy and the new hotspot locations as they come online. The integration of GAS capabilities in the iPass portal will also provide Wi-Fi network operators with significant benefits. Wi-Fi network operators will be able to offer their services to multiple mobile network operators, while incrementally upgrading their hotspots. In other words, Wi-Fi network operators can seamlessly and transparently upgrade individual hotspot locations. This allows the mobile network operators to take advantage of next generation hotspots as they become available, with the confidence that their service policies are being enforced.

A phased approach protects the network operator’s investment

Figure 5 illustrates how the iPass mobile network can be incrementally evolved to support network generation hotspots. The bulleted items shown in black are the interfaces that are supported by the current iPass service network. These include the Wi-Fi Alliance WISPr, IETF RADIUS and IEEE 802.1x specifications. The items shown in blue are the interfaces that can be incrementally added to support Next Generation Hotspot deployments. These include the IETF EAP-AKA, IETF EAP-SIM and IEEE 802.11u standards. Through a phased approach to implementing these enhancements, iPass enables network operators to leverage hotspots solution today, while providing a seamless and integrated evolution plan to next generation hotspots.


Footnotes

1 ‘Understanding today’s smartphone user: Demystifying data usage trends on cellular & Wi-Fi networks’:

Informa Telecoms & Media, 2012

2 ‘Tablet Cellular Connections Losing Out To Wi-Fi’: Connected Intelligence, December 2011

3 Strategy Analytics, December 2011

About The Author

Dr. Avril Salter is an award-winning wireless network researcher, consultant and instructor. She has over 20 years of experience working with major corporations and startups, and is a co-founder of Next Direction Technologies; a leading provider of network consulting and education solutions. For more information please visit www.nextdirectiontech.com