Wi-Fi Industry Basics

Wi-Fi hotspots are going to be a big business, and one company can’t possibly provide all of the components necessary for success by itself. For starters, the short range of Wi-Fi networks means that, even with billions of dollars to spend, one company can’t build all of the hotspots necessary to meet the ubiquity demanded by customers.

Also, as was discovered in the wireline ISP space, it’s difficult to be successful both at building and operating networks and servicing and supporting end users. They are very different skills.

Wi-Fi is often compared to the cellular phone industry, however, it is more accurately compared to the ISP industry, which, like Wi-Fi, is built upon an unlicensed foundation, allowing literally thousands of competitors to enter the market. This creates very different conditions than those found in cellular, where licensed spectrum limits competition. This limited competition allows the cellular industry to be vertically integrated – the same company that owns the spectrum can afford to build and operate far-flung physical networks, and market to, support and bill end user customers. Through their purchase of spectrum licenses, cellular companies bought the ability to vertically integrate.

In Wi-Fi, no such spectrum protection exists, and as in the ISP space, anyone with a bit of capital and entrepreneurial ingenuity can compete in the service provider value chain. With this reality as a backdrop, vertical integration in Wi-Fi will be very difficult, if not impossible, to pull off. Thus, it is critical to understand how the distinct layers of the industry fit together so that Wi-Fi-related companies can focus their capital effectively. The segmentation pattern of the Wi-Fi industry is discussed in the following section.

Lack of control for carriers and ISPs
As users move from hotspot to hotspot, they will encounter many different providers and will be exposed to competing brands. Without the right solution, carriers and ISPs who hope to offer a Wi-Fi service to their customers have no way to uniformly brand and control their users’ experience.

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