Paying Mooching Carriers—Wi-Fi Spectrum Use by Licensed Operators

            Some stakeholders support a growing strategy by incumbent carriers to offload ever increasing bandwidth demand onto other networks including unlicensed Wi-Fi.  See https://www.qualcomm.com/.../making-the-best-use-of-unlicensed-spectrum

           Others consider this a clever tactic to reduce spectrum auction payments while contributing to congestion in frequency band designed to provide consumers with an unlicensed, unmetered and cheaper alternative to licensed carrier service.  http://www.infoworld.com/article/2942455/networking/lte-u-is-coming-to-take-your-wi-fi-away-consumer-advocates-warn.html#tk.drr_mlt.

             Not so long ago, carriers prematurely handing off traffic to another carrier risked being branded as a “hot potato” router.  See a 2013 blog entry on the subject: http://telefrieden.blogspot.com/2012/03/hot-potato-routing-and-real-or-imagined.html.

The consolidated Bell System took pride in offering “one system with end to end responsibility.” Now it does not seem to matter if another carrier handles traffic if the strategies accrue cost savings.

             It should come as no surprise that incumbent licensed carriers would prefer consumers not have an unlicensed alternative, particularly in light of the billions paid for spectrum. Whether provided free, below cost, or on profit generating terms, municipal Wi-Fi is reviled as socialism.  Many legislators have bought this logic, even though they don’t seem to fret over taxpayer subsidized stadiums, golf courses, cemeteries, libraries, sewers and water authorities.  With righteous indignation, opponents of municipal Wi-Fi networks claim the socialists ignore the rule of law.  Never mind the law was championed, (make that written) by stakeholders keen on removing, or reducing any unmetered option.  They would love a prohibition on home Wi-Fi routers, but somewhere a line can be drawn where federal authority preempts “states’ rights” and offers consumers a much welcomed option to increase the value of a broadband subscription. 

            Incumbent carriers must maneuver a difficult course where they tolerate (if not welcome) some free spectrum, if they can use it for commercial purposes, coupled with a global bar on the socialistic version called municipal Wi-Fi.

Loving Wi-Fi to Death—Wireless Carriers Want to Commercialize Unlicensed Spectrum?

            Once upon a time, wireless carriers in the U.S. intentionally disabled handsets they sold/leased to prevent subscribers from using Wi-Fi in lieu of licensed and metered spectrum.  Time passes and demand for wireless spectrum skyrockets.  Apparently Verizon and other wireless carriers now so need more spectrum that they have unlicensed Wi-Fi spectrum in their sights.  All to better serve consumers, of course.

            Can you see the irony here?  Rather than compete on price, wireless carriers used to emphasize quality of service, availability and signal strength.  They spent millions on advertising explaining the superiority of their networks and billions in acquiring licensed spectrum.  Now they seem to have come upon a strategy that uses spectrum that they cannot control and must share with home Wi-Fi users apparently with no diminution in service, or congestion.  No “tragedy of the commons” overconsumption, because the wireless carriers will have techniques to avoid interference—apparently without having to identify vacant spectrum before using it.

            If licensed wireless carriers had their way, there would be no unlicensed spectrum for voice and Internet access.  You should read their filings over the years explaining the catastrophic consequences of noncommercial, private and unlicensed spectrum use.  These carriers wanted to charge for Wi-Fi service.  Failing that gambit, they want to expropriate unlicensed spectrum and convert it from noncommercial private use to commercial, for profit use.  What a deal!  Is this country great, or what?

            Verizon et al will try to explain how access to Wi-Fi is essential, right now!  Of course they will try to frame the Wi-Fi option as having nothing to do with saving money, or  not having to invest in more spectrum.

            Carriers no longer seem concerned about offloading traffic and free riding on the broadband and wireless spectrum of others.  This practice used to be derisively termed “hot potato routing.”  Now it’s a clever and greedy gambit to avoid paying their fair share for the bandwidth and spectrum they use.

Hot Potato Routing and Real or Imagined Congestion

            Several years ago when the Internet was beginning to grow, the matter of fair sharing of traffic loads arose.  Because ISPs did not or could closely meter traffic as they can now, the possibly arose that some ISPs could hand off traffic to other carriers without detection and penalty.  The term hot potato routing refers to the deliberate off loading of traffic onto another carrier’s network.  The burdened carriers resented such “free riding” and emphasized that the hot potato routing carrier could not guarantee quality of service having handed off traffic to other carriers.

            With the passage of time and the onset of real or claimed congestion, the hot potato resenting carriers have become hot potato routers themselves.  Wireless carriers want to sell—make that give away—femtocells ostensibly so that subscribers can get better in-building signal penetration.  This positive outcome occurs, because the carrier has had subscribers install mini-cellular radio towers on premises.  But what kind of backhauling does the femtocell use?  Some operate on cellular frequencies in effect retransmitting wireless signals.  But others inject what would have been more wireless traffic into the Internet cloud via the wireless subscriber’s DSL or cable modem broadband connection.  This is hot potato routing masquerading as signal enhancement.  In reality the wireless carrier suffers less congestion and the need to cell split and install additional towers if it can offload traffic to other carriers. 

Another example: Wireless carriers don’t mind—make that are happy when—subscribers substitute wi-fi minutes of use for cellular minutes of use.  These very same carriers used to require equipment manufacturers to disable wi-fi access via cellular phones, so that subscribers had to use network minutes.  With real or imagined congestion cellular carriers can reduce capital expenditures in more plant by offloading traffic onto another carrier’s network. 

Bear in mind that such offloading often does not trigger a charge for the hot potato routing (traffic originating) carrier.  While incumbent carriers, such a Verizon and AT&T, vigorously complain about free-riding VoIP operators, which find ways to inject traffic onto their networks without compensation, Verizon and AT&T do the same thing.  Of course they can claim the need to do so results from the FCC’s inability to reallocate spectrum, or from unanticipated data service demand.  What better way to shift the blame to the FCC or those pesky, gluttonous customers?

I appreciate that ongoing high capex harms carriers’ profits, but U.S. wireless carriers do not seem to be suffering at least in terms of Average Revenue per User (“ARPU”).  These carriers have some of the highest ARPUs globally, and the elimination of unmetered and unlimited data plans promises even higher ARPUs going forward. 

Skimping on capital expenditures accrues short term benefits, but it may foreclose longer term gains.  If wireless carriers make the investment in 4G bandwidth and switching capacity, they can encourage subscribers to treat smartphones as the functional equivalent of wired computers.  Additionally they can exploit technological and marketplace convergence that promote an IP-centric network serving an ever expanding aggregate demand for information, communications and entertainment (“ICE”) services.  But the incumbent players dither: they threaten to become innovative and aggressive competitors, but back off.  Cable operators realize the need to offer a wireless component in their bundle of services, but instead want to sell their spectrum to incumbent wireless carriers.  Wireline incumbent carriers, such as Verizon, toy with the idea of offering video content, instead of serving as the conduit for the content managed and produced by others.  But this week we hear that Verizon would rather partner with Netflix than compete.

Who wants to devote sleepless afternoons competing, investing and innovating?