This summer, Germany is getting its largest Wi-Fi network following a deal last month between the country's incumbent telco, Deutsche Telekom, and crowdsourced Wi-Fi hotspot provider FON.
The deal will allow Deutsche Telekom to extend its Wi-Fi network across Germany from June 2013 and also covers the operator's network operations in Bulgaria, Greece, Romania, Slovakia and Hungary.
For FON, the deal is something of a coup: Deutsche Telekom is a "gold-plated reference customer" for the community Wi-Fi company, according to Emma Mohr-McClune, global service director for consumer services at Current Analysis, who notes that this is also FON's first multi-market deal.
For Deutsche Telekom, the deal means it will become part of a global network of Wi-Fi hotspots created by users who have signed up to share their home broadband services, giving away a section of their bandwidth to other FON users in need of a connection.
The importance of Wi-Fi
However, what's most notable about the deal is that it sees Deutsche Telekom putting its foot firmly in the Wi-Fi offload camp, and marks a further signal of Wi-Fi's growing importance to operators who seek alternative ways of managing rampant mobile data traffic.
"The astonishing increase in data traffic calls for network optimisation and expansion, as well as the implementation of new high-speed networks," said Deutsche Telekom spokesman Dirk Wende, citing comments made by outgoing Deutsche Telekom CEO Rene Obermann. "The partnership with FON fits perfectly with Telekom's network expansion strategy. Wi-Fi and hotspots can be used to divert heavy data traffic to fixed-line networks and thus reduce the load on mobile networks."
Deutsche Telekom sees Wi-Fi as complementary to its existing services, and certainly has no plans to blanket Germany (a geographically large country) with its own Wi-Fi hotspots.
As it builds up its Wi-Fi offering, the operator is continuing with its LTE rollout across Germany, aiming for 85 percent population coverage by the end of 2016. Wende said Deutsche Telekom doubled the number of its LTE sites by the end of 2012 compared to 2011, and has deployed LTE services in 1800MHz spectrum in more than 100 cities.
"With Wi-Fi To Go we want to extend our Wi-Fi network; a wide area coverage with Wi-Fi like we have with mobile is not the intention," said Wende. "Wi-Fi is a complement to mobile and fixed lines. In our mind we want our customers to be always best connected — it doesn't depend on the technology."
Deutsche Telekom is launching the Wi-Fi To Go service based on the FON partnership, and said by 2016 it wants to set up more than 2.5 million additional hotspots in Germany through the offering. As part of the FON deal, Deutsche Telekom customers now have access to some eight million hotspots worldwide, with Deutsche Telekom adding 12,000 hotspots to the FON pot.
The carrot for customers
Persuading customers to jump on the FON bandwagon and open up their Wi-Fi networks to others could be one of Deutsche Telekom's biggest challenges: German consumers tend to be cautious in their approach to new technology, and the onus is on Deutsche Telekom customers to opt in to share their home broadband access.
Wende said Deutsche Telekom will address this by "emphasising the benefits for our customers: no disadvantages and no risks but free Wi-Fi on millions of hotspots worldwide".
Telekom will also be able to use FON's international aspect as a value-add for its customers, Mohr- McClune said. "Deutsche Telekom can bundle 'free global Wi-Fi' to customers in Germany, Bulgaria, Greece, Romania, Slovakia and Hungary as a USP," she wrote in a research note.
However, there are of course some competitive challenges ahead: Mohr-McClune also noted that the new router will only be applicable to customers of IP-based broadband products (not standard DSL), and said the "whole deal throws a question mark over the future of the Deutsche Telekom-Orange alliance for international Wi-Fi, as announced two years ago at MWC."
Also not to be ignored is the potential impact on voice and text revenue, and also possibly on mobile data roaming revenue, with the increased use of FON hotspots at home and abroad.
Mobile data offloading
Such elements are doubtless a bonus for Deutsche Telekom, but it's the issue of offloading mobile data that's really key here.
Rising data traffic is a problem operators around the globe are wrestling with due to the increased use of smartphones, tablets and other wireless devices. Deutsche Telekom’s collaboration with FON serves as a good illustration of the various approaches operators are now taking to help relieve the burden on their 3G and LTE mobile networks, while keeping costs down.
There is also growing talk about the so-called heterogeneous network, or HetNet, which essentially provides a hybrid network of macro cells and small cells. Many operators are considering small cells such as metro cells as lower-cost alternatives to improve coverage and capacity, and WiFi offloading is a similarly hot topic.
The choices that operators have to make are far from easy, and will be to a large extent dictated by their existing network and spectrum assets. For its part, Deutsche Telekom is pursuing a strategy of mobile, fixed and WiFi, a technology mix it hopes will enable it to "gradually introduce our customers to the benefits of internet access anywhere and anytime".