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Telstra's U-Turn on Wi-Fi opens up new doors

Telstra may have to train customers to look for hot-spots again, says Tony Brown.
Telstra may have to train customers to look for hot-spots again, says Tony Brown. Photo: Matt Davidson

A couple of years ago I asked a Telstra executive, "What’s the story with Telstra and Wi-Fi? Most operators are using Wi-Fi for off-loading mobile data or at least as a value-added service – why aren’t you guys doing this too?"

"Well, our view would be that if you have to use Wi-Fi then that’s probably a sign that your mobile network isn’t really all that great!" he replied, clearly proud of the quality of Telstra’s mobile network.

Telstra’s well publicised U-turn on Wi-Fi last week does not mean that its much lauded mobile network is suddenly creaking – it most certainly is not – but the move does represent a fascinating change in strategy from the operator.

As every man and his dog knows, the explosive popularity of tablets and smartphones means that people are viewing more video than ever via wireless connections, with in-home Wi-Fi networks doing most of the heavy lifting, which means more wireless bandwidth is needed.

Given that Telstra are not about to go troppo and suddenly start offering everybody all-you-can-eat 4G data-plans, the operator needed to find some way to meet this demand for on-the-move content consumption. And Wi-Fi is really the only game in town.

However, whilst Telstra has taken a pretty well-trodden route with the announcement that it will deploy 8000 of its own hot-spots at commercial and community areas, its decision to partner with Fon on a Wi-Fi sharing business model is a much bolder move.

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Telstra essentially has three main challenges ahead if it really wants to pull this thing off.

Firstly, Telstra has to reintegrate its subscribers back into a ‘Wi-Fi culture’ because the firm has been out of the Wi-Fi business for a couple of years and it needs to get its customers back into the habit of seeking out those Telstra hot-spots and using them.

Even in the very advanced 4G markets of Asia such as South Korea and Japan mobile operators use Wi-Fi as a crucial part of their platform and subscribers are conditioned to seek out their operator’s Wi-Fi when they are in a public area.

Secondly, if it is going down the Fon pathway then Telstra is going to need a lot of hand-holding with its subscribers to persuade them that sharing their home Wi-Fi connection doesn’t mean that some scary individual is going to be able to empty out their bank account at will.

Fon has already signed up some of the world’s biggest telcos to its technology – you don’t get to sign a deal with the likes of AT&T if your product is not seriously good – but there are still going to be concerns from some users about security issues.

Moreover, given that most of the country is not going to be seeing upgraded broadband for some time to come there are going to be lots of Telstra subscribers on low-speed DSL connections saying, "Hell, my Wi-Fi is bad enough now, I’ll be damned if I am sharing it with anybody!"

Thirdly – and this is really where the gold might eventually be found for Telstra – the company really needs to work on integrating its 4G networks with Wi-Fi to create a seamless mobile broadband experience for its subscribers – something that would certainly put the wind up Optus and Vodafone.

Telstra says "over time Telstra Wi-Fi access will be offered to Telstra mobile-only customers", but if Telstra can create a seamless, yet properly authenticated and secure, handover between its 4G network and the extensive Wi-Fi connectivity that is being put in place then that is really going to change the game in the mobile market.

That kind of fixed-mobile convergence would free up subscribers from worries about using up their meagre 1GB or so data allowances because Wi-Fi can take most of the strain. That’s if Telstra gets the Wi-Fi part of the network set up well enough.

NBN implications

Some commentators have argued that Telstra’s move into the Wi-Fi area is a defensive move aimed at protecting its position in the fixed-broadband market ahead of the looming arrival of the NBN.

There may be some truth to this. It certainly makes Telstra a more attractive proposition to fixed-broadband subscribers if they get access to a massive Wi-Fi network, but given there are so many unknowns around the NBN at the moment then basing any strategy around it is pretty risky.

Had we pursued the original all fibre-to-the-premises NBN plan, then there would clearly have been a huge opportunity at the ‘copper cutting’ point for subs to quit Telstra but if fibre-to-the-node and hybrid fibre-coaxial cables are making up the bulk of NBN connections, then the situation is not as fraught for Telstra because there will probably not need to be any new expensive truck-roll at all to subscribers' homes.

Therefore, whilst the NBN is very likely a factor in Telstra’s thinking, the main focus of the Wi-Fi move in the longer term is likely to be on the mobile side of the business and how, by using what is essentially a fixed-mobile convergence solution, it can provide a next-generation mobile experience to its subscribers that its rivals cannot match.

Tony Brown is senior analyst with Informa Telecoms & Media.

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