Should you Build a WiFi Network?

Free Wireless (WiFi) Minneapolis Hotspot in Su...

Free Wireless (WiFi) Minneapolis Hotspot in Sumner Field (Photo credit: Wikipedia)

For years I have had clients who have been building WiFi networks and then trying to figure out ways to make money with them. For the first time I think there is now enough opportunity to sufficiently monetize a WiFi network to make it look like a good investment. The following are some of the ways that other carriers are making money from WiFi. A good business plan will probably need to combine several of these together to make a viable business.

Cellular Data Upload. The biggest use of WiFi is becoming the uploading of cellular data to the network. Most cellular carriers sell data plans with low caps and they want and expect their customers to use WiFi to keep data traffic off the cellular networks. In most places the cellular networks are not nearly robust enough to handle all of the data they would need to carry if it wasn’t for WiFi. There are two different possible ways to monetize this.

If your service area has enough customers of one or more of the major cellular companies, the carriers might be interested in buying wholesale access into your WiFi network. This is something that is happening in big cities, and in many places the cellular carriers are deploying the WiFi directly. But there are now a number of markets where cellular carriers are buying bulk WiFi access from other carriers.

However, deals with cellular carriers are not yet something that has been commoditized, and the alternate plan is to sell data plans directly to cellular customers in your town for their smart phones. Many cellular customers already have WiFi in their homes, but with a city-wide WiFi network they could then get the WiFi benefits anywhere in town. Statistics say that 85% of cellular data is used in the home territory and you can sell data for less than the cellular carriers and make good money at it.

MVNO Wireless. Even better than selling cellular data to others is consider offering your own wireless plans using an MVNO. In this scenario you buy bulk cellular minutes, text messaging and cellular data and then package them your own cellular plans. If you have a city-wide WiFi network you have a big advantage because you can make sure that your cellular customers use your network for both voice and data when that is possible. This means that you can charge them cellular-level pricing for traffic that you are delivering at landline costs. The margins on MVNO wireless are already decent, but combining it with a robust WiFi network really enhances the bottom line.

Broadband Alternative. There are now a significant number of customers who don’t want traditional broadband delivered by wireline. In addition to smartphone users, there are many customers who now use pads and laptops instead of traditional PCs. So you can sell WiFi business plans as an alternative or as an adjunct to your existing data plans. WiFi-only plans can be priced similarly to traditional low-level landline plans and you might sell a ‘portability’ additive plan to your normal landline data customers. Finally, you can sell hourly, daily and weekly WiFi to visitors or occasional users.

VoIP / Local Only Phone. In every market there are customers who almost never leave town and with a WiFi network you can give them a much lower cost portable phone alternative than using a traditional cellphone carrier. This essentially is a cordless phone that will go anywhere in the town. You also can use WiFi to give local phones to kids and others for low prices, saving parents the cost of pricey cellular family plans.

Public Safety. Most towns and cities would be interested in using your network for public safety and public works. With a citywide WiFi network you can give all city employees access to data anywhere in town, making it easier for police and fire to operate using pads but also improving the productivity for inspectors and other city workers who are mobile in the town. You should be able to sell bulk access to the city and local utilities, particularly if you will arrange a QOS arrangement to give public safety a priority for the network when they need it.

Workforce Needs. And of course, a city-wide WiFi network will also increase your own productivity since your own installers and salespeople can always be connected to the network with a pad or smartphone. This is not a revenue opportunity but rather can save you money.

There certainly some issues to consider and it would make sense to pre-sell to the larger WiFi users before you build the network. But if you can sign up a cellular carrier or the City government as anchor tenants then you can build knowing that these other revenues will materialize if the network is built with good coverage.

Like any business there are operational issues to consider. For instance you will want to insure that only people who are paying for your service use the network so you will want a secure system to validate users and be prepared to boot off customers who give away passwords to others.

From a technical and cost perspective it has never been easier to get into the WiFi business. The price of equipment has dropped and it has become more science and less art to keep the network functioning well.

Upsell Your Customers – What to Sell

One of the best strategies you can undertake to improve bottom line performance is to increase your average revenue per existing customer by getting those customers to buy more of the services that you already offer. These are customers who already know you and trust you and send you a monthly check, so there is no target market that has a higher potential for successful marketing.

Many of my clients have been very happy to sell basic packages to customers for years. But as I have discussed in other blog posts, the traditional products that many carriers sell are becoming commodities and now have market alternatives available. Households have been dropping voice lines for a decade and are starting to drop cable connections. Many of my clients are seeing significant customer losses in their traditional products and things like long distance have withered away. These same clients have a number of products and services available to them that they are not selling. If they are going to stay profitable and remain relevant to their customers for the coming decades they are going to have to find new products to replace the ones they are losing.

If you want to undertake an upsell program you need goals. Do the math, but most of my clients would be very happy if they could increase margins per existing customer by a few dollars a year. So set a specific goal each year and then develop a plan to get there. I will have some future blogs discussing the best ways to upsell, and in this first blog on the topic I will look at the products you can sell as part of this process.

So, what are some of the products you can be selling today? The following is just a partial list that is intended to show you some of the possibilities. I have clients successfully selling all of these products:

Voice. Today, anybody with a softswitch has a score of communications tools that hardly anybody is selling. This includes such things as:

  • Unified Messaging. Almost everybody has this available on their switches and yet hardly anybody sells it. This allows customers to seamlessly move communications across all devices and once customers see how this works many want it. We are no longer talking about the ability to toggle between a cell phone and home phone, but also to tablets, laptops and any other device capable of receiving an Ethernet stream.
  • IP Centrex. Again, anybody with a softswitch can probably offer this service, and if not you can partner with somebody who offers it. This is becoming the new standard product for businesses and many home businesses will also be interested because it can allow them to act like a larger company.
  • Cheap Second Lines. Second lines today can be little more than a number of you deliver the service over Ethernet. So sell $5 or $10 second lines for teens or home businesses.
  • Other Advanced Features. Softswitches come with dozens of features that almost nobody sells. These include features like seamlessly integrating emails and voice mail; integrating voice with computers; advanced screening and call control. I have a few customers who have figured out how to sell these features and they are almost 100% margin if you have already bought them with an existing switch.

Wireless. As long as there is good cell phone coverage in your area, you can now be in the cell phone business through an MVNO program where you resell somebody else’s wireless minutes. This is very different from the resale in the past where you resold a large carrier’s products with little margins. With MVNO you can repackage minutes into your own products, and if you match this up with household Wifi you can have very good margins.

Cable TV. And on the cable TV side of the product line

  • OTT Access. Add over-the-top programming to your channel line-up. Rather than risk losing customer to OTT, let them easily get OTT directly on your video line-up without needing to buy a Roku or Apple TV box. There are numerous vendors around who have created channel line-ups for OTT programming.
  • Cable Portability. Enable your customers to watch the TV programming you sell to them on portable devices around their home like computers, cell phones and pads. If you buy programming from the NCTC coop this is now becoming available.
  • DVR Services. Provide whole-house DVRs, or even better offer centralized DVR where you do the recording on servers at your hub. Centralized DVR greatly reduces the bandwidth you have to send to customers while allowing them to easily record multiple shows at the same time. Centralized DVR also means you don’t have to invest in expensive set-top boxes.

Security. Many of my clients are doing well with security products:

  • Cameras. The simplest product is to sell and install security cameras and then set customers up to monitor these themselves from any ethernet device.
  • Safety Monitoring. Sell, set-up and monitor safety monitors for things like fire, radon and CO2.
  • Burglar Alarms. I have many clients selling ‘traditional’ burglar alarms. This is now easier than ever to do since there are a number of vendors who offer the police monitoring and as a carrier you supply the equipment and get a monthly line rental.
  • Advanced Security. Many business customers will be interested in advanced security systems that can monitor all sorts of things in addition to traditional security.

Cloud Service. Everybody is talking about things moving to the cloud but very few smaller carriers are marketing any cloud services yet. This is an area where a small carrier is going to have to break the mindset that you have to own and control the back office system behind the product. Instead, you need to find partners who offer cloud services and then repackage them to your customers. This will not be a static transaction since these products are going to change a lot over the next decade. But you can’t wait for this market to ‘stabilize’ because it may never do that. So you should start looking for cloud partners today.  Some of these services include:

  • Data Backup and Storage. While there is free back-up available on the web, many customers still prefer the safety of backing up for a fee and there are many for-pay back-up services. We are seeing is that many people would prefer to back-up their data with somebody local rather into the ‘cloud’.
  • Centralized Software A lot of software like Windows, Microsoft Office and other popular products are now available at the cloud level, saving customers from having to keep buying these for every machine they want to operate.
  • Medical Monitoring. This will eventually be a huge business and most people will elect to get monitored. It’s just starting, but worth getting into early.
  • PC Replacement. Let customers use your storage in place of their hard drives, meaning they can get to their data from any device capable of using the software.

Home Automation. I have several clients who are successfully selling and installing home automation systems. These systems are commercially available, but only really geeky customers feel comfortable making this work on their own. So the product is selling / leasing the systems, making it work, and continuing to integrate future customer devices into the systems.

Geek Squad. I have a number of customers, particularly in rural markets that are doing well offering the same sorts of services that the Geek Squad sells. They will go into customers’ homes and help customers manage make their computers, TVs, energy management, and anything else that is electronics based. All this is sold on an hourly or an insurance-type basis.

Should You Become an MVNO?

This article compares the price of US cell phone plans to those around the world. It shows that the basic packages from the large US providers are in some cases twice as expensive as in other countries.

The small oligopoly of nationwide carriers, being AT&T, Verizon, Sprint and T-Mobile, have no incentive to lower prices. The only thing that will get them to come down in price would be competition or some sort of regulatory action.

The large carriers have created an opportunity for some competition against their products by selling bulk minutes, data and messaging. Companies that buy these bulk minutes are known as MVNOs (Mobile Virtual Network Operators). There are scores of MVNO providers in the country with the largest ones listed here.

The three original MVNOs are TracPhone, Virgin and Boost and who still had over half of the pre-paid cellular phone business in 2012. However, note that Sprint recently bought Virgin and Boost, so perhaps part of their strategy is to create sub-markets and then gobble them up to make more profit.

MVNOs have various marketing strategies:

  • Republic relies on shunting a lot of traffic to WiFi which greatly lowers their costs.
  • Ting lets customers design their own rate plan.
  • Kajeet has plans for kids that are parent-controlled.
  • Solavei uses multi-level marketing similar to Amway.
  • Voyager Mobile competes on price and is selling very low-cost plans.

If your carrier business already has a loyal customer base you should consider becoming an MVNO. Your loyalty will bring you customers, and your existing customers will appreciate being able to save money on cell phones while buying from somebody they trust. As long as you do it smartly there are significant profits to be made in the MVNO business. All that is really needed is having good existing cell phone coverage in your area and the desire to expand your product line.

CCG can help you get into the MVNO business. We can assist you with finding a good deal on bulk minutes, help you design products and prices, help you create a business plan, and help you with technical strategies such as a handphone strategy, and using WiFi to lower costs.