China Mobile abandons its $3b Wi-Fi network

Another consequence of China's tortuous path to 4G: China Mobile has all but abandoned its massive Wi-Fi hotspot network, while China Telecom plans to build one of its own.

China Mobile has found that its network of 4.3m hotspots, presumably the world’s largest, and deployed at a cost of 17bn yuan ($2.75b), is uneconomic.

Wireless data revenue across all of China Mobile’s networks last year rose 59%. But Wi-Fi data occupied an unsustainable 74% of all traffic, and generated a microscopic 2.6% of revenue.

The operator returned just 15 yuan per month from each Wi-Fi user - “not even enough for network optimisation, let alone ROI,” a Henan Mobile official in charge of Wi-Fi told Sohu IT.

The result is that China Mobile has cancelled further Wi-Fi construction and has cut back on optimisation and maintenance.

This comes as no surprise, given China Mobile’s well-documented difficulties with TD-SCDMA.  In fact it was the poor data performance of the local 3G technology that drove China Mobile into Wi-Fi in the first place.

But low-priced, widely-deployed Wi-Fi is also an attractive alternative to 4G, as early figures from China Mobile's 4G campaign suggest. To the end of April it had sold 14m TD-LTE handsets but fewer than 4m of these had upgraded to 4G.

Sohu IT also points to an unhealthy skewing of the Wi-Fi rollout to a handful of provinces. For some reason, China Mobile’s Shandong unit has installed more than 1m hotspots, Shanxi 560,000 and Henan 400,000 - three provinces with less than a fifth the population accounting for 46% of the installed base.

In light of the poor returns from Wi-Fi, China Mobile is going all-out for TD-LTE and has forecast it will have rolled out 500,000 base stations in 300 cities by year-end.

Yet while 4G has driven China Mobile out of Wi-Fi, it is an accelerant for China Telecom. Chairman Wang Xiaochu said in an interview last month that he is planning to step up Wi-Fi investment.

That’s because the operator is being held back from deploying its preferred brand of 4G, FDD, while its cdma EVDO network is no match for either LTE or China Unicom’s HSPA services.

China Telecom has been issued with a ‘trial’ FDD licence, but for just 16 cities – a long way short of the 300 it’s hoping to reach nationwide. In that light, Wi-Fi makes some sense, yet it's hard to see how China Telecom can avoid the same problems besetting China Mobile once its FDD network gets up to speed.

The best solution would be for a third party to take China Mobile's Wi-Fi network off its hands and wholesale it to the big three or any of the new MVNOs. Ranking 96th in world global broadband speed rankings, you'd think China couldn't afford to allow infrastructure to go to waste. In fact, duplication and waste appear to be the order of the day.

HKBN dives into Wi-Fi

Ground-breaking broadband player Hong Kong Broadband Network (HKBN) has moved into wireless, promising to make “low-cost or no-cost” Wi-Fi ubiquitous following its acquisition of the city's s biggest Wi-Fi wholesaler, Y5Zone.

It's planning a HK$200m ($26m) upgrade in the next 12 to 18 months to more than double the number of hotspots to 15,000 and boost bandwidth speeds from 100Mbps to 1Gbps. 

While the city is already heavily-connected via 3G, 4G and broadband, Billy Yeung, the head of HKBN Wi-Fi, says the Wi-Fi market is still in its infancy. He sees opportunity in the rising data demand, the number of Wi-Fi devices and the massive influx of mainland tourists.

Hong Kong has 13m mobile connections, or an ownership rate of around 185%, and mobile data use is expected to increase 53 times between 2010 and 2020. Around 70% of phones in use are Wi-Fi-enabled smartphones. 

The number of mainland Chinese visitors has doubled in the past four years and is likely to have topped 32m in 2012. 

HKBN hasn’t announced pricing, but CFO NiQ Lai said the aim would be to offer at “low-cost or no-cost – maybe it will be free for the first 20 minutes.” The idea was to make it ubiquitous and affordable to everyone, he said.

Privately-held HKBN will not disclose the acquisition price, which is partly in stock. The company went private last year and is now owned by senior managers and private equity firm CVC Capital.

HKBN is Hong Kong’s second largest fixed-line broadband provider. Its all-fibre network connects to 85% of households and offers packages of 100Mbps for HK$168 ($21.80) and 1Gbps for HK$268.

“We think of not hotspots but ‘hotzones’,” said Yeung, an industry veteran who founded PCCW’s ISP arm in 1993 and set up Y5Zone 11 years ago. “Instead of a single hotspot in a mall, we will cover the whole mall.”

“Hong Kong may not have the most number of WiFi hotspots in Asia, but we hope to have the most sophisticated users of any Asian city,” he added.

Y5Zone will continue its Wi-Fi wholesale business, which supplies connectivity to every major telco except for incumbent PCCW.