O2's free wi-fi giveaway: Where's the catch?

Data offloading may not be the only thing on the operator's mind...

The launch of a free wi-fi network by O2 is not just about offloading mobile data, it's about creating new marketing opportunities too, says silicon.com's Natasha Lomas

Mobile operator O2 has announced plans to launch a free wi-fi hotspot network called O2 Wifi. Yes, that's free - it won't cost a bean of your hard-earned cash to log on. Nor do you have to be an O2 customer to gain access to this connectivity bounty. Customers of any other mobile provider can join in the free fun too. Sounds too good to be true, right? So what's really going on?

First, the wi-fi free-for-all can be seen as a measure of exactly how keen mobile operators are to offload our data from their cellular networks. O2 wants mobile users to log on to wi-fi so they can log off its 3G network and free up bandwidth for other data-demanding customers.

Having convinced mobile users to gobble lots of data by offering unlimited data tariffs in the early years of mobile broadband, operators now have the task of reining usage back to a level that sits more prettily on their bottom lines. It's all about ARPU - average revenue per user. More data has not historically translated into fatter ARPUs for operators - quite the opposite: it's been gobbling up their ARPU.

Shift in usage patterns
Last year, operators started to try to bring about a shift in usage patterns - by scrapping or capping the too-successful unlimited tariffs, and moving users on to tiered data pricing models. In other words: use more, pay more.

It may sound reasonable on the surface but to customers nursed on a diet of all-you-can-eat data and limitless internet surfing, it's been difficult to swallow.

Earlier this month, T-Mobile attempted a similar offloading manoeuvre that O2 is hoping to encourage here - but with one big difference. Rather than using a carrot to encourage users to switch to wi-fi, T-Mobile got out a big stick, telling its customers their data caps had just become a whole lot smaller - a move it partially revoked after the inevitable storm of protest.

"If you want to download, stream and watch video clips, save that stuff for your home broadband," T-Mobile warned on its website.

Antenna: O2 is to offer free wi-fi

Demand for mobile data is making mobile operators seek ways to offload traffic
(Photo credit: Shutterstock)

O2's tactic is more emollient than telling people what they can and can't do with their own smartphones. Instead of dictating how its customers can use their devices, it is offering the carrot of free connectivity to data lovers. How can we resist?

Wi-fi helps mobile operators in another way too. 3G networks tend to have poor indoor coverage, owing to the limitations of the spectrum they use. That shortcoming means wi-fi hotspots - which are typically located inside buildings - can be used to plug indoor connectivity gaps.

Again, this approach is a win for the mobile operator - not immediately in the sense of beefing up bottom lines, but because it helps it keep its customers connected and therefore happy. Since mobile penetration is so high in mature mobile markets such as the UK, customer churn is a big headache for operators. After their biggest headache: data gobblers.

Of course, the flip side of customer churn is customer acquisition. Bundling access to wi-fi hotspots with a mobile data tariff, via third-party wi-fi providers such as BT Openzone and The Cloud, has been a strategy operators have used to woo new customers.

Goldmine of marketing opportunities
O2 appears, on the surface, to be bypassing this opportunity by opening its wi-fi hotspots up to customers of rival networks for free, but the registration process for this freebie could offer a goldmine of marketing opportunities - not least the chance to grab the mobile phone numbers of rivals' customers.

In other words: hello direct marketing and customer poaching. There's no such thing as a free lunch - and there's no such thing as free wi-fi without a set of T&Cs to click 'I agree' to.

One thing's certain: wireless technologies are becoming increasingly entangled - and this connectivity patchwork is here to stay. Few people would say a smartphone user could manage on wi-fi alone, eschewing 3G connectivity and hopping from hotspot to hotspot to get their connectivity fix. Nor, it seems, can many mobile users make do without wi-fi - relying on it to provide a fast and reliable connectivity shoulder to lean on in an increasing number of locations.

Logging on to wi-fi hotspots can be a tiresome and fiddly process at the best of times, so the challenge for mobile operators is to make it really simple to hop between different access technologies - truly a 'seamless' wireless quilt is what the future will demand. So operators of every stripe be warned: keep it simple, stupid. And that will keep your users smiling.