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The People’s Republic of Wi-Fi

There is a criticism common in some quarters that telecom operators fail to innovate. This tends to be levelled at the spectrum license-owning national and multinational carriers cruising through the oceans of communication like vast oil tankers, unable to plot a course that can successfully steer them around the maelstrom of OTT content providers and out into calmer waters of steadily growing revenue.

The criticism is unfair, although not without some merit. The major providers can be conservative, but it is with good reason. There are plenty of ‘innovative’ wrecks in the sea of ubiquity which makes embracing innovation a dangerous business. As regular readers of my blog posts will know, one such disruptive influence that the major carriers are coming around to is Wi-Fi.

Back in November, Republic Wireless launched in the US promising to turn the Wi-Fi/cellular usage model on its head. For $19 per month Republic is offering all-you-can eat voice, text and data provided that when you’re in the home, you direct all of your voice and data traffic over your router.  When you’re out and about, you’ll ‘fall back’ onto Sprint’s CDMA network. Your ratio of Wi-Fi usage to cell usage is tracked. If you rely on too much of Sprint’s spectrum, you’ll be sent a gentle reminder to curb your cellular addiction, if you persist, you’ll be shown the door.

Republic is banking on the premise that users spend 60 percent of their time within range of Wi-Fi. A figure that Republic, along with everyone else (including me), says is going up. It is an exciting story and one that generated a lot of media coverage which, in-turn, resulted in more than one million unique visitors to the firm’s website, which led to Republic completely selling out of its inventory within four hours of going live.

Even if you don’t use any Wi-Fi, your $19 a month gets you 550 minutes, 150 texts, and 300 megabytes of data without crossing the community’s fair use threshold. ARPU in the US is around the $55 mark – a figure, we are routinely reminded, which supplies razor thin margins. Of course, Republic’s overheads are not on the same scale as those of its larger carrier competitors, so perhaps it really can make $19 a month pay.

It’s all looking rather rosy at this stage in the game for Republic. Although, the service is not without its hurdles to uptake, not least of which is the fact you can currently only get one handset that will work with the service. So, unless you like the look of an LG Optimus (for which you need to shell out $180 at the start of your contract), you might be reluctant to churn. Republic doesn’t have scale at this stage and so it could be some time before it ranges more devices.

The biggest hurdle though, and one that so many other disruptive services providers face, is the fact that while the idea is quite clever, it can’t be protected all that that well with IPR. The biggest hurdle to success then, is success itself. If Republic makes this business model work to such an extent that it looks as though subscribers are willing to churn then the carriers will adopt it. And this, perhaps more than any other reason, explains why the major carriers can afford to not be especially innovative. Either way, Wi-Fi wins.