Cable Wi Fi Market
 

Cable Wi Fi Market

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How Cablecos can use Wi-Fi to double sales.

How Cablecos can use Wi-Fi to double sales.

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Cable Wi Fi Market Cable Wi Fi Market Document Transcript

  • Wi-Fi: Sales Doubling Opportunity in CATV Wi-Fi: A CATV Opportunity1 SummaryOur telecom universe that is changing rapidly. Wi-Fi is quickly replacing cellular—thegrowth driver of telecom since NTT launched the first mobile network in Japan in1979—as the primary telecommunications market. We are at the end of one era—cellular—and the beginning of another—Wi-Fi. The resulting shift to a small celltopology means that some $5 trillion in global telecom plant will have to be replaced.Cablecos sit in the perfect place at the perfect time to turn this shift into a growth driverof unprecedented magnitude.Soon, the bulk of wireless devices will bypass high-cost, low-capacity cellular networks.At the power end of the Moore Curve, 85% of iPads and 90% of laptop PCs already useWi-Fi only. Small cell Wi-Fi is siphoning off all the growth in telecommunications.Wi-Fi is also enabling new enterprise and M2M markets of enormous potential.On the down side, cellcos and everyone who supplies them, will find themselves likeminicomputer makers a quarter century ago, topologically isolated in one, small part ofNorth River Ventures 1 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVthe computer market with limited capacity and reach. At worst, cellcos risk going theway of DEC and Wang and, at best, of enduring the painful restructuring of IBM and H-P.On the up side, as the primary growth engine of telecom, small cell Wi-Fi can play ahuge, sales-doubling role for CATV.Here we expand on the assessments we made of Wi-Fi in our reports to CorporateInnovation Project participants The Future of Wireless Networks: A StrategicFramework, December 2010, and Wi-Fi: The Existential Threat to Cellular, April 2011.In those CIP reports, we said that on track one, incumbent cellcos must cut costsdramatically to maintain and expand their valuable cellular franchises while at the same Small is the New Big! ≥1000X Mobile Data Traffic Growth 2010-2020 Spectrum 2X +Femto LTE 10X Pico 25X Wi-Fi ≥500X Offloading and Bypass Provided by Small Cells North River Ventures Source: Qualcomm, FCC, NRV estimatestime re-building their networks to deliver not just millions of phone calls, every day butbillions of interactive, always-on 3DHD and soon 4K apps over Wi-Fi. Cellco networks,we said, must be flexible enough to inflate with the cloud and priced low enough toharness all the devices, especially M2M, coming onto the cloud. This report confirmsthis view, makes its implementation urgent, and in doing so lays out a large CATVgrowth opportunity.The rapid shift to small cell Wi-Fi is strong evidence that the cellular model is broken.Cellco giants face declining revenues per subscriber and stalled growth. They have noclear Wi-Fi bypass win-back strategies. Only T-Mobile has embraced Wi-Fi bypass on aNorth River Ventures 2 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVglobal level. And this company is struggling in key markets like the U.S., havingproposed and failed to sell its operations there to AT&T. As CIP Innovator BelAirexplained to us, under very high app loads—and Apple has surpassed 25 billion appdownloads1—cell size is not your friend. Cells must be small with tightly managedfrequencies and quality of service.The signs of change are everywhere. China Mobile owes nearly 100% of its lead overChina Unicom to its ten million Wi-Fi only iPhone customers and will launch one millionnew Wi-Fi hotspots in 2012.2 CATV companies are beginning to offer strand-mountedWi-Fi to capture this traffic and reduce churn.3 O2 plans Europe’s biggest open Wi-Fi inLondon for this year.4On track two, wireless newcomers like Canada’s Shaw Communications will skip thecellular era entirely for a new, low-cost Wi-Fi infrastructure.5 Microsoft is followingsuit.6 Some cablecos that have already invested in cellular spectrum are unloading it,often very profitably, because they can become major players in wireless by offering low-cost Wi-Fi services instead.7Steve Jobs, as we discovered following his death, planned in 2007 to use Apple’s largecash reserves to fund a 100% Wi-Fi carrier to carry traffic from Apple’s 100% Wi-Fiproduct base.8 Since 1998, Apple has kept its Wi-Fi development running a good twoyears ahead of product announcements and joined a consortium with Microsoft thatacquired Nortel’s wireless patent portfolio, of which Wi-Fi is a big part.Cell tower owners, like CIP participant Crown Castle (26,000 sites), are moving intosmall cell Wi-Fi and expect to play a major part in the growth of the new topology.All these newcomers recognize that everything on the power end of the Moore Curve isalready a Wi-Fi exclusive, making cellular a network of the past.On track three, enterprises the world over are discovering that, to meet the needs of rapidcloud inflation, well-managed small cell systems are more flexible than wired systemsand are easier to upgrade. Also, because of the phenomenon of Cloud Indifference—thecloud is indifferent to the devices and apps that run on it—Wi-Fi will open up largevertical markets from healthcare to facilities management to manufacturing and almosteverything in between. This new age of wireless will, literally, shower the market withopportunities far beyond cellular today.Wi-Fi has challenges, like security, handoff, and mobility. Cisco and, notably, Ruckus,Meru, Alepo, Ubiquisys, and BelAir all of which have presented to CIP’s regularInnovation Committee meetings for Participants, are working fast to overcome these.CIP Innovator Acient offers Wi-Fi roaming exchanges.In addition, the coming of Super Wi-Fi, an unregulated medium with a cell-towermatching footprint, and the fast growth of small cell Distributed Antennae Systems andCATV strand mounting are driving the momentum of Wi-Fi in the infrastructure market.As Cisco made starkly clear in its annual wireless survey, Cisco Visual NetworkingIndex: Global Mobile Data Traffic Forecast Update, 2010–2015, all the most powerfuldevices into the foreseeable future will use Wi-Fi, not cellular. Cisco also told CIP thatwhile 99% of devices today support Wi-Fi, only 50% will support LTE by 2015. ThisNorth River Ventures 3 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVcould be a serious underestimate. Yankee group says that in that year the Wi-Fidominant tablet market will reach 213 million units, 22% bigger than the 2015smartphone market. 9 ABI says the tablet market will reach 366 million units in 2016.10Wi-Fi is also growing fast in less powerful devices, especially M2M, because none ofthese can support cellular’s high, average cost-based pricing.11Akamai, in its reports, shows that the app load on the cloud is growing much too fast forthe cellular architecture and has overwhelmed it already, driving large amounts of appoffloading by cellcos onto Akamai Content Delivery Network (CDN) edge servers andother networks. Cisco confirmed to CIP that because of this, cellco revenue and costlines will cross going the wrong way by 2016 unless a radically redesigned newarchitecture with a different cost base replaces cellular.This new architecture will be our Applications Delivery Architecture of radicallydistributed 3DHD-capable CDNs integrated with Wi-Fi/Super Wi-Fi RAN (see Section9). Our network, which is cheap, ubiquitous and fast, will become the delivery mediumfor all cloud-based apps.In addition, there is strong evidence that legacy cell towers, when combined with solar,fuel cells, and battery backup can become sources of primary power for the grid, alteringwireless and carrier economics profoundly.In the future, as small cells proliferate and the cost of these nodes falls on the Moore andMemory-Density Curves, the cost of powering them, now 60% of macrocell operatingcosts, will not fall proportionately and alternate energy management will be ever moreimportant.By integrating scalable Energy Management Systems like the energy arbitrage systems ofCIP Innovator Viridity into small cells, next gen carriers will be able to turn theeconomics of wireless on its head.North River Ventures 4 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV Table of Contents1 Summary ...................................................................................................................... 12 The New Age of Wireless ............................................................................................ 6 2.1 Cloud Inflation and Next Gen Network Requirements ................................................ 73 Wi-Fi and the Local Loop ........................................................................................ 104 Wi-Fi and the Cloud-Driven Implosion of the Cellular Model............................. 12 4.1 Cellco Wi-Fi Offloading ................................................................................................. 12 4.2 Wi-Fi Bypass: The Dark Energy of Wireless .............................................................. 15 4.2.1 Super Wi-Fi ............................................................................................................... 20 4.2.2 Cellco Response to Bypass ....................................................................................... 20 4.2.3 Hotspot New Carrier Business Model....................................................................... 205 CATV: A New, Fast growing Wi-Fi Opportunity.................................................. 22 5.1.1 Wi-Fi Enables CATV Everywhere ........................................................................... 23 5.1.2 CATV Line Power Advantage .................................................................................. 25 5.1.3 Strand-mounted small cell Equipment Suppliers ...................................................... 256 The Power Management Opportunity .................................................................... 267 Wi-Fi Operational Considerations .......................................................................... 29 7.1 Wi-Fi Network Topology ............................................................................................... 298 The New Wi-Fi Markets ........................................................................................... 31 8.1 Legacy Cellcos in Wi-Fi ................................................................................................. 32 8.2 New Generation Wi-Fi Carriers ................................................................................... 32 8.3 Living Room Brand Leaders in Wi-Fi ......................................................................... 33 8.4 Cablecos in Wi-Fi ........................................................................................................... 35 8.5 Cell Tower Operators in Wi-Fi ..................................................................................... 36 8.6 Utilities and Smart Grids in Wi-Fi ............................................................................... 36 8.7 Enterprise Wi-Fi............................................................................................................. 37 8.8 Monetizing the Long Tail .............................................................................................. 379 Future growth: CIP’s App Delivery Architecture ................................................. 3910 Footnotes .................................................................................................................. 41Copyright © 2012 North River Ventures Management, LLC. All Rights Reserved.North River Ventures Management, LLC275 Madison Avenue, 14th floor.New York, NY 10016Tel +1 (646) 530-8318North River Ventures 5 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV2 The New Age of WirelessIn August 1980, early in the cycle of global deregulation that coursed through thatdecade, we advised that the simple act of allowing people to attach whatever they wantedto the network would sooner or later reverse network polarity. In December 1994, wewent further with the original of this chart, saying that the Moore Curve will generate“toys as powerful as mainframes” which will turn “each home into a TV station withimmense transmitting capability.”12 We called this the Big Bang and said that its logicrequired a complete rethink of network architecture to handle Big Bang traffic. The newnetwork, we advised in November 1995, would have to be wireless, high-capacity, low-cost, and fully distributed to the edge. (See Section 9) Anything else could not flex withthe forces unleashed by the Moore Curve.The needed network rebuild did not happen. Instead, carriers worldwide overbuilt high-cost, low-capacity core-dependent landlines optimized for 8kHz voice traffic with equallyhigh-cost, low-capacity, and core-dependent cellular. Now, the long predicted crisis ofnetwork under capacity is upon us, sharply accentuated by the logical extension of theMoore Curve, our era of Rapid Cloud Inflation. No surprise, users are seeking solutionsof their own in cheap and powerful Wi-Fi, bypassing traditional carriers to get what theyneed. Wi-Fi & Rapid Cloud Inflation! Networked Rate of Cloud Inflation = Devices! 10,000,000! •  The Number of 100K! Devices 1,000,000! Mainframe •  X Power on the Moore Computers Curve 100,000! •  X Power of Apps They 1M! Support 10,000! Minicomputers All Increasing 1,000! Exponentially 10M! 100! Personal Computers Cellular Age Wi-Fi Age 10! Moore 100M! $/MIPS! Curve! 1! Internet MIPS/$! 2020! 10 ! 1960! 1970! 1980! 1990! 2000! 2010! 1B ! Device Big 100! Bang 1,000! 10B! North River Ventures Rapid Cloud InflationNorth River Ventures 6 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVAbove, we mapped wireless onto our 1994 chart. As you can see, because Wi-Fi isfarther down the curve than cellular, everything on the power end of the curve uses Wi-Fiexclusively. Cellular is yesterday’s business.Like the mainframes of half a century ago, core-dependent cellular does not have theprice-performance to handle the explosion of devices on the cloud at the bottom right ofthe chart. Cellular is the technology of a past age. For CATV, Wi-Fi is the wireless agethat will drive growth.2.1 Cloud Inflation and Next Gen Network RequirementsClouds change everything in our world for a simple reason: Clouds allow the remotestperson or thing access to unlimited computing power at marginal cost, which is basicallyzero. Wi-Fi makes cloud access work.How fast does the cloud inflate? Explosively. The cloud inflates with the Moore Curvepower of devices times the number of devices times the power of the apps they cansupport. Also, while not infinite, the cloud has no borders.Cellular’s place in such a world is at the margins, like communicating in a movingvehicle. For all other applications it is too rigid and too core dependent, requiring long Cloud Inflation = Unlimited Opportunities! Cloud 2100?! Cloud Tomorrow! Cloud Today! North River Venturescapex cycles and, with its average cost-based pricing, great expense to use. Indeed, it isnext to impossible to upgrade cellular at the pace at which the cloud inflates. LTE, forNorth River Ventures 7 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVexample, is already obsolete. The “long” in Long Term Evolution is just too long and the“evolution” just too slow. To meet the rate of cloud inflation, we need a Short TermRevolution. That STR is Wi-Fi.The pace of the resulting change from cellular to small cell Wi-Fi is already the fastestchangeover that we’ve seen in our 35 years in the telecommunications business. Indeed,we are not usually surprised and have an unsurpassed record for predicting such secularshifts in demand—we predicted this one in detail seventeen years ago—but the rapidityof change since we sent our CIP Participants Wi-Fi: The Existential Threat to Cellular inApril 2011, only eight months ago, has astonished us. Events in Wi-Fi that we thoughtwould occur two to five years, at the traditional pace of telecom, have already takenplace.Go-to-market strategies that might have worked in cellular with its long, slow capexcycles, will not work in small cell Wi-Fi where decisions must be made at the rate ofcloud inflation. Indeed, when Cisco told us that while today, 99% of all devices alreadyhave Wi-Fi, but by 2015, only 50% will have LTE, we realized that the “Long” in LongTerm Evolution has been outrun by the rate of cloud inflation already. In addition, Ciscocalculates, small cells are 80% cheaper to build than macrocells.13What is happening? We are in the middle of the greatest economic transition of all time:The Great Marginal Cost Revolution. In the mid 1990s, the worldwide webrevolutionized the Internet, giving all humans access to landline communications atmarginal rather than average cost. This undermined carrier business models and theysoon found that they were spending more to collect customer billing information than toconnect calls. On landlines, call metering vanished.Cellular, however, used its so-called mobility premium to maintain average cost pricingwell beyond time and is now in a world of business model unreality.The second phase of the marginal cost revolution, cloud computing, is now here. Withthe cloud, the marginal cost revolution has swept through access to computing power andto gain that access at marginal cost, P2P and M2M communications are flowing into Wi-Fi at an ever-accelerating rate.The reason is simple: As you can see on page 6, small cell Wi-Fi is to cellular as PCs areto mainframes—much further down the price-performance curve. As such, Wi-Fi is asuperior enabler of the marginal cost cloud revolution.Average cost-based cellular has been reduced to an ever more isolated island in a fastexpanding sea of marginal cost-based Wi-Fi communications. It is a high-cost voice appstruggling in a sea of low-cost data apps. Apple alone had 25 billion app downloads byFebruary 2012.14The power of the cloud’s marginal cost access to the unlimited computing power of thefuture is that, like a giant, gravitational force, the cloud will pull in everything.Cloud access will become universal for all people, and all devices, no matter how remote,no matter how small.North River Ventures 8 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVThis vast sea of devices will not be able to support average cost-based cellular pricing.These devices will require marginal cost-based pricing in order for the business modelsthey use to work.The opportunity to build wireless cloud access into so many things in so many markets,and to manage the systems that result, is one of the largest in history.The big question from all this is, what does cloud inflation and the marginal costrevolution say about the next generation network?At CIP we set some ground rules and then built an architecture on these rules. To toleraterapid cloud inflation, a network capable of delivering all forms of cloud-based apps mustmeet seven criteria: 1. Deliver unlimited computing power between unknown numbers of devices, at marginal cost. 2. Support rapid cloud inflation—all media, all wireless and wireline innovations— for at least thirty years to ensure a reasonable rate of return. 3. Be application-indifferent, supporting all cloud content from medicine to entertainment. 4. Have an order of magnitude lower cost than legacy networks. 5. Be low-powered, and an order of magnitude more efficient than legacy networks. 6. Be highly reliable, achieving “five 9’s” through self-healing and redundancy. 7. Be self-installing, reducing even eliminating installation costs.This tells us several things.First, no wireline network meets these rules or can meet them. No matter how powerful,like fiber, wireline is too expensive to build and maintain and cannot be expanded easilyor simply.Second, any network with heavy core requirements cannot flex fast enough to meet therate of cloud inflation. This means that core-driven networks like LTE—built onthinking unchanged since the Strowger Switch of 1880—are futureless. Also like fiber,they are too expensive to build and cloud inflation will make them obsolete before theybegin to return their investment.The network of the future must be wireless and fully distributed with all of its power atthe edge so that it can expand simply and quickly without changing its architecturalfundamentals.Only this way can a network be built and expanded economically.Our conclusion: Wi-Fi is a function of cloud inflation and so is everything else. Theimplication is not a simple replacement of spectrum—Wi-Fi for cellular—but areplacement of network architecture. In other words, Wi-Fi is the leading edge, orindicator, of a much larger shift with a much larger opportunity: the whole of the world’s$5 trillion telecom plant will have to be replaced and the new network will grow with thecloud. This is an opportunity of exceptional magnitude.North River Ventures 9 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV3 Wi- Fi and the Local Loop “Local loop” is communications industry parlance for the last kilometer of wire thatconnects the network core of exchanges and routers to subscriber homes and offices. Wi-Fi was not designed to be a local loop technology. Rather, Wi-Fi was for the last 30meters, connecting computers to hotspots in home or business, replacing Ethernet cablesstrung across living rooms and offices.According to Cisco, about one-third of mobile data traffic is “on the move,” i.e. awayfrom work and home. Until now, mobile data has been the exclusive domain of cellcos.No more. What this next Cisco chart shows is that 65% of the market can already beserved where Wi-Fi is strongest: at home and at the office.Inadvertently, wireless carriers changed the last mile paradigm. By pushing Wi-Fioffloading (see 4.1) for their smartphones, they turned Wi-Fi into a near-local looptechnology. Wi-Fi is not perfect, but it is good and getting better.CIP Innovators, like Ruckus, Meru, BelAir, Alepo, Ubiquisys, and Acient, are quicklyaddressing Wi-Fi’s deficiencies: • Authentication: in the past, login procedures have made hotspot roaming a challenge.North River Ventures 10 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV • Security: historically, hotspot security was non-existent. If you used Wi-Fi in a public place, your communications were open to the world. • Hotspot selection: when devices detect multiple Wi-Fi hotspots, connection procedures get more complicated; no standard method exists for handing off connections between hotspots. • Power: Wi-Fi chips use more power than most other wireless technologies; Wi-Fi wasn’t designed for the purposes to which it is now applied. Nevertheless, advances from a number of chip suppliers have lowered Wi-Fi power requirements dramatically. • Roaming management: exchanges now intermediate between carriers. • High Definition: now available on Wi-Fi. • Self-organizing: Lowers costs and uses node redundancy rather than costly network cores to generate five nines reliability. • Virtualization: Many brands can share a single Wi-Fi AP.North River Ventures 11 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV4 Wi- Fi and the Cloud- Driven Implosion of the Cellular ModelTo understand the growth in Wi-Fi, we must begin by understanding what is happeningto the cellular business. Here there are clear signs of cloud-driven implosion. Both thegrowth of Wi-Fi and the failings of cellular have to do with the increasing amount ofhigh-value traffic that is moving off cellular and onto Wi-Fi.We have identified two such moves: • Wi-Fi offloading by cellcos where cellcos capture traffic and shunt the high value load to Wi-Fi, keeping low value voice traffic on net. • Wi-Fi bypass by users and enterprises where users direct their traffic to Wi-Fi and avoid high-cost, low-capacity cellnets altogether.Cellcos can make money in offloading to Wi-Fi because this keeps customers and cutscosts. But, most traffic and all the growth in wireless is in bypass by users, often throughWi-Fi hot spots and enterprises. This is traffic that cellcos never see and so cannotmonetize. Bypass is a revenue Black Hole for cellcos. By contrast, as a huge andgrowing market, it is a gigantic opportunity for cablecos.4.1 Cellco Wi-Fi OffloadingFirst, let us look at offloading. In response to the heavy data load generated bysmartphones on high-cost/low-capacity cellnets, cellcos began several years ago toencourage their customers to divert data traffic to alternate networks, primarily to Wi-Fiand secondarily to femtocells. In some cases, cellcos divert traffic once it comes on-net.In other cases, like T-Mobile, cellcos are embedding customer devices with apps thatdivert traffic to Wi-Fi before it comes on net.Offloading is good for the cellcos: they collect high, average cost-based subscriptionrevenues while shifting spectrum and backhaul costs to others. Furthermore, byimproving data connections, offloading can improve customer satisfaction (whichreduces churn) and can lower customer costs (by avoiding extra charges on their cappeddata plans).In its authoritative February, 2011 report on mobile data traffic Cisco for the first timemeasured offloading. 15 Then, Cisco estimated that in the U.S., offloaded smartphone andtablet data would grow from 21% of the total in 2010 to 30% by 2015. But, a year later,Cisco said that it hit 33% worldwide in 2011.16 Of note, Cisco’s offloading calculationdoes not include tablets and PCs without 3G/4G cards that rely exclusively on Wi-Fibypass. We will discuss the market-shifting importance of this bypass exclusion in detaillater.See the Cisco chart below.Offloading behavior varies widely between cellcos. See our website for a completereview of cellco Wi-Fi plans.17North River Ventures 12 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVSome cellcos try to capture traffic on cellphones and offload heavy data and video to Wi-Fi so that only the voice app uses the cellnet. This relies on users electing to use cellnets,something that, for their more high-powered devices and high value traffic they do notdo. Even so, a large number of Wi-Fi system suppliers are trying to sell carriers on howto do this. The systems they are promoting add to the core, rather than subtract from it,and are expensive to install and maintain. This adds capex during a time of falling ARPUand is a bit like going back up the Moore Curve to add 1970s-style mainframe solutionsto 2020 problems.AT&T reported that its Wi-Fi traffic grew 5X in 2009-2010, reaching nearly 70 million“Wi-Fi connections” by mid 2011.18 The company has since stopped breaking out theseresults. There are reports that smartphone connections to AT&T’s hotspots jumped from68 million in 2Q 2010 to 247 million in 2Q 2011.In 2010, AT&T joined the Wireless Broadband Alliance, giving its subscribers access to220,000 hotpots worldwide.19However, no amount of offloading seems to be working. To cut usage to manageablelevels, AT&T wireless is throttling customers, sending threatening e-mails and generatinga great deal of bad publicity in doing so, including negative videos in the Wall StreetJournal.20 The company even urges smartphone customers to turn off cellular and bypassits network entirely, coming close to asking them to unsubscribe. By March 2012,AT&T admitted defeat and began cutting service to high volume app users, generatingmuch outrage among its customers.21North River Ventures 13 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVSprint Business Solutions, focusing explicitly on the power end of the Moore Curve, gavecustomers series of webinars in February 2012 on the benefits of Wi-Fi over cellular.This is a major shift in strategy. Sprint had sold its airport Wi-Fi hotspots to Boingo in2007.Orange uses access to BT’s Openzone commercial Wi-Fi hotspots in the United Kingdomas a load leveler for its cellnet there, but customers must upgrade to a “Wi-Fi Bundle” toget it.22 In France it uses the same packaging strategy, offering access to its own 30,000Wi-Fi hotspots.23 Deutsche Telekom, Swisscom, PCCW, China Telecom and KT arelaunching similar efforts.Republic has gone farther than either T-Mobile or AT&T by making Wi-Fi the default onits cellphones. Cellular comes on only when needed, cutting Republic’s costs andprices.24 You can expect the aggressive moves by KDDI—adding 100,000 hotspots in2012—and China Mobile—adding 1,000,000 in 2012—to presage similar use of Wi-Fi asthe default and core to their business models.Verizon’s approach to Wi-Fi is more cautious than its competitors’ but it recentlyannounced that its LTE network will implode as soon as 201325 and that it is making aradical switch so small cells.26 Through partnerships, Verizon offers Wi-Fi access to itsMobile Broadband (i.e. tablets, mobile hotspots, netbooks and laptops with VerizonWireless data cards) and landline FIOS Internet customers. To improve security, Verizonhas its own “VZAccess Manager” app, which does not work with Apple computers.And, to strengthen is LTE network for more data traffic it recently bought spectrum fromU.S. cablecos Comcast, Time-Warner, and Bright House, for $3.6 billion.This is very shrewd of the cablecos. They are getting a lot of cash for cellular spectrumthey no longer need as all the growth in wireless shifts to Wi-Fi where they can leveragetheir exiting assets far more effectively than investing in LTE or AWS.In effect, Verizon is spending $3.6 billion on cellular spectrum to enable it to spend manytimes that to build out a core-heavy LTE network from which it will just have to off loadonto Wi-Fi anyway and to which, according to Cisco, the most powerful devices willnever connect.27 Moreover, Cisco estimates that video traffic will increase 25X by2016,28 crushing LTE networks. In our view, VZW would have been much smarter tosave the money and build a fully distributed 3DHD CDN network with Wi-Fi smallcells—think Mac Mini CDNs with Wi-Fi router on every third telephone pole, shown inSection 9—than to reinforce a dying architecture.Indeed, Telefónica was recently forced to cut its dividend in order to finance the highcapital costs of LTE.29 As was France Telecom, Telecom Austria, and soon possiblyDeutsche Telekom.30Now, let us turn to the most complex Wi-Fi market, bypass. This, as you will see, will bethe vehicle by which new entrants, enterprises, SOHO businesses, and cablecos willexploit Wi-Fi in their interests.North River Ventures 14 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV4.2 Wi-Fi Bypass: The Dark Energy of WirelessWi-Fi lets wireless users bypass the cellular network entirely. This makes bypassers theDark Energy—the unseen growth engine—of the wireless universe that cellcos cannotsee, cannot measure, and to whom they do not sell. As we said on page 6, this trend ismost marked for the most powerful devices on the Moore and Memory-Density Curves.Bypass is a growth market that is flowing straight towards the cablecos.Apple’s iPad is the starkest example. Estimates vary, but some 85% of iPad buyers relyon Wi-Fi exclusively.31 Apple sold more than 30 million iPads by the end of 2011.32Some expect the Wi-Fi only market to reach 400 million devices by 2016.33 Most of thetraffic they generate will not be “offloaded” by anyone. Offload implies a level ofcontrol that the bypassed cellcos no longer have over bypassers. In fact, never had. Thisnew traffic will never be seen by a cellco, let alone monetized by one.Some cellcos try to turn Wi-Fi hot spots—bypass POPs, in affect—into channels forharnessing bypass before it occurs.In one of the most intriguing carrier responses to Wi-Fi, AT&T opted to monetize bypassby purchasing independent bypass provider Wayport in 2007 for a generous $275 millionin cash. This works out to more than $3,000 for each of Wayport’s 80,000 hotspots.AT&T Wi-Fi sold off its European hot spots in 2010,34 retaining more than 20,000 ownedand operated locations in the United States.North River Ventures 15 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVAT&T monetizes bypass by having AT&T Wi-Fi Services as part of its enterprise, notcellular, business unit. Bypass therefore operates as a separate profit center for AT&T,not a cost center for the company’s wireless unit. This makes good sense and effectivelyputs AT&T in the next-gen tower business. But, it divides AT&T’s wireless businessinto two. The company has extended its Wi-Fi range beyond Wayport’s airport andMcDonald’s restaurant POPs to heavily used venues like New York’s Times Square.Prior to AT&T’s move to monetize bypass, Wi-Fi hotspots were for laptop users atselected locations. A few companies (like Wayport) sold Wi-Fi to road-warriors atairports and other travel locations. Some coffee shops attracted customers with free Wi-Fi. This was a niche market.Today, Wi-Fi is no longer just for laptops. According to a 2010 FCC report, some 35%of Wi-Fi hotspot connections are made with smartphones, and Wi-Fi carries some 40% ofiPhone data.35 Since the introduction of more powerful products like Apple’s iPad andGoogle’s Android tablets, which uses Wi-Fi almost exclusively, these numbers have shotup. Owners of high-end devices with the most bandwidth demand increasingly use Wi-Fito avoid mobile network charges and to get the throughput they need.Seeing this, Wal-Mart in the U.S. and Tesco in the U.K. have entered the hotspotbusiness. As Apple recognized as long ago as 2007, the boundaries between hotspots areblurring and there is an opportunity to bypass cellcos entirely.North River Ventures 16 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVCellcos everywhere are caught trying to defend their obsolete average cost-basedbusiness models while their customers are bypassing them en masse for marginal cost-based Wi-Fi access to cloud computing services. As for the mobility premium, whatmarks Wi-Fi is what customers are prepared to give up to gain access to marginal costcloud computing.So, as Wi-Fi’s Dark Energy rapidly expands the wireless market, it is diverting a growingshare of traffic (that is, cash) away from cellco networks which now risk implosionunless they change direction and quickly. For cablecos this new market is a source ofgreat opportunity.Even the Communist Party of China has taken notice and is now trying to pull the hugevolume of Wi-Fi bypass in China back on net so that it can monitor the behavior of theChinese people who, by using bypass, were unmanaged by the state.Consumers will use Wi-Fi ever more conscientiously to limit billing surprises and ensureaccess to marginal cost-based communications. Large companies and other organizationswill begin deploying Super Wi-Fi to “bend the curve” in Wi-Fi even more dramatically.Finally, M2M devices in the hundreds of billions will flood the market and all will needmarginal cost-based networks to communicate with the cloud.Cisco does not estimate the amount of traffic bypassing cellco networks. However, atCIP we can calculate bypass using Cisco’s data.North River Ventures 17 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVIn tablets and smartphones without any cellco data plan, Wi-Fi bypass will grow from14% in 2010 to 42% in 2015. See the chart on page 15.Note these figures are just for tablets. We estimate that less than 5% of the 100 millionlaptops in use (more than one per household) in the United States are connected to cellconetworks with 3G cards or other cellular devices. So, while laptops transmit 22 times asmuch data as smartphones and 498 times a simple cellphone, a massive 95% bypass thecellcos altogether.36 This is a lot of cash that cellcos never see—the dark in Dark Energy.For cablecos, managing this traffic is an outstanding opportunity.We can safely say that, by 2020, the Moore and Memory-Density Curves will unleashbillions of app-enabled devices many times more powerful than today’s PC. Thesedevices, many of which, perhaps even the majority, will be machine-to-machine, arealready morphing into bypassing edge servers in their own right, redefining what weknow about the boundaries of clouds. And the networks that connect them.Most of the devices that, like today’s iPad, will drive traffic in the future will not be soldor otherwise controlled by cellcos. There will be too many of them to channel throughphone shops. And, they will generate much more dark Wi-Fi traffic than now.By contrast, T-Mobile, the number four-ranked cellco in the U.S., made bypass acornerstone of its network build-out plans. In a presentation to investors in New York, T-North River Ventures 18 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVMobile emphasized the importance of Wi-Fi, not just to relieve network congestion, butas a way to avoid meaningful capital investments. See the T-Mobile chart above.T-Mobile phones now come with a “Smart Wi-Fi” app from CIP Innovator KinetoWireless that simplifies and automates the switch from mobile to Wi-Fi access. T-Mobile has its own hotspots, and provides easy access to Boingo, the largest privatehotspot provider.With its Smart Wi-Fi app, T-Mobile is alone in allowing its customers also to offloadvoice traffic. Voice calls over Wi-Fi work just like any other call, even outside theUnited States. With other cellcos, the customer must set up a Skype or other VOIPconnection. T-Mobile’s is an attractive capability, although it cuts right to the heart oftoday’s cellco model.So, while others are using Wi-Fi offloading as a congestion Band-Aid, T-Mobile hasmade bypass a key part of its strategy. In effect, T-Mobile turned every Wi-Fi hotspot inthe world into a T-Mobile femtocell. Perhaps because it is the weakest of the big fourU.S. cellcos, T-Mobile changed the rules of the game. AT&T executives thought Wi-Fiwas important enough to mention in their announcement of the now failed T-Mobileacquisition.37The tiny Maltese carrier Melita told CIP that Wi-Fi is attractive because anything thatputs off the capital investment in LTE is a good thing.Cellcos are counting on wireless M2M traffic for growth. AT&T and Verizon Wirelessconnected millions of new wireless M2M devices to their networks in recent quarters,with growth accelerating in 2010. Between them, these two companies now have nearly20 million devices connected. While Sprint does not report M2M data, the company hasan estimated 2-3 million devices connected to its network.38But M2M on the scale we anticipate cannot possibly support cellco average cost pricing.Only a marginal cost-based network like Wi-Fi will cover so many devices embedded inso many things. Indeed, marginal cost-based Wi-Fi business models do not intersect atall with average cost-based cellco models, so cellcos will miss all the dark M2M revenueopportunities.Sales of Wi-Fi devices of all kinds reached 750 million in 2011 and are rising rapidly.39This market is just too big to ignore.It’s not just Wi-Fi that is dark.Of the twenty-one million smart meters installed in the United States at the end of 2010,40CIP innovator Silver Spring Networks provided some 25%. Silver Spring builds privatemesh networks for its utility customers, which cost cents per month to operate, andobviates the need for carriers entirely. In addition a CIP M2M innovator, Trilliant, whichhas the world’s largest installed base of smart meters, told us that endless cellco networkupgrades—1G-2G-3G-4G—over very short cycles are playing havoc with their smartgird operations, driving these operators into bypass at a rapid rate.Within five years, we expect there to be ten times the number of dark M2M connectionsbypassing U.S. cellco networks as using them.41 Others believe there will be trillions ofoff net wireless connections within a decade.42 Innovation may make these connectionNorth River Ventures 19 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVpatterns much more fluid and price sensitive than they are today. Apple received a patentfor a method described as “dynamic carrier selection,” which allows devices to selectnetwork connections on the fly.43 CIP Innovator Acient has introduced Wi-Fi roamingexchanges.Whatever their provenance, we expect cellco pricing to drive these new connections todark alternatives. Dark Energy Wi-Fi is where the growth is. Not cellular. For thecellular ecosystem, the impact will be large and immediate.4.2.1 Super Wi-FiIn 2010, the FCC released unused television “white spaces,” a new form of wireless DarkEnergy called Super Wi-Fi. This spectrum, all below 1GHz, has much better propagationcharacteristics than what is now used for regular Wi-Fi. Super Wi-Fi will reach as far asseveral kilometers, making it competitive with small cell, if not today’s macrocells.Depending on how devices evolve, Super Wi-Fi will make wireless communicationsavailable for many applications far beyond the range of today’s home and office boundWi-Fi. Products will reach the market as soon as next year, and support a significantamount of traffic in the medium term. Much of this will be for new, and as yetundeveloped, applications. And much will be at the expense of today’s cellcos.Microsoft is leading a Super Wi-Fi consortium with TV broadcasters in the UnitedKingdom and BT is rolling out Super Wi-Fi in Scotland.44Super Wi-Fi may inspire Super WISPs. The first generation of Wireless Internet ServiceProviders, which mostly used traditional Wi-Fi, never got off the ground for a variety oftechnical and financial reasons. Newcomers like Amazon, Apple, Best Buy, and Netflixare already moving to exploit all new wireless options.4.2.2 Cellco Response to BypassThe cellcos dominate the smartphone market. But, they are already losing 85+% of post-PC data traffic to Wi-Fi. Their average cost-based response to this loss to Dark Energywireless is to raise prices, meaning that they will see even less dark traffic. AT&T hasimposed data caps on its tablet and smartphones: customers now pay $15 for 250MB permonth or $25 for 2GB. You could burn through 2GB on an iPad with a few movies.Verizon’s prices are just as steep and it has recently imposed traffic caps. This is not arecipe for bypass-busting success.Consolidation may help the largest cellcos regain pricing power in cellular. But higherprices will only drive more people and machines off-net into Wi-Fi.4.2.3 Hotspot New Carrier Business ModelHotspots are one of the main bypass avenues and so, in theory, might be attractive.Hotspot carrier Boingo provides a cautionary tale, however.With its own Wi-Fi hotspots and those of its affiliates, Boingo claims to be the “largestcommercial Wi-Fi network in the world.” In January 2011, the company filed an S-1report with the SEC in anticipation of going public. The numbers are not inspiring, eitherin terms of scale or profitability.North River Ventures 20 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVBoingo struggles to sell Wi-Fi access for $10 per month to road-warriors passing throughits airport locations. Churn is 10% per month—every customer must be replaced in lessthan a year. Wholesale revenues, earned from its partners, were just $25 million duringthe first three quarters of 2010. Boingo therefore offers little in terms of landlinewinback for carriers, earning them next to nothing from the Dark Energy of Wi-Fi.Landline gains are not symmetrical with the sum of offloaded and dark Wi-Fi.While AT&T has 20,000 hotspots managed through its enterprise group, most cellcostreat Wi-Fi like a hot potato that you toss to someone else. They do not run thesenetworks, but have access to the networks of others by joining the Wi-Fi Alliance.Boingo is a confederation of 125 network operating partnerships. This is an extremeexample of network sharing; cellcos are not spending meaningful dollars on Wi-Fi.Customers see Wi-Fi as a freebie. It is available at home and at work where it rides forfree on existing access systems, and cellcos provide their customers with access to Wi-Fihotspot alliances for nothing. In a version of what T-Mobile is doing, Canadian carrierRogers is building on this free perception by offering customers cell numbers for Wi-Fibypass so that customers appear to be using the cell net when they are not. This wayRogers is morphing itself into a multi service company and slashing the cost of forcingtraffic onto costly LTE networks that cannot handle the traffic anyway. And getting tobill customers into the bargain.Some hotspot networks are built on individual sharing. For example, those willing tomake their home Wi-Fi available to others can access for free three million hotspotsworldwide through FON. British Telecom, Google, and Skype are investors. Its businessmodel is based on selling FON routers to members where the cost of service is baked intoa one-time equipment charge.45Skype, known for free telephone service and now owned by Microsoft, may be the loneoutlier in the Wi-Fi landscape. The company sells access to 200,000 hotspots around theworld (all operated by others) for 14 cents per minute, expensive by Skype standards. 46North River Ventures 21 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV5 CATV: A New, Fast growing Wi- Fi OpportunityUnlike cellcos, cable operators know that they are missing out on the explosion inwireless data and are doing something to capture and monetize it. All the largestcablecos have experimented with wireless alternatives to capture some of this growth. Inthe past, this meant cellular and most signed re-sale agreements with existing carriers.These deals have mixed results. More important, the ability of cellular to support whatcable operators sell, video entertainment on the power end of the Moore Curve, islimited.With their widespread use of easy-to-install, easy-to-power, strand-mounted accesspoints, the cable operators are driving down the cost of Wi-Fi network deployment. Thishas the potential to alter the wireless topography just as the service mix is changing to thevideo and data traffic that Wi-Fi handles better than cellular.In the U.S., Canada, and U.K., cable operators are turning to Wi-Fi instead of cellular asa cornerstone of their wireless strategies. This move—essentially a cheap, fundamentalchange in network topology that goes well beyond cellular—is better suited toentertainment, and could even pre-empt small cell Distributer Antenna Systems (DAS.The cablecos come with none of the baggage of core-dependent cellco networks, canmore easily move into the fully distributed world of the 2020s and 30s, and haveubiquitous wireline power to meet their needs.Generally, cable operators are not charging for Wi-Fi use, but giving it to their existingsubscribers. Nevertheless, they have clearly articulated business models. Here wediscuss the most important ones.Cable operators use free Wi-Fi as a tool to reduce churn, a key determinant of financialperformance. In the U.S., Cablevision is relying on Wi-Fi most openly. The companyhas spent $300 million to build the largest Wi-Fi network there, and sells its OptimumWi-Fi service against cellular for data connections. 47 See recent Cablevision televisionspot.While most customers will keep their smartphones, they may rely on Cablevision Wi-Fifor their heavy data use, avoiding cellular data surcharges. This is not as farfetched as itmay seem: as we saw, China Mobile has added almost 10 million iPhone customers whouse Wi-Fi exclusively.48Cablevision has tens of thousands of hotspots in the New York metropolitan area andclaims that 20% of its high-speed data customers use its free Wi-Fi service, 60% ofwhom connect this way more than ten times per month. The company believes thatcustomer retention alone justifies this $300 million program although that includes thecost to upgrade its cable network to DOCSIS 3.0. It shares it hotspots with TWC andComcast, using CIP Innovator BelAir’s AP virtualization technology, and complementsthese with 7,000 sites operated by its small business customers. Cablevision faces fiercecompetition in its territory from Verizon, which offers telephone, video, and high-speedInternet on its Fiber Optic Service (FiOS).Comcast, Time Warner Cable, and Cablevision have jointly proposed to the suburban railsystems in the New York area that they install Wi-Fi in their passenger cars.49 To give anNorth River Ventures 22 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVidea of the scale of this investment, AT&T is leading a similar, $250 million, project toprovide cellular and Wi-Fi service in New York City subway stations.50New York is unusual with its high concentration of public transit riders what can takeadvantage of these networks. But cable build-outs are not limited to this market.In southern California, Time Warner Cable is spending $15 million on strand-mountedWi-Fi to blanket large areas between Los Angeles and San Diego.51On a smaller scale, Cox is piecing together a network of its small businesses customers inConnecticut, Ohio and Rhode Island to make their Wi-Fi available to other Coxcustomers.52 So far, about a hundred hotspots are operating.Bright House Networks, Comcast, and Time Warner Cable took the next step, investingin Clearwire. These companies are re-selling Clearwire’s WiMax service, which has theprice-performance they need. However, Clearwire is struggling to raise enough capital tobuild its network. It has also made the decision to switch to LTE, which gives its cablepartners no advantage over cellular competitors. They will terminate their Clearwireservice in June 2012.BT is offering its residential FON Wi-Fi service and Commercial Openzone Wi-Fiservice to complement its fiber operations, and is expanding both. BT uses Wi-Fi as achurn management tool for its 40 MBs fiber residential services and offers its BT FONservice free to all its Total Broadband customers (see 4.2.3). In an interesting twist, itencourages all three million BT FON customers to open service to each other, creatingwhat Steve Jobs envisaged for Apple in 2007 (and TeliaSonera, interestingly, over adecade before that), a seamless shared bypass network across the United Kingdom.Canadian cableco Shaw Communications is the most dramatic example of a cableoperator adopting Wi-Fi. Shaw planned to spend C$1 billion (US$980 million) to addcellular service. After it had spent C$190 million on spectrum and C$180 million onplant, Shaw estimated that the capital costs of LTE were too high for the low rate ofreturn. Shaw concluded that entering cellular now, when all the most powerful deviceson the Moore Curve are leaving it, makes no sense. Shaw went 100% Wi-Fi.Shaw made its decision in September 2011. By November, China Mobile and the giantsof the U.S. cable business had followed suit. Events are moving faster than anyone couldhave predicted.For other cable operators, see Carrier Offerings in Wi-Fi.5.1.1 Wi-Fi Enables CATV EverywhereCablecos have an ARPU problem just as the cellcos do. Their customers think that cableprices are too high and they are switching to cheaper alternatives like Netflix. Many findthese Internet alternatives so attractive that they are cutting cable altogether, a double hitfor the cablecos. At the same time cablecos are under enormous pressure to increase,often double, distribution payments to content providers like Fox.With low-cost Wi-Fi, cablecos can begin to turn this around, boosting price-performance,and becoming price disrupters. This is a powerful incentive for them to act and cableoperators are developing new ways to deliver TV shows to their customers. For example,North River Ventures 23 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVComcast provides access to most video content from any Internet-connected device.Cablevision has a special iPad app for subscribers to watch TV.53Wi-Fi has the capacity to deliver TV, whether in the home or elsewhere. Average costbased-cellular is simply too expensive and capacity-limited for TV viewing, and so is notcomplementary to the core cable business. Canadian carrier Rogers took this a stepfurther, declaring that the future of video extends far beyond traditional TV into OverThe Top (OTT) traffic that flows from individuals and homes, not to them,54 echoing ourDecember 1994 prediction that, at some point, “with toys as powerful as mainframes,”the Moore Curve will turn “each home into a TV station with immense transmittingcapability.”55 Cellular is too inflexible, constrained, and expensive to handle highvolumes of OTT traffic. Wireless Cloud Access and the Power to Go with it Small Cell Line Power Cable Operators Strand Mounted Small Sites Are Line Powered Cable Operators Have a Significant Advantage in Power North River VenturesCable operators also need to reach new customers, just as they need to reach new devices.Their franchises limit them to specific places, but there are far more potential customersbeyond these boundaries, and their existing customers move about.With Wi-Fi and virtualization, they can solve these problems simply and cheaply byconnecting existing, and new, customers anywhere in the world.Time Warner Cable and Bright House offer non-subscribers access to their Wi-Finetworks using Boingo-like pricing plans. These revenues are de minimus. We expectothers that start charging separately for Wi-Fi to price the same way.North River Ventures 24 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV5.1.2 CATV Line Power AdvantageThe cablecos’ biggest advantage in Wi-Fi is that their small cells can all be line powered.Because small cells have the ability to multiply spectrum efficiency by allowing reuse, bysome estimates by a factor of ten,56 cablecos can use their line power to launch atopological revolution in wireless.This advantage is so potent that CIP Innovator BelAir is rolling out its GigXone MetroServices for cablecos and reports that Wi-Fi small cells can be installed in as little asfifteen minutes and cost $150 each. It is now selling GigXone to Comcast, Time-WarnerCable, Cablevision, Bright House, and Africa’s Wananchi Group. The cableco poweradvantage could usher in a new era of simple, cheap, and easy-to-manage distributednetworks.BelAir offers cablecos a big benefit. As it explained to CIP, it can virtualize Wi-Fiaccess points. One AP can appear as many brands. A customer of a carrier “sees” thatcarrier on any AP, no matter who is hosting it.Line power introduces yet another cableco advantage: they can cohost LTE with Wi-Fiand rent LTE small cells back to cellcos. And they can do this much faster than cellcoscan build macrocells to roll out LTE on their own. In other words, cablecos are in aunique position to redraw how everyone thinks of, and uses, wireless. LTE is hugelyexpensive and cablecos can give cellcos a new lease on life by altering their capexplanning and giving them flexibility that they do not now have.CATV line power puts the cablecos in a position to upend the wireless business veryquickly. This is especially important to remember because with they are in a position tomake changes and their decision cycles are much shorter than those of cellcos or telcos.They are also under enormous pressure to relieve the cost of content that they distributeand so will be clear sighted as to their opportunities.5.1.3 Strand-mounted small cell Equipment SuppliersIn 2011, BelAir was the first to introduce combined Wi-Fi/LTE strand-mountedpicocells, leveraging the cableco power advantage to add a new revenue stream.Since then, Huawei announced that it is also developing a strand-mounted base station,specifically for the American market.57 With China Mobile’s plans to install a millionWi-Fi hotspots,58 Chinese suppliers may come to dominate this market.CableLabs now has a program to institutionalize the use of picocells by its cable operatorsponsors for their own wireless purposes, and to expand their backhaul portfolio forwireless carriers.59Stand-mounted Wi-Fi APs allow cablecos to avoid the cost of macro cell ubiquity andserve customers only where the traffic is at its most dense, and therefore most lucrative.North River Ventures 25 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV6 The Power Management OpportunityPower is the limiting factor in the fast inflating wireless world. Since the 19th century,networks were designed from bases of both power sources and power backup. These two Wireless Power Matrix! Type of Site Primary Power Backup Power Macro Low Capital High Capital 250,000 Low Operating Low Operating 5% annual growth <33% of locations Small* High Capital Limited or 50,000 (cellular) Low Operating Unavailable! 150,000 (Wi-Fi) 15% annual growth <5% of locations Source: NRV estimates * Includes DAS, rooftops and other non-traditional sites including water towers, church steeples, flagpole, strand mounts, etc. North River Venturesgoverned network architecture and topology. Wireline APs were always mapped ontoprimary power and back-up first, not the other way around.By contrast, wireless exploded so fast over the last two decades that these strong rules ofnetwork design were forgotten as this chart on the U.S. market shows.Some cellcos, like Verizon in the U.S. insist on power back up for all cell sites just as ithas for its landline network for over a century. Others, like AT&T, Sprint, and T-Mobiledo not. As the market moves rapidly to small cells, even Verizon may find backup powerproblematic.In addition, as the chart shows, the smaller the cell the higher the proportion of capitalcosts that must be devoted to primary and backup power.One way or another, a logical extension of the small cell market is that, as the chart onthe next page shows, wireless is the power business.North River Ventures 26 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV Wireless Is The Power Business! $ Cost of Delivering Power to Site Cost of Building Site Number of Sites North River VenturesMoreover, the increasing number of small cells implies an increasing number of hard-to-power and harder to back up sites that will need alternate energy sources like solar.Power backup and remote power management are, therefore, major deficiencies inwireless networks in general and small cell Wi-Fi in particular.All of this begs a question: can wireless power and backup be turned into a revenuesource? At CIP we put a lot of time into answering this question over the last three years,have a long list of CIP Innovators in the space, and the answer is, unequivocally, yes.Already most of the pieces are in place. The military has long used alternate energy fromCIP Innovators like IdaTech for remote wireless locations that cannot be serviced foryears. Carriers in developing economies are pioneers in such systems for commercialuse. CIP Innovators like Viridity have Energy Management Systems that will allowcarriers to arbitrage time shifted energy use to manage costs and generate revenues.North River Ventures 27 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV Is Power a Revenue Source?! Turn The Economics Of Wireless On Its Head. This Scales From Macro Cell to Small Cell $ Energy $ $ Natural Fuel Back Up Power Gas Cell Power System Energy Energy Management System North River VenturesWe believe that EMS integrated into the radio Access network (RAN) is the way of thefuture and that operated on a wide enough scale could significantly alter the revenuepicture of the wireless business as it moves from macrocell to many more and smallercells. In this chart, the electric grid is the backup for natural gas, a complete rolereversal.What we see here is network economics on its head. With the marginal cost revolutionripping into telecom, carriers have to think hard about new revenue sources. Here theenergy management potential of wireless nodes could drive new revenue sources forinfrastructure owners, turning a cost into a source of real time cash.North River Ventures 28 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV7 Wi- Fi Operational ConsiderationsWi-Fi has many challenges, almost all related to Quality of Service (QoS), security, andinterference. But its biggest challenge, by far, is that no one has thought through thewireless analog of Google-like marginal cost-based pricing for Wi-Fi service.CIP Innovators Cisco, Meru, BelAir, Alepo, and Ruckus are working on QoS and Ruckusand BelAir appear to be the leaders. Ruckus capabilities in Wi-Fi optimization, as it callsit, are prodigious, especially in security, HD and interference.7.1 Wi-Fi Network TopologyThere are three considerations here: • Wi-Fi and Super Wi-Fi footprints. • Replacing the core-dependent cellular network. • Trend to small cells for better capacity and quality management.Wi-Fi does not map well onto the cellular infrastructure. Super Wi-Fi does. Mobilenetwork cells are typically 1-20km in diameter; Wi-Fi hotspots are 100m across. Simplyadding Wi-Fi radios to cell towers would not make cellcos big players in this market.By contrast, small cell distributed antenna systems are often well suited to Wi-Fideployment for airports, malls, stadiums, office buildings, campuses, CATV standmounts, and elsewhere. Many of these places are the very ones causing data trafficcongestion for the cellcos. CIP Participant Crown Castle bought Next G, the largest U.S.small cell operator and is now the largest macro and small cell operator there.With the new 802.11af Wi-Fi standard, over the next few years Super Wi-Fi will becomea reality. The Wi-Fi Alliance is preparing a certification program for Super Wi-Ficompatible devices.60With a range of five or even ten kilometers, Super Wi-Fi technology is well suited to bothtraditional macro and small cell network deployment. The rules will allow fixed SuperWi-Fi devices to have antennas up to 30m in height, ideal for tower siting. Operationally,the availability of spectrum for Super Wi-Fi in urban areas will be a big challenge.Television broadcasters still have the first claim on this real estate. With InterferenceCancellation Technology (ICT) on small cells, Super Wi-Fi could become more usefulthan planned with regular frequency repurposing.While promising, Super Wi-Fi will take at least five years to scale sufficiently to make animpact.In the matter of the core-dependent network, as we mentioned earlier Cisco told us thatcellco revenue and cost lines will cross—going the wrong way—in only four years andthat a radically redesigned architecture is needed to support wireless cloud access. Ciscoalso told us that even so, while 99% of devices are Wi-Fi compatible today, in four yearsonly 50% of devices will be LTE compatible. The days of expensive, core dependentnetworks are clearly at an end.North River Ventures 29 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVAlepo’s innovative Wi-Fi business model for MTN in Africa shares revenues between thecellco and hotspots. This could prove to be the way cellcos manage Wi-Fi in much of theworld. BelAir’s brand virtualization on common Wi-Fi APs could be another.CIP Innovator Ubiquisys has taken distributed networking the farthest by creating a SelfOrganizing Network (SON) that can carry unlimited amounts of intelligence at thewireless AP. This, in our view is the only way the explosion of app traffic on the cloud—effectively, the rate of cloud inflation—can be handled. We have advised since 1995 thatthat this thinking would come to dominate network architectures, wholly replacing high- Shift to Active Networks
 " Major Shift in Strategy for All Players Wi-Fi Back haul C-RAN Towers ADA Power DAS Passive Active (Real Estate (Operationally Pure Play) Complex) Relative Market Potential North River Venturescost, low-capacity, core-dominated legacy structures. This would be the biggestdiscontinuity in networks since the 1880s and an unprecedented opportunity. See Section9, Future Growth: CIP’s App Delivery Architecture, shown here in the yellow circle.You can see the steady progression as small cells drive wireless access points frompassive to active nodes that will hold the bulk of network intelligence, offloading thecore. Section 9 goes into more detail.North River Ventures 30 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV8 The New Wi- Fi MarketsWi-Fi will extend well beyond human-to-human communications to P2M, M2P, andM2M communications. Cloud indifference will support an enormous range of devicesand applications. The size and variation of markets will be unprecedented. Ineverything, energy management and power generation will be key.In this simple chart we’ve ranked by need and capability some of the players now in aposition to scale small cells rapidly. You can see who has the three capabilities essentialto dominate small cells: Who Can Scale Small Cells?! Target Real Estate Backhaul Line Power Comments Partner Reach Cablecos Ready ✔ ✔ ✔ Utilities Sleepers ✔ ? ✔ LECs Inflexible ✔ ✔ ✔ Cellcos Unprepared ? ✗ ✗ Hotspots Business Model ? ✗ ✗ DAS Need Scale ? ? ✗ North River Ventures • Real estate • Backhaul, • Line PowerWhat also jumps out from this chart is how unprepared legacy cellcos are for a video-driven explosion in demand for small cells. And a small amount of work with thecablecos—CIP has had many meetings with them—confirms that they recognize theiropportunity clearly and realistically.North River Ventures 31 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV8.1 Legacy Cellcos in Wi-FiCellco capex cycles are long, five years minimum and usually ten, meaning that whathappens today was decided at least five years ago. This puts cellcos far out of synch withthe rate of cloud inflation, as we are seeing with LTE. But, with their large operatingmargins, many seem neither to notice nor to care. With operating margins now underpressure, and many cutting dividends, this will change.We have advised and/or sold to legacy carriers for three and a half decades and knowwell how they operate. For example, we have worked with teams that have successfullysold some $2.5 billion in three deals. Closing these took the better part of a year withcomplex RFQ requirements that bore no relation to the market realities of what carriercustomers needed.In another case, we introduced the CFO of one of the world’s largest cellcos to a cheapinterference cancellation technology that would make his network many times moreefficient and in doing so return several hundred million dollars to the company’s coffersto be used in dividends or repurposed capex. But the operations people in the meetingrefused, point blank, shamelessly leaving the CFO powerless and with a huge budget holeto fill. Many cellco operations people will look at Wi-Fi the same way: not our problem.8.2 New Generation Wi-Fi CarriersNew carriers will court the fast-growing market for low-cost Wi-Fi users as aggressivelyas possible. In the U.S., Clearwire is already optimized for low-cost data. It is the onlycarrier that can compete with Wi-Fi bypass today. LightSquared was close behind untilthe FCC derailed its business with claims that it interfered with GPS.Clearwire achieved remarkable growth in recent quarters, recently topping 10.4 millionsubscribers, hitting $1.25 in annual revenues and more than doubling in size in 2011.61Clearwire is following our low-cost script (see CIP’s The Future of Wireless Networks: AStrategic Framework, December 2010), with a 30X cost advantage over its competitors.The company delivers 10X data of its cellular rivals at 33% the investment per marketserved. Installation costs per tower site are 33% lower than cellular and operating costsare lower too. For example, Clearwire uses microwave instead of fiber to connect itsbase stations, reducing backhaul outlays by at least 80%. Clearwire’s new “green” basestations cut power costs by 90%. Perhaps most important, Clearwire runs a single,simple IP network. Its rivals have separate, incompatible voice and data systems.Complexity will be magnified when they layer on 4G data.Clearwire’s average monthly revenues are lower than those of competitors, but so aresales costs. Clearwire had top grade resellers, including Comcast and Best Buy until itsretrograde shift to LTE deprived these firms of the advantages they sought.Until shut down by the FCC, LightSquared was making progress with its wholesale-only,satellite, and cell tower plans.62 Its schedule called for nationwide deployment of 40,0004G base stations by 2015.63FCC or no, in a capital-scarce environment, both companies remain long shots.North River Ventures 32 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVThe important point, however, is that there is enough wireless demand to support bothcompanies and probably more. The incumbent cellcos are counting on data for growth,but consolidation, and the higher prices that will result, will drive traffic elsewhere. IfClearwire and others can make marginal cost-based pricing work as Google did, they willtake share away from the legacy cellcos. The key for all such players will be the rate atwhich they can roll out their own small cells or capitalize on those of others.8.3 Living Room Brand Leaders in Wi-FiIn The Branding War in July 1994, we advised clients that: “There are 1.1 billion middle class consumers in the world today and there are thousands, if not tens of thousands, of companies who want nothing more than to suck cash out of their pockets. The company that can dominate direct, electronic access to these consumers will be the most formidable industrial enterprise ever known.”Apple figured this out. To understand where other new entrants will come from, andtherefore, how to sell to them, we ask a simple question: who benefits directly fromcloud inflation and the stratospheric growth of data traffic? These are the companies thatwill dominate consumer markets for entertainment and other cloud-based apps. Theyhave the most to win from Wi-Fi we expect them to act decisively in their interests. Takethis group of living room leaders: • Amazon • Apple • Best Buy • Facebook • Google • NetflixThese are all aggressive, credit worthy companies with a lot of upside in Wi-Fi. And justas importantly, they are growing and their working capital metrics make them scalable.(See NRV’s Soccer Ball Management: Using Working Capital Metrics to Scale RevenuesProfitably.)Most interesting is Microsofts entry into Super Wi-Fi in the U.K. This could be a gamechanger for everyone, especially when combined with its deal for Skype.There is no better example than Apple, the pioneer in Wi-Fi and clear leader in corrallingWi-Fi traffic into its revenue model, as iPad sales show. (See CIP’s Apple: A StrategicAnalysis, CIP Quarterly Meeting April 2011.) Post cellular Apple has no more incentiveto put cellular into its next gen products like Apple TV than it does to put hard drivesback into its laptops. Apple is now running at $200 billion a year in sales, is creating newdemand that is untapped, and untappable, by anyone else, and will soon be the biggesttech company in history. Wi-Fi is at the heart of this strategy.Indeed, it is clear from Apple’s response to consumer concerns last year about locationdata that it is using this data to map seamless Wi-Fi transmission for its customers toNorth River Ventures 33 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVavoid the many problems they have experienced with cellular—and that the cellcos haveexperienced with Apple. This, as we saw, was confirmed shortly after Steve Jobs’ deathby one of the investment colleagues with whom Apple proposed to invest in a 100% Wi-Fi network.None of this has been lost on Google, which moved to buy Motorola.Like Wal-Mart in the U.S. in its Sam’s Club, Tesco appears to have recognized thepotential of Wi-Fi to extend its brand in the U.K.Living room dominators will use unlicensed spectrum and low-cost carriers todisintermediate high-cost legacy cellcos. All have strong brands that give them tightconnections to their customers. While necessary today, cellcos simply get in the way ofthese relationships. Wi-Fi eliminates this obstacle.Looked at this way, Wi-Fi is a brand extension for these companies, vital for them to bestmanage how their customers experience all the products and services that they sell.To meet the needs of living room brand leaders, all new Wi-Fi markets will look andoperate like on-line gaming today: immersive and interactive, and 3D and 4K high-definition, as CIP Innovator Bigpoint has shown us repeatedly in our InnovationCommittee meetings. Therefore, all Wi-Fi traffic in these huge markets will be: • High Definition, 4K and Above • 3D • Immersive • Interactive • Always onLike gaming, these markets will create a huge, “long tails” and will requireunprecedented levels of audio and video fidelity and security.We cannot imagine what will be on the cloud a decade from now. But we are starting tosee the outlines of several important new markets, all wireless and just as big as cellulartoday, all with attendant network management and power management needs, and all ofwhich Wi-Fi will dominate: • Media and consumer electronics • Next generation automotive information platforms • Health information technologies • Smart grids and energy managementOur six living room leaders fall into the first category in our list. But, all four verticalsare huge, information-intensive game changers. Each is populated by highly creditworthy giants. Wireless will be the key enabler in each market.The business models for all new entrants, regardless of vertical, will be marginal cost-based, more like Google and Netflix, and not average cost based like today’s cellcos andwireline carriers.A future network for any new entrant must be designed to adapt quickly, cheaply, andeasily to all the forces at play here:North River Ventures 34 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV • Huge high definition Wi-Fi loads. • Wi-Fi device power increasing on the Moore and Memory-Density Curves. • Unknown app power and application.The needs of these newcomers are clearly different from those of cellcos. Indeed, giventhe foregoing, we have concluded that tapping the new entrant market will be more aboutthe economics of shared networking that any other factor. This will make raising thecapital needed easier for all parties and open a large unique market for the first mover.Had, for example, Steve Jobs seen BelAir’s virtualization capability in 2007, there is nodoubt that Apple would have funded and build a shared Wi-Fi network.8.4 Cablecos in Wi-FiCablecos have natural reasons to move into Wi-Fi. As we saw on page 31, they have aready infrastructure, backhaul, and sure sources of power, though not necessarily backuppower. In addition, most cablecos have knowledgeable executives targeted at leveragingWi-Fi. At the same time, cablecos are under huge pressures on two fronts. On one,customers are cutting back on service packages in favor of the Internet or cutting out Cableco Wi-Fi/LTE Leveraging the Line Power Advantage Wi-Fi LTE Cellcos Pay Rent to Cablecos Bundle Wi- Cableco (as they do Fi With CATV Billing for cell towers) Cut Churn PMC Engineers and Deploys Dual-Mode Benefits For Cablecos Base Station Upgrades • Increased Revenues & New Builds • Lower Capex • Expanded Carrier Sales, Beyond North River Ventures Backhaul • Neutralizes Content Cost Riskcablecos entirely. On the other, content providers are demanding more and more up frontfees from cablecos to finance their own, lagging, business models.This combination of incentive plus pressure makes cablecos the likely prime movers,especially where the cable is above ground and strand mounting is easiest. BelAir hasNorth River Ventures 35 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVmade a lot of advances in vaults and other cable points of presence, making Wi-Fi evermore attractive to cablecos.Cablecos are not tied to cellco requirements—often a condition of cellco licenses—thatthey offer ubiquitous service available to everyone. Cablecos can focus only on thoseareas that are heavily used, optimizing their capex and opex in ways cellcos cannot.In addition, with combined Wi-Fi/LTE strand-mounted access points, cable operatorsmay soon dominate small cell as well as public Wi-Fi markets.The cable companies have eagerly adopted strand mounting for their hotspots, because(as one equipment provider says) “by leveraging existing cable plant for mounting assets,cable operators avoid the delay and cost associated with tower or roof-based siteacquisition.”64Adding Wi-Fi to cable networks is relatively easy. Strand-mounted nodes are cheap andcan be installed in 15 minutes. In territory, cable operators have the crews and allnecessary plant. They also have the Ethernet backhaul capacity needed to connect plentyof hotspots. And, since Wi-Fi operates on a “best efforts” basis, cablecos need minimalnew investment in network management resources.Some question whether cable franchises allow operators to string up wireless accesspoints anywhere they like in public rights-of-way.65 But events may already havesurpassed them and, for now, cablecos are undeterred.Recently, Comcast formed a tower company, CTI Towers, with a portfolio of 800macrocell towers. Small cell will certainly become part of the CTI Towers plan.8.5 Cell Tower Operators in Wi-FiCell tower operators have two reasons to be in Wi-Fi. They too are in the race to smallcells to ensure that their highly successful macrocell model lives on in the small cellworld. They see real opportunities in turning macro and small cell nets into sources ofenergy generation, and they are cognizant of the power of their shared access model indoing this and in building the distributed network described in Section 9.Most importantly, however, by using a shared asset model to delaminate the oncevertically integrated common carrier asset base into separately managed cash flows,tower owners introduced the first major communications innovation since the BellSystem over a century ago.No one understands shared assets and cash management in telecom better and no one isbetter prepared for further innovation as the network moves from macrocell to small celland layers EMS into the RAN. This makes cell tower owners ideal partners for in bothnetwork and power management businesses.8.6 Utilities and Smart Grids in Wi-FiUtilities have two things essential to small cell Wi-Fi: real estate and line power. Theyhave added incentives in growing unregulated revenues and expanding their reach intohomes, offices, and the M2M business.North River Ventures 36 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVCIP smart grid innovators MAGICC, Silver Spring Networks, and Trilliant are welladvanced in their thinking and CIP Participant Panasonic has made inroads in smart gridsin China, Japan and France.Selling to this new market is full of unknowns. The business models of these companiesare still developing and the information deficit is significant. This, however makes themall the more attractive and worth careful examination.8.7 Enterprise Wi-FiEnterprise Wi-Fi networks, part of the global $3.8 trillion corporate IT business, arealready a multibillion-dollar market. Healthcare alone will exceed $1.3 billion in 2016by some estimates and these are probably low.66 Many companies meet this demand withhardware and software that overcome the limitations of consumer Wi-Fi devices.On the equipment side, this is a crowded, competitive field with formidable contenders.These include big companies like Cisco and HP, and venture-backed ones like CIPInnovators Aruba and Meru Networks.A few companies build and operate hotspots for others. AT&T Wi-Fi, part of AT&T’senterprise group, does so for retailers, hotels, hospitals and universities. Small cellenterprise operators like Innerwireless have also added Wi-Fi to their portfolios. Toweroperators, like CIP participant Crown Castle, are also beginning Wi-Fi enterpriseoperations as they expand into small cells.Enterprise may be the best opportunity for exploiting Wi-Fi (and small cell), anddiversifying the wireless customer base at the same time. However, building the salesorganization to do so successfully is an enormous commitment. Cellco efforts in thismarket have so far been desultory, though Sprint Business Solutions is trying to tochange this.Also, selling to enterprises means selling mainly to IT departments, specifically the CIO,where big name suppliers like IBM, Cisco, and H-P dominate, and where carriers havelittle or no presence. These suppliers are powerful enough that they often set the ITpriorities of their enterprise customers and then sell into these priorities.One thing is certain; the vertical markets that will explode in the Wi-Fi space are huge.Health care, for example, is possibly the largest market in the world and with the agingpopulation will only get larger. There is probably no way of overestimating the potentialof these markets they are so large. Even small investments in them will return enormousrewards.8.8 Monetizing the Long TailMonetizing Wi-Fi has been a conundrum for many. As we’ve seen already there is cashin energy. But we think that the real money is, as we have said since 1994 inunderstanding OTT and how top make money from it. Look at the following chart.North River Ventures 37 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATVThe market potential in porting a Google like monetization model onto a distributed3DHD App Delivery Architecture with virtualization will be one of the biggest in history,if not the biggest. Apple understands this better than anyone. Long Tail Economics! Akamai, Networks, and Studios Are Here … Number of Customers … But, The Tsunami Of Always On, Interactive 3DHD Wireless Apps Will Hit Here, In The “Long Tail.” This Google-sized New Market Is Totally Unserved Number of App Developers North River VenturesNorth River Ventures 38 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV9 Future growth: CIP’s App Delivery ArchitectureBecause the cloud computing-driven marginal cost revolution is transformingcommunications like nothing else in history, telecom needs a new network architecture tosupport the cloud. Average cost-based cellco operating models and network topology arenot elastic enough to adapt and scale profitably with rich new opportunity inherent incloud inflation.We first described this system to clients as our New Network Topology in November1995: Client server architectures will bring the Moore Curve to networks by getting rid of mainframes, and moving processing power to the end points of the network. As a result, network MIPS capacity will go up and customers will get more power. Network reliability too will go up because—as long as they dont depend on a single device, like a big CO—they will be more reliable than point-to-point connections. But, partly because complexity in any single device will go down, costs will fall, often spectacularly. We believe that local access networks—whether twisted pair, cable or RF based—will look like big LANs. This means switching functions will take place in microprocessor-based devices the size of a plastic lunch box stapled CIP ADA Solution! Turn The Economics Of Wireless On Its Head. This Scales From Macro Cell to Small Cell $ Energy $ $ Natural Fuel Back Up Power Gas Cell Power System Energy Low Power Wi-Fi, Super Wi-Fi BTS + 3DHD-CDN Edge Server Energy Management System North River VenturesNorth River Ventures 39 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV to a telephone pole. These "switches" will be strung together on fiber optic rings. There wont be any "central office." Everything "upstream" in the network will be obsolete.The logic of cloud inflation therefore says that much of the world’s $5 trillion installednetwork plant must soon be replaced with something simpler, cheaper, and moreefficient, and that this new network in turn will be driven by cloud inflation, the salesvolumes will be significant.To meet the needs of cloud inflation and long tail economics, CIP created a new networktopology—the App Delivery Architecture (see the chart above and for more on ADA, seeCIP’s Next Gen CDN)—to serve as the delivery medium for all cloud-based apps.Under the basic rules of CIP’s App Delivery Architecture the new network must, as wesaid on page 9: 1. Deliver unlimited computing power between unknown numbers of devices, at marginal cost. 2. Support rapid cloud inflation—all media, all wireless and wireline innovations— for at least thirty years to ensure a reasonable rate of return. 3. Be application-indifferent, supporting all cloud content from medicine to entertainment. 4. Have an order of magnitude lower cost than legacy networks. 5. Be low-powered, and an order of magnitude more efficient than legacy networks. 6. Be highly reliable, achieving “five 9’s” through self-healing and redundancy. 7. Be self-installing, reducing even eliminating installation costs.ADA must be cheap, ubiquitous and fast. Wi-Fi fits it perfectly.At CIP, we are exploring with our strategic partners the immediate potential for usingADA to exploit the sudden growth in Wi-Fi traffic. Our New Network Topology of 1995moved network management to the edge. Our 2009 ADA adds CDNs and EMS. WithNNT, wireless was optional. In ADA, it is mandatory.China Mobile is now planning a pre-cloud 1995-era NNT system, called C-RAN, incooperation with Intel, IBM, Huawei, and ZTE.67 This network does not meet the cloudinflation requirements of ADA and will be obsolete before its planning is finished. CIPInnovator Ubiquisys is several steps ahead, working with Intel on an ADA-compliantsmall cell system that will support full CDN integration. ADA is, therefore, a big andfast emerging small cell opportunity.Exploiting exploding Wi-Fi markets means deploying the next generation of highlydistributed, low-cost, CDNs on ADA. Our ADA CDN model will move content muchcloser to the edge of the network, making it faster and richer. And by relaying thiscontent to millions of low-cost edge servers with Google-like pricing, and integrating itwith revenue-generating EMS, ADA will change the economics of content delivery forthe next half century or longer.North River Ventures 40 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV10 Footnotes1 Brian, Matt. “Apple Hits 25 Billion App Store Downloads.” Usatoday.com, March 5, 2012. http://www.usatoday.com/tech/news/story/2012-03-05/apple-app- downloads/53372352/1.2 “China Mobile Skirts Apple to Add 5 Million IPhone Users: Tech - Bloomberg”, October 31, 2011, http://www.bloomberg.com/news/2011-10-31/china-mobile-skirts- apple-to-add-5-million-iphone-users-tech.html.3 “Cable Wi-Fi Solutions including BelAir100SNE 802.11n strand-mount AP and BelAir100SP Strand Picocell”, n.d., http://www.belairnetworks.com/customers/index.cfm/intSolutionID/2/intCustomerID/ 9.4 “London set for free wi-fi boost,” BBC, January 6, 2012, sec. Technology, http://www.bbc.co.uk/news/technology-16440911.5 Iain Marlow, “Shaw kills wireless network plan - The Globe and Mail”, September 1, 2011, http://www.theglobeandmail.com/globe-investor/shaw-kills-wireless-network- plan/article2149909/.6 Dan O’Shea, “Microsoft’s Wi-Fi NC adds color to white spaces debate”, January 9, 2012, http://www.fiercebroadbandwireless.com/story/microsofts-wi-fi-nc-adds-color- white-spaces-debate/2012-01-09?utm_medium=nl&utm_source=internal.7 “Light Reading Cable - IP & Convergence - MSOs Sell AWS Spectrum to Verizon for $3.6B - Telecom News Analysis”, n.d., http://www.lightreading.com/document.asp?doc_id=215243&site=lr_cable&f_src=lrd ailynewsletter.8 Brian Caulfield, “Steve Jobs Toyed With Idea Of Building His Own Wireless Carrier - Forbes”, November 15, 2011, http://www.forbes.com/sites/briancaulfield/2011/11/15/steve-jobs-toyed-with-idea-of- building-his-own-wireless-carrier/.9 Lund, Denise, and Gene Signorini. “Creating the Enterprise-Class Tablet Environment”. Yankee Group, October 2011. And “As Smartphone Market Expands, Many Mobile OS Vendors Will Be Left Behind.” MarketWatch, January 9, 2012. http://www.marketwatch.com/story/as-smartphone-market-expands-many-mobile-os- vendors-will-be-left-behind-2012-01-09.10 Purdy, Gerry. “Forecasting the Tablet Market: Over 366 Million Units by 2016.” GigaOM Pro. 22 Feb. 2012. Web. 23 Feb. 2012.11 David Pogue, “Nest Learning Thermostat Sets a Standard - David Pogue,” The New York Times, November 30, 2011, sec. Technology / Personal Tech, http://www.nytimes.com/2011/12/01/technology/personaltech/nest-learning- thermostat-sets-a-standard-david- pogue.html?_r=1&scp=2&sq=david%20pogue&st=cse.North River Ventures 41 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV12 Francis McInerney and Sean White, “Whose Ox Will Be Gored,” North River Ventures, December 199413 Light Reading Webinar, Meeting the Cable Mobile Challenge: https://vts.inxpo.com/Launch/Event.htm?ShowKey=771114 Nuttal, Chris. “Apple’s 25th Billion App Downloaded.” The Globe and Mail, March 5, 2012. http://www.theglobeandmail.com/news/technology/mobile-technology/apples- 25th-billion-app-downloaded/article2358735/.15 “Cisco Visual Networking Index (VNI) Global Mobile Data Traffic Forecast for 2010 to 2015” (Cisco Systems, Inc., February 1, 2011).16 Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011- 201617 Go to www.northriver.com/ or click here.18 “AT&T Delivers Double-Digit Earnings Growth in Second Quarter, Raises Full-Year Outlook,” company press release.19 “Verizon, AT&T to offload network overload by joining Wi-Fi interoperability group | VentureBeat,” June 22, 2010, http://mobile.venturebeat.com/2010/06/22/verizon-att- to-offload-network-overload-by-joining-wi-fi-interoperability-group/.20 Willa Plank, “Confessions of an iPhone Data Hog,” Wall Street Journal, January 27, 2012, sec. Technology, http://online.wsj.com/article/SB10001424052970204624204577183032028581306.ht ml?mod=WSJ_hpp_MIDDLE_Video_Top.21 Bensinger, Greg. “AT&T Caps Unlimited Data Plans.” Wall Street Journal, March 1, 2012, sec. Technology. http://online.wsj.com/article/SB10001424052970203986604577255532947217336.ht ml?mod=WSJ_hp_LEFTTopStories.22 “Orange - WiFi”, n.d., http://www2.orange.co.uk/servlet/Satellite?c=OUKService&pagename=OUKPersonal &cid=1281978269322.23 “Orange wifi - Accueil”, n.d., http://www.orange-wifi.com/fr/index.htm. 24 “republic wireless - The Mobile Network that Runs on Freedom”, n.d., http://republicwireless.com/.25 Goldstein, Phil. “Verizon: We’ll Hit LTE Capacity Limit in Some Markets by 2013 Without New Spectrum”, March 5, 2012. http://www.fiercewireless.com/story/verizon-hit-lte-capacity-limit-some-markets- 2013-without-new-spectrum/2012-03-05.26 Goldstein, Phil. “Verizon to Deploy LTE Femtocells, Small Cells”, March 5, 2012. http://www.fiercewireless.com/story/verizon-deploy-lte-femtocells-small-cells/2012- 03-05.North River Ventures 42 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV27 Anton Troianovski, Lauren A. E. Schuker, and Greg Bensinger, “Verizon Spectrum Deal Would Pressure AT&T - WSJ.com”, December 3, 2011, http://online.wsj.com/article/SB10001424052970204826704577074103860244794.ht ml?mod=WSJ_qtoverview_wsjlatest#articleTabs%3Darticle.28 Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011- 201629 Thomas, Daniel, and Miles Johnson. “Telefónica Dividend Cut Could Open Floodgates - FT.com”, December 15, 2011. http://www.ft.com/intl/cms/s/0/84b2847a-272e-11e1- b7ec-00144feabdc0.html#axzz1h02ypG4A.30 Paris, James Boxell in. “France Telecom to Cut Dividend.” Financial Times, February 22, 2012. http://www.ft.com/intl/cms/s/0/be290f9e-5d34-11e1-889d- 00144feabdc0.html#axzz1n7KJwDDy.31 “Sprint Lures AT&Ts IPad Customers With Portable Wi-Fi Hotspots - Bloomberg,” September 28, 2010, http://www.bloomberg.com/news/2010-09-28/sprint-nextel-lures- at-t-ipad-customers-with-wi-fi-device-s-unlimited-data.html.32 “Steve Jobs Introduces the Updated iPad - NYTimes.com,” March 2, 2011, http://www.nytimes.com/2011/03/03/technology/03apple.html?_r=1&scp=4&sq=appl e%20ipad&st=cse.33 O’Shea, Dan. “IMS Eyes 400 Million 802.11ac Devices by 2016”, January 18, 2012. http://www.fiercebroadbandwireless.com/story/ims-eyes-400-million-80211ac- devices-2016/2012-01-18?utm_medium=nl&utm_source=internal.34 “AT&T will sell European WiFi operations; Motorola agrees to antenna licensing deal | GSMtalks.com is the meeting place for leaders in the mobile technology.,” April 8, 2010, http://www.gsmtalks.com/att-will-sell-european-wifi-operations-motorola- agrees-to-antenna-licensing-deal/.35 FCC Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, April 2010, p. 184.36 “Cisco Visual Networking Index (VNI) Global Mobile Data Traffic Forecast for 2010 to 2015.”37 AT&T, “AT&T + T-­Mobile: A World-­Class Platform for the Future of Mobile Broadband,” March 21, 2011, p. 27.38 Company Press Release, “Sprint Nextel plans to open M2M centre,” June 17, 2010, http://www.totaltele.com/view.aspx?ID=456441.39 “Wireless Local Area Network Chipset Market to Double in 2011 Courtesy of Wi-Fi,” February 17, 2011, http://www.isuppli.com/Mobile-and-Wireless- Communications/News/Pages/Wireless-Local-Area-Network-Chipset-Market-to- Double-in-2011-Courtesy-of-Wi-Fi.aspx.North River Ventures 43 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV40 “57.9 Million Smart Meters Currently Planned for Installation in the United States « Pike Research,” November 22, 2010, http://www.pikeresearch.com/newsroom/57-9- million-smart-meters-currently-planned-for-installation-in-the-united-states.41 “The economic value generated by current and future allocations of unlicensed spectrum,” Richard Thanki, sponsored by Microsoft Corp., Sept. 2009, p. 17.42 “Visions and research directions for the Wireless World,” Wireless World Research Forum, July 2009, p.5.43 “AppleInsider | Apple granted patent where carriers bid to provide service to iPhones,” February 9, 2011, http://www.appleinsider.com/articles/11/02/09/apple_granted_patent_where_carriers_ bid_for_iphone_service.html.44 Joseph Volpe, “Microsoft-led consortium to trial super WiFi network across the pond -- Engadget”, June 27, 2011, http://www.engadget.com/2011/06/27/microsoft-led- consortium-to-trial-super-wifi-network-across-the/.45 “Fon - A world of free WiFi,” http://corp.fon.com/en.46 “Skype wifi Access - Skype,” http://www.skype.com/intl/en/features/allfeatures/skype- access/.47 “Cable Wi-Fi Solutions including BelAir100SNE 802.11n strand-mount AP and BelAir100SP Strand Picocell”, n.d., http://www.belairnetworks.com/customers/index.cfm/intSolutionID/2/intCustomerID/ 9. See also the Light Reading Webinar, Meeting the Cable Mobile Challenge: https://vts.inxpo.com/Launch/Event.htm?ShowKey=771148 “China Mobile Skirts Apple to Add 5 Million IPhone Users: Tech - Bloomberg”, October 31, 2011, http://www.bloomberg.com/news/2011-10-31/china-mobile-skirts- apple-to-add-5-million-iphone-users-tech.html.49 “Will cable follow AT&T and T-Mobile to New York City subways with WiFi? - FierceCable”, September 28, 2011, http://www.fiercecable.com/story/will-cable- follow-att-and-t-mobile-new-york-city-subways-wifi/2011-09-28.50 “MTA finally announces agreement with AT&T and T-Mobile to provide cell and WiFi service in stations - NYPOST.com”, October 4, 2010, http://www.nypost.com/p/news/local/at_mobile_customers_to_get_wifi_bInPxkMfB9 7Hn0vOty7n8L.51 Jonathan Kramer, “TWC Deploys WiFi in SoCal | Wireless Tower Siting”, September 25, 2011, http://cellularpcs.com/2011/09/25/twc-deploys-wifi-in-socal/.52 “Cox Business Launches Free Cox WiFi Hotspots in Rhode Island -- WEST WARWICK, R.I., April 30 /PRNewswire/ --”, n.d., http://www.prnewswire.com/news-releases/cox-business-launches-free-cox-wifi- hotspots-in-rhode-island-92545149.html.North River Ventures 44 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV53 “Viacom Sues Cablevision Over Streaming of Live Programming - WSJ.com”, June 24, 2011, http://professional.wsj.com/article/SB100014240527023033399045764037636226345 74.html?mg=reno-secaucus-wsj.54 “TelecomTV | News | Canadian telco Rogers goes OTT with video”, December 2, 2011, http://www.telecomtv.com/comspace_newsDetail.aspx?n=48276&id=e9381817-0593- 417a-8639-c4c53e2a2a10.55 Francis McInerney and Sean White, “Whose Ox Will Be Gored,” North River Ventures, December 199456 Light Reading Webinar, Meeting the Cable Mobile Challenge: https://vts.inxpo.com/Launch/Event.htm?ShowKey=7711 P. 657 “Light Reading Cable - IP & Convergence - Meet Huawei’s New Cable Guy - Telecom News Analysis”, October 18, 2011, http://www.lightreading.com/document.asp?doc_id=213578&site=lr_cable.58 “China Mobile Skirts Apple to Add 5 Million IPhone Users: Tech - Bloomberg.”59 “CableLabs working on small-cell architecture for cellular backhaul offerings - FierceBroadbandWireless”, March 24, 2011, http://www.fiercebroadbandwireless.com/story/cablelabs-working-small-cell- architecture-cellular-backhaul-offerings/2011-03-24.60 “Super Wi-Fi: The Great White Hype? - SmallNetBuilder,” September 27, 2010, http://www.smallnetbuilder.com/wireless/wireless-features/31281-super-wi-fi-the- great-white-hype?tmpl=component&print=1&layout=default&page=.61 “Clearwire Reports Record Fourth Quarter and Full Year 2011 Results (NASDAQ:CLWR)”, February 15, 2012. http://corporate.clearwire.com/releasedetail.cfm?ReleaseID=649019.62 “Wireless Network Races for Funds - WSJ.com,” n.d., http://online.wsj.com/article/SB10001424052748704875004575375220463047714.ht ml?KEYWORDS=satellite.63 “LightSquareds fledgling LTE comes under fire from GPS sector -- Urgent Communications article,” March 16, 2011, http://urgentcomm.com/networks_and_systems/commentary/lightsquared-lte-gps- 20110316/; “PE Firm Plans Open LTE Network to Challenge AT&T and Verizon,” Mar. 27, 2010, http://gigaom.com/2010/03/27/harbinger-lte-network/.64 “Cablevision Attracts and Retains Broadband Subscribers with Wi-Fi” (BelAir Networks, November 2009).65 Jonathan Kramer, “TWC Deploys WiFi in SoCal | Wireless Tower Siting.”66 Gullo, Chris. “By 2016: Healthcare WiFi Market to Hit $1.3B | Mobihealthnews.” 16 Aug. 2011. Web. 23 Feb. 2012.North River Ventures 45 www.northriver.com
  • Wi-Fi: Sales Doubling Opportunity in CATV67 Merritt, Rick. “China Drives Servers to Base Station Role”, March 1, 2012. http://www.eetimes.com/electronics-news/4237314/China-drives-servers-to-cellular- role#.North River Ventures 46 www.northriver.com