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Will network operators start charging for Wi-Fi?

As wireless operators and cable companies see their Wi-Fi networks as strategic assets will they start charging customers more to use them in an effort to generate revenue?

Wi-Fi is quickly becoming a key part of almost every broadband providers' network strategy. But is the day soon coming when Wi-Fi will no longer be free?

That's a big unanswered question as operators signal they'd like to get more value out of their Wi-Fi networks.

According to a recent survey from Analysys Mason, on behalf of Amdocs, more wireless and cable operators than ever have deployed Wi-Fi networks. But many of these service providers see these networks, which are often offered to subscribers for free, as potential revenue generating assets in the future.

Most broadband service providers -- 89 percent of them -- have deployed Wi-Fi in some fashion to either offload wireless traffic or extend services to customers, according to the survey. And 40 percent of service providers indicated in the survey that they expect Wi-Fi to be more than a solution for simply offloading congested networks and are interested in using it to provide incremental value to their customers.

There are already a large number of operators who have begun monetizing their Wi-Fi networks. In fact, according to the survey 57 percent of service providers with Wi-Fi networks say they're making money in some way from those networks.

So far none of the big service providers, cable or wireless, have indicated that they'll charge for Wi-Fi. But as network operators see Wi-Fi as more strategic and as they add authentication and security to make the service more "carrier grade," there are some indications that service providers may be testing the waters when it comes to charging or adding limits to Wi-Fi usage.

For example, AT&T, which offers unlimited free access to thousands of Wi-Fi hot spots in the U.S., has added Wi-Fi roaming to its International data plan at no additional charge for consumers signing on to that service. But instead of allowing unlimited data usage in these hot spots, as it does in the U.S., AT&T has set a limit of 1GB per month for Wi-Fi.

To be fair, AT&T International data plan subscribers are getting an additional 1GB of data usage for the same $60 price, where previously they got only 300MB of cellular data usage. But the fact that AT&T has put an actual limit of 1GB on the Wi-Fi suggests that AT&T views Wi-Fi usage as something that has value and not just merely as best-effort offload.

The company hasn't said it will change its policy toward Wi-Fi in the U.S. But if history is any indication, there's the fact that wireless operators have revised service plans in the past in an effort to get consumers to pay more for what they use.

"People need to understand that services go through an evolution in terms of pricing," said Chris Nicoll, a principal analyst with Analysis Mason, who worked on the Amdocs Wi-Fi survey. "We've seen it in cellular, where early plans offered flat-rate pricing on wireless data. That helped users build up their usage habits under unconstrained plans. Then they moved to tiered plans and now multidevice plans."

But actually getting people to pay for Wi-Fi could be a tough fight says David Reeder, a vice president at Accuris Networks, the company providing AT&T with the authentication technology to offer Wi-Fi roaming overseas.

Reeder said Wi-Fi's inherent limitations as a short-range wireless technology make it tough to provide consistent quality of service.

"It's very difficult to offer quality of service in a Wi-Fi environment as compared to a mobile network," he said. "And I don't think it will ever be equal. And the carriers recognize this."

Instead, Analysis Mason's Nicoll believes operators will be more creative in how they monetize Wi-Fi.

"Monetiziation doesn't mean charging users extra for the service," he said.

For example, Nicoll believes carriers may sell information gathered from Wi-Fi access points to advertisers and marketers. He said information gleaned from Wi-Fi hot spots may be even more valuable than other location-based information that carriers currently have on their customers via cell towers. The reason is that Wi-Fi hot spots have a much shorter radius, making it easier to pinpoint someone's exact location. This would make it simpler for a specific retailer in a mall to target a customer with advertisements and coupons when that customer is just outside the store.

Networking-equipment maker Cisco Systems is already starting to include such analytics in its access point gear, he said.

Wi-Fi users would, of course, have to opt in to these sorts of programs, but Nicoll said that even aggregated Wi-Fi usage data that is not subscriber specific could be worth something to marketers.

Even though it's true that carriers access unlicensed wireless spectrum to deliver Wi-Fi services, and that the equipment used to set up these networks is relatively inexpensive compared with cellular equipment, the cost of delivering high capacity, reliable Wi-Fi coverage is not inconsequential.

"The spectrum may be free," Nicoll said. "But the backhaul isn't."

Indeed the data links that are used to connect the Wi-Fi hot spot into the carrier's core network are not cheap. And Nicoll admits there is a chance that operators may be tempted to charge higher fees for access to this service or count usage toward monthly data cap totals. But he said it's more likely network operators will simply find other ways to make money.

"Wireless carriers understand that their customers are not a bottomless pit of revenue," he said. "They have a limit on what they will pay for service. And they are already paying a lot for data services."