Wi-Fi lets wireless users bypass the cellular network entirely. These bypassers are the Dark Energy—the unseen growth engine—of the wireless universe that carriers cannot see, cannot measure, and to whom they do not sell. See Wi-Fi, the Dark Energy of Wireless).
Apple’s iPad is the starkest example. Estimates vary, but some 85% of iPad buyers rely on Wi-Fi exclusively (see Wi-Fi article). Apple will sell more than 30 million iPads by the end of 2011, and most of the traffic they generate will not be “offloaded” by anyone (see Apple comments). Offload implies a level of control that the bypassed carriers no longer have. In fact, never had. This new traffic will never be seen by a carrier, let alone monetized by one.
The carriers have a lock on smartphones. But, they are already losing 85+% of post-PC data traffic to Wi-Fi. Their response to this loss to Dark Energy wireless is to raise prices. AT&T has imposed data caps on its tablet and smartphones: customers now pay $15 for 250MB per month or $25 for 2GB. You could burn through 2GB on an iPad with a few movies. Verizon’s prices are just as steep. This is not a recipe for bypass-busting success.
Consolidation may help the largest carriers regain pricing power in cellular. But higher prices will only drive more people and machines off net.
NTT DoCoMo is a cautionary example. This company introduced wireless apps a decade before Apple, and built its business on widespread Internet use well ahead of its American peers. This one-time innovator now suffers from falling ARPU and declining overall revenues. Even data ARPUs have stalled. A similar fate awaits cellcos everywhere unless they change course.
Other foreign carriers are embracing Wi-Fi. Shaw Communications in Canada will use Wi-Fi exclusively for wireless, avoiding the cost of a cellular buildout (See our analysis). KDDI in Japan is overlaying a 100,000-hotspot Wi-Fi network to offload data from its cellular network (See KDDI article).