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Sprint Nextel Corp
If you’re a MetroPCS (PCS) cell-phone customer, chances are much of your smartphone activity runs not through billion-dollar networks of cell towers but through the $80 Wi-Fi router down at the local library.
The mobile carrier uses technology from a 60-person company called Devicescape that automatically detects nearby Wi-Fi hotspots and connects subscribers to one with available bandwidth, rather than take up scarce capacity on strapped cellular networks. The Silicon Valley company has assembled a database of more than 8 million “unsecured” wireless routers, owned by coffee shops, cities, and other entities that have either intentionally made them available to the public, or not gotten around to setting up a password to keep freeloaders out. “There’s a huge network that’s been hiding in plain sight,” says David Fraser, Devicescape’s chief executive officer. “Why not use it?”
Just a few years ago, carriers saw Wi-Fi as evil incarnate—free, unlicensed spectrum they couldn’t charge for. Now, almost every phone company has a “Wi-Fi offload” plan to hold down the cost of building cellular capacity to satisfy mobile data traffic that, according to Cisco Systems, may rise 78 percent a year through 2016. AT&T (T), for example, has acquired or set up 30,000 of its own hotspots, including at McDonald’s (MCD) and Starbucks (SBUX) stores, and is rolling out free coverage in 20 parks in New York City—which itself has a pilot program to add Wi-Fi transmitters to more than 12,000 old-fashioned pay phones.
Republic Wireless, a new mobile carrier and Devicescape customer, is testing a service that offers unlimited data for $19 a month, far below the typical $80 bill. If no Wi-Fi is available, Republic pays Sprint (S) to connect via cellular. Most people have Wi-Fi at home and in the office, says Brian Dally, Republic’s general manager. “People are conditioned to switch to Wi-Fi wherever possible,” he says.
Devicescape’s technology is designed to make that switch even when users aren’t thinking about it. Its carrier customers install Devicescape software into the handsets that run on their networks. That software continually collects information on nearby hotspots, including signal strength and, by checking the GPS to see precisely where they’re located, who the hotspot owners are. (The system doesn’t tap into residential Wi-Fi.) Devicescape’s Fraser says its database of usable hotspots is growing by 25,000 a day.
Though Devicescape’s role may be invisible to consumers, it’s significant to its carrier clients. Fraser says more than 40 percent of their mobile data traffic—e-mails, YouTube (GOOG) videos—run over hotspots in Devicescape’s database. Devicescape-enabled smartphones tap one of these open hotspots 12 times a day on average. “Most people think there’s two places you get connected with Wi-Fi—at home and at work,” says Fraser. “The reality is you’re connecting on the bus and the train and at the coffee shop and while you’re getting your oil changed,” he says. When all goes right, the handset goes from cellular to Wi-Fi without the user ever knowing.
Devicescape or something like it was inevitable. Consumers favor Wi-Fi because it’s usually much faster and more reliable than cellular, especially in crowded urban areas where thousands of people may be connecting to every cell tower at any one moment. But there are potential gotchas. If every carrier offered Devicescape’s service, the hotspot at the local espresso bar could be swamped with traffic from passersby, says Roger Entner, founder of consulting firm Recon Analytics. Either the shop would finally assign a password, or access speeds would slow to a trickle. “Devicescape’s model works as long as they’re not really successful. Freeloading only works if the people you’re freeloading off don’t mind,” Entner says.
Fraser says the software is smart enough to leave overburdened hotspots alone. And if a shopkeeper reacts by calling in lawyers? “There is definitely legal risk involved,” says Fraser. Although his company has yet to be sued, he admits some businesses have complained when they figured out people were logged onto their router via Devicescape. The company stops sending traffic to a hotspot if the owner objects, and automatically disqualifies any router that seems to have been left unsecured by mistake. Harold Feld, a senior vice president at the digital rights advocacy group Public Knowledge, says Devicescape’s Wi-Fi siphoning probably isn’t illegal—just obnoxious. “It’s like a limo pulling up in front of a soup kitchen for the free food.” Maybe that’s why AT&T and Verizon Wireless haven’t signed up with Devicescape. The only carriers that acknowledge they use its technology are MetroPCS, Republic, Canada’s Public Mobile, and France’s Bouygues Telecom. Devicescape says it has six carrier customers in all.
Fraser says carriers’ concerns will fade as they move away from unlimited data plans and Wi-Fi becomes a way for them to keep all those YouTube videos streaming without raising prices. Fraser says he doesn’t hear many complaints from merchants. “That coffee shop set up a hotspot for a reason: to get their customers to have another cup of coffee,” he says. “We make their Wi-Fi more convenient, and they don’t even have to train the barista how to help customers get online.”
The bottom line: As YouTube videos and other data jam cell networks, wireless carriers are using fast, and often free, Wi-Fi to keep traffic flowing.