Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
Connectivity is everywhere, from the clothes we wear to the tablets and smartphones we use. There’s also been considerable buzz around the influx of wearable devices. In fact, Juniper Research estimates that shipments will grow ten-fold, reaching 150 million by the end of 2018. While some wearable devices will be Bluetooth enabled and others will operate using Wi-Fi, many will take advantage of cellular networks.
But there’s a catch to all this – the vast majority of cellular usage today (more than 70%) originates indoors, where reception can be spotty at best. The question we should be asking is what will happen if smart watches, devices like Google Glass and other wearable devices don’t have a strong enough mobile signal to work indoors?
A recent NSN Acquisition and Retention Study suggested that network and service quality is the top influencer for 34% of customers, ranking second only to cost and billing at 42%. Within that 32%, half was attributed to network coverage (the other half was comprised of voice quality and messaging and Internet quality).
It is also estimated that 17% to 25% of all mobile users worldwide experience poor quality indoor wireless coverage, translating into well over one billion subscribers and over $10 billion in losses relating to customer churn and lost up-sell opportunities.
The issue of in-building dead zones has been a long-standing challenge for mobile subscribers. The problem will only increase as the adoption of wearable devices escalates. Yet when it comes to that last mile of coverage, operators are as stymied as they always were – largely because of the costs involved in pushing signals beyond those concrete walls. Only now the stakes are higher.
Ten years ago, concerns over indoor coverage were barely a blip on the radar. But once the migration to indoor usage began, an increasing number of subscribers expressed growing concerns to their providers over dropped calls and slow data speeds. As providers talk about rolling out more infrastructure and upgrading to LTE, that last piece of air as we like to call it, is still an issue. Whatever the technology, signals will not all magically find their way through drywall, concrete and glass.
At the best of times operators are looking at the situation from a capital expenditure point of view and rightfully so. That view tells them that they simply can’t afford to service everybody well indoors. That’s a problem when you consider that Google research indicates that 97% of smartphone usage is at home, in stores and restaurants, and at work or social events. Where coverage fails, customer dissatisfaction and churn numbers grow.
In the past, churn wasn’t as much of a concern since there was a wealth of potential new customers to tap into. But in saturated markets, new customer acquisition is no longer an option, and retention has become the major focus. In other words, retention is the new acquisition.
In truth, incentives such as extra minutes, reduced fees and free upgrades may serve as stopgaps, but ultimately they will only hold water if the coverage is good. The answer to improved retention numbers lies in providing strong, consistent coverage service. However the reality remains, while hundreds of millions of dollars are being spent expanding the macro network, it will never get to the point where it will be able to penetrate every indoor nook and cranny.
As the last frontier, ubiquitous indoor coverage could be the deal maker – and breaker – for providers. Anyone that can solve that problem will likely see much stronger loyalty metrics. Our experience has shown in fact that once indoor coverage is improved, the loyalty factor reaches well in excess of 80%.
While the cost of pushing the macro network beyond indoor barriers may be out of reach, signal boosting technology for home and office subscribers can fill the gap quite nicely and will become increasingly important for users of wearable devices. Service providers are taking a serious look at several options as a means to improve customer satisfaction ratings and mitigate churn. These technologies may be offered free of charge or subsidized, depending on the carrier and the contract details.
The appropriate technology choice depends on a number of factors, including geographical location, the device brand and existing coverage. In areas that have no cellular coverage for example, one option is leveraging an existing Wi-Fi network. This requires a Wi-Fi router and a broadband connection, as well as a compatible phone that supports the feature.
Small cell/femtocell technology is tantamount to installing a miniature cell tower in premises. This does not need a Wi-Fi network because it plugs directly into a broadband connection and broadcasts inside the home. It does require some set up, limits the number of people who can make calls at the same time and is only available to registered users.
Then there is a significant portion of the global population that does not have broadband and are solely reliant on wireless connectivity. In the United States alone that translates into 30% of the population. In those cases, a smart signal booster that draws from cellular signals (3G and up) would be a workable solution. It does not require a broadband connection, external antennas, cabling or user registration and can work on any 3G handset.
The indoor coverage issue is something that is not solely relegated to home users. Even some of the most sophisticated of office facilities can experience coverage holes. For example, the developers of a new 27-floor office tower in Hong Kong spent hundreds of millions of dollars implementing a distributed antenna and fiber optic cable system for carrying cellular signals throughout the building. Even with that, stockbrokers working on two floors could not get a good cellular signal, making it necessary to install two or three strategically placed signal boosters to fill the gap.
As mobile subscribers rapidly reach a saturation point and new markets for connected wearable devices emerge, it is in the best interests of every service provider to address the final link in cellular coverage the most cost-effective and efficient way that they can. This need will only increase as wireless device usage proliferates at home, in offices, on buses and trains, and in cars. Ultimately we all want a balanced and happy ecosystem where every constituent gets what they want: quality of service for the user, and a loyal customer base for providers.
Werner Sievers is CEO of Nextivity, a San Diego-based developer of the Cel-Fi Smart Signal Booster. He is a veteran of the wireless industry and experienced leader of technology-centric, venture backed startups.