China's belated entry into 4G is driving operators to start unwinding their massive WiFi deployments -- almost certainly the world's largest.
According to the Ministry of Industry and IT (MIIT), the three mobile network operators (China Mobile Ltd. (NYSE: CHL), China Unicom Ltd. (NYSE: CHU) and China Telecom Corp. Ltd. (NYSE: CHA)) decommissioned 87,000 WiFi access points in the first nine months of the year. That leaves just under 6 million still in operation, which is still nearly 50% more than the number of cellular basestations. While WiFi is shrinking, operators added another 680,000 2G, 3G or 4G basestations to take the total to 4.08 million.
The numbers highlight China's tortuous path to 4G as well the rapid rise to importance of LTE in a market where mobile dominates.
The operators began ramping up their WiFi offerings in 2011 and 2012 to meet the demand for data. Chinese consumers were buying smartphones in large numbers but, unlike in other advanced telecom markets, did not have 4G networks to deploy them on.
China Mobile embarked on what was likely the world's largest and most ambitious WiFi deployment. With its "four-network coordination" strategy across GSM, TD-SCDMA (China's homegrown 3G standard), WiFi and LTE-TDD, it planned to deploy 6 million access points in three years.
The enormous scale of the rollout highlights its problem with TD-SCDMA, which it was railroaded into adopting but generated little interest outside China.
If the aim was to find a way of carrying data traffic, the plan was spectacularly successful. By 2013, more than 70% of China Mobile's data traffic was carried over WiFi. Yet financially it was a disaster, contributing just 2.7% of the operator's total data revenues.
According to commentary on local telecom website C114, the WiFi rollouts were plagued by poor user experience and the difficulties of integrating WiFi and cellular technologies. The report also noted that some operators had concluded the "nature of the mobile operator business just wasn't suited to WiFi."
"They can't find a way to monetize their WLAN system," said Guang Yang, a senior analyst with Strategy Analytics. "When 4G is available, the WiFi offload is not necessary for China Mobile. China Mobile has put its focus on 4G."
Alibaba Group , Tencent Inc. , Xiaomi and others have invested in commercial WiFi service providers to offer free services to their users, Yang adds. But he also points out that it is unlikely state-owned China Mobile would share its infrastructure with private companies.
Instead, China Mobile is revamping its WiFi operation to focus on government and enterprises, where it sees a business in offering tailored networks and services.
The WiFi retrenchment points to the impact of 4G, which formally launched in China only early last year but has dominated growth since. In the first three quarters of 2015, China Mobile's revenues have been higher than those of its two rivals combined, accounting for 69% of net adds. Staggeringly, around 30% of the operator's 823 million customers are now using 4G services. (See China Unicom Still on 4G Back Foot and China Mobile's 4G Roll.)
— Robert Clark, contributing editor, special to Light Reading