Wireless

WLAN roaming profitable for mobile operators

Niklas Lybäck

WLAN services can be seamlessly integrated into the technology portfolios of mobile operators, providing a new source of revenue. The SIM card's functionality makes it ideal for international WLAN roaming, and combining GSM and WLAN services in the same card provides major benefits for subscribers and operators.

Already well established in the corporate environment, the wireless local area network (WLAN) is beginning to have a major impact in the public access arena. The driving force behind the growth of public access WLANs is the demand from the business community for access to the Internet and corporate intranets while away from their desks.

WLANs offer broadband wireless access in areas such as airport lounges and hotels, enabling business users, for example, to retrieve and answer e-mails on the move. The public access WLAN market is growing fast. A recent report from technology research firm Analysys predicted that there would be over 20 million WLAN users in Europe by 2006, and the numbers are likely to be higher still in North America.

A major factor in driving the growth of this market will be the introduction of international WLAN roaming. Overwhelmingly, users of public-access WLAN services are international business travelers, accustomed to global voice roaming with their GSM phones. Offering a similar capability to WLAN users would significantly increase the uptake of WLAN services. Gartner Group identified this issue last May 2001, stating: "One of the key missing pieces to public WLANs is roaming agreements among all carriers. Roaming arrangements allow carriers to reduce the coverage area required by each one, allowing carriers to reach a wider customer base in a cost-effective way."

International voice roaming was undoubtedly a significant factor behind the global success of GSM. Since 1992, when the first roaming agreement was signed between Telecom Finland (now Sonera) and Vodafone, the roaming industry has exploded and there are now 25,000 roaming agreements worldwide. Around 500 million roaming calls are made each month, and revenues account for between 10 percent and 15 percent of the operators' net sales.

It's all in the SIM
GSM voice roaming is based on the SIM card. A mobile phone can be uniquely and reliably identified when roaming to another GSM network through the international mobile subscriber identity (IMSI) number within the SIM card. This provides security and invoicing capability. The SIM card offers the operator secure and unique identification of the user, as well as branding opportunities and the ability to build a stronger relationship with its customer.

For end-users, it is like using a GSM handset. SIMple! The end-user simply enters a PIN code. The user's terminal also authenticates the network according to the Internet draft EAP/SIM standard defined by IETF. This prevents a malicious end-user from pretending to be a public WLAN operator. Further, if the physical SIM card is stolen, the user's account can be easily and quickly closed.

The alternative approach to using a SIM, and the method currently used by most WLAN operators, is for the subscriber to input his or her user name and password into the browser, a very cumbersome procedure compared to the ease-of-use offered by the SIM card. A more serious drawback with this method is that if a malicious end-user is able to get a subscriber's userID/password credentials, the subscriber may not notice that someone is using his or her WLAN account until receiving the next bill.

Combining GSM and WLAN services
The SIM card's functionality makes it ideal for international WLAN roaming, and combining GSM and WLAN services in the same card provides major benefits for the subscriber and the operator. The subscriber can purchase WLAN services from his or her existing GSM operator and have a single invoice for WLAN, GSM and GPRS services. The GSM PIN code, with which the user is very familiar, can be used to activate both services. The same SIM card could be used to activate both services. For convenience, the user will probably have a second SIM card for use in the WLAN card installed in the user's laptop.

Nokia's C110 WLAN card product can also be used as a standard WLAN card, where applicable. Secure GSM authentication is becoming the natural choice for authentication in multimode WLAN terminals as WLAN becomes increasingly integrated with other cellular and wide-area wireless technologies - as in the case of the Nokia D211 multimode terminal, which integrates GSM, GPRS and WLAN.

For the operator, a major benefit of combining GSM and WLAN into a single offering is that the existing GSM network elements can be reused. There will probably be a need to expand the home location register (HLR) capacity, but the additional capital expenditure is minimal. The WLAN service zone can be linked into the GSM network where the mobile switching center (MSC), authentication, HLR and GSM/GPRS billing systems can be used for both services. As all of the roaming SS7 links are in place, the WLAN user can roam to the same networks as the GSM user.

WLAN services can be seamlessly integrated into the technology portfolios of mobile operators, providing a new source of revenue. A critical mass of WLAN service zones must be created for achieving this. But once these are in place, international business customers will be demanding access to such services.

A number of major operators are planning to launch WLAN/GSM services in the first half of 2002. Sonera has already demonstrated a new subscription service called Corporate Data which bundles HSCSD, GPRS and WLAN into a single package using a single SIM.

Generating revenues
It is clear that combining WLAN and GSM services is technically feasible, but what of the business case? Let us analyze the solution for providing international WLAN roaming with the combined WLAN/GSM approach outlined above.

GSM roaming is big business with hundreds of millions of roaming calls being made each month. In 1999, global wholesale roaming revenues, that is the monies passed between operators to pay for roaming calls, reached €2.4 billion. The retail revenues, i.e., the charges paid by subscribers, reached €3.3 million. The majority of these revenues pass through established GSM clearing houses such as Dan Net/Roameo MACH, Comfone, Cibernet and EDCH, which balance roaming revenues between operators around the world. GSM roaming is co-ordinated through the GSM Association's Global Roaming Forum.

Another factor in favor of SIM-based roaming is the way large corporates, whose employees form the bulk of international travelers who would use WLAN services, do business. IT managers within these corporates wish to deal with single entities who can provide all the required communications services, be it GSM or WLAN, to all their employees. Mobile operators are well positioned to provide WLAN roaming service with their existing roaming infrastructure.

Business model for growth
Nokia has constructed a business model that shows how pivotal GSM-based roaming could be to a mobile operator's WLAN revenues. In this business model, WLAN services without roaming bring no revenue increase at all in the first two years (through 2003), and the operator's overall cumulative revenue is €102 million. However, by offering roaming, the operator could enjoy revenue increases due to WLAN during each year of the four-year model. Its overall income would improve by an additional €18 million to €120 million. (The model is based on an operator building up a network of 500 WLAN public-access zones over the next four years and growing its WLAN subscriber base to 100,000 over the same period.). This represents an almost 20 per cent increase in revenue, with virtually no increase in capital expenditure.

These figures prove that international WLAN roaming is a solid business proposition for GSM operators. In fact, it represents an almost perfect business scenario; increased revenues without increased capital expenditure; a solution to increase the 'stickiness' of subscribers; and reduce churn. Nokia's Operator Wireless LAN technology, which has already been trialed with more than 20 GSM operators, provides the solution for operators looking to capitalize on this new market opportunity.

The author is the Wireless LAN program marketing manager at Nokia Networks.