By Ryan Knutson
It is almost impossible to imagine life without a cellphone. But
imagining life without a cellphone bill is getting a lot
easier.
For 30 days beginning in January, I disconnected my iPhone from
AT&T Inc. and lived entirely off the free Wi-Fi connections
that are available nearly everywhere. It wasn't exactly seamless.
An effort to dump extra tickets to the NCAA College Football
Championship game in Dallas was more stressful than it would have
been with an always-connected phone. On occasion I had to lean on
friends who were still on the network. But with a few changes in
habits, it was definitely doable.
So doable, in fact, that it would be surprising if wireless
carriers aren't already starting to worry that their industry could
one day face a version of the cable-television business's
cord-cutter problem.
If millions of TV watchers are making do with a money-saving
patchwork of online shows, over-the-air broadcasts and services
like Netflix Inc. how long will it be before wireless subscribers
decide they can get by making calls with Google Voice, sending
texts via WhatsApp and asking for the Wi-Fi password every time
they enter a bar?
The question isn't theoretical. Thousands of people in the U.S.
already are. In addition, the majority of mobile data traffic flows
over Wi-Fi, and more access points are being built daily. There are
commercial efforts to build cellphone businesses on Wi-Fi, too,
from companies such as startup FreedomPop and pay-TV heavyweight
Cablevision Systems Corp.
In Europe, low-cost operator Iliad SA has used Wi-Fi in part to
help increase its share of the French mobile market. Seoul offers
free Wi-Fi across its public transit network, part of the
proliferation of hotspots across Asia.
"The percentage of time that a phone is in Wi-Fi coverage is
very high," said Rick Osterloh, president of Motorola Mobility, the
cellphone pioneer that was sold to Google Inc. and then Chinese
computer company Lenovo Group Ltd. "This is the beginning of a
trend."
Of course, carriers aren't going away anytime soon. Verizon
Communications Inc. said wireless revenue rose 8% to $88 billion
last year. AT&T's climbed 6% to $74 billion. Together, they
added a total of 8.8 million mainstream subscribers, about three
million more than a year earlier.
There are real hurdles to relying only on Wi-Fi. Not every
building has it. Most outdoor areas certainly don't, so talking on
the phone while traveling in a car or walking down the street can
be nearly impossible. Logging into a Wi-Fi network generally
requires a password, and there are millions of them. If the power
goes out, the Wi-Fi goes out along with it because most hotspots
don't have backup battery power.
But at $0 a month it is hard to beat the price.
The threat that inferior services pose to established companies
was explained by Harvard Business School professor Clayton
Christensen in the 1997 book "The Innovator's Dilemma." Incumbents
gear their services toward getting the most money out of their best
customers. That leaves an opening for cheaper services to find a
market around the edges. Eventually, the inferior product improves
enough that its audience is in the majority, and the established
players are marginalized.
Mr. Christensen said in an interview that he has been waiting
for that scenario to take root with Wi-Fi and the wireless
business. "This is something that we've watched for a long time,"
he said, "and frankly it has moved more slowly than we'd
expected."
My experience playing the role of the marginal customer was
relatively painless. Most buildings in New York and on a trip to
Dallas had hotspots. Calls can be forwarded free to Google Voice or
to Skype if you sign up for a plan. Internet apps like Apple Inc.'s
FaceTime and iMessage, Google Hangouts, and Facebook Messenger make
it easy to stay in touch with friends and family. Even the little
blue dot on Google Maps will track your location without cellular
service. It works in part by mapping Wi-Fi hotspots, in fact.
There is a lot of technical help out there for people trying to
cut the wireless link. A $5 app, Wi-Fi Map Pro, shows the locations
of nearby hotspots even when your phone is off line, and it
provides passwords to some private networks. I used it, for
example, when a friend was 45 minutes late for dinner at a ramen
shop in Manhattan that didn't have Wi-Fi.
Companies such as iPass Inc. and Devicescape have stitched
millions of hotspots together globally into a networks with a
single sign-on. Major U.S. cable companies have built millions of
hotspots around the country and their home Internet customers get
free access. And several startups are trying to ease phone-call
handoffs and solve the password problem to enable more widespread
use.
The experiment did require a few changes in habit. I had to plan
my route before leaving home since accessing directions on the spot
while I was out wasn't guaranteed. I also called restaurants and
shopping centers in advance to see if Wi-Fi was available and asked
for passwords when I arrived. And I had to set and keep a time for
meeting friends.
A few times I had to give colleagues a friend's phone number so
I could be reached. Once, I had to skip my usual basketball game
because the gym didn't have Wi-Fi, and I needed to remain reachable
via email on deadline.
Adjustments such as those are inevitable.
The high price of mobile service led Charissa Struble of
Arkansas City, Kan., to give up Verizon Wireless and make the
switch to Wi-Fi only. "I just got really tired of paying an
exorbitant phone bill," she said.
In September, Ms. Struble bought a $99 phone from a company
called Scratch Wireless that enables Wi-Fi calls and texts from the
minute it is turned on. When Wi-Fi isn't around, unlimited text
messages are provided via a deal Scratch struck with Sprint
Corp.
"Almost everybody offers Wi-Fi now, so I haven't really had an
issue," said 37-year-old Ms. Struble. Scratch also sells cellular
day passes for $1.99. She has bought them a few times to gain
access during long car rides.
Big carriers are starting to address the issue, emphasizing that
only their networks can keep subscribers connected at all times,
wherever they are. Peter Ewens, executive vice president of
corporate strategy at T-Mobile US Inc., told Wall Street analysts
in late February that Wi-Fi can supplement cellular service but
can't replace it.
"We don't see Wi-Fi per se as a threat," Mr. Ewens said. "We see
Wi-Fi as a natural complement."
AT&T and Verizon say consumers have an insatiable demand for
connectivity and will continue to pay for the ability to stay
connected wherever they go.
Wall Street is also starting to pick up on the trend. Craig
Moffett, senior analyst at MoffettNathanson, says that one day
Wi-Fi will be the primary network, and cellular will serve as the
fallback when Wi-Fi isn't around. "That shift may sound subtle, but
it will usher in a period of profound disruption," he said in a
research note in October.
Jonathan Chaplin, a telecom analyst at New Street Research,
estimated in a report last year that Wi-Fi-first mobile services
offered by cable companies in the U.S. could devour more than
15%--or $68 billion--of the equity value of U.S. wireless carriers
within the first five years of launch.
There is no question people around the world have become
accustomed to always being on. But there is a difference between
habit and necessity. Some researchers, such as Harvard professor
Leslie Perlow, say that being connected constantly can hinder
productivity. Other experts, such as David Greenfield, founder of
the Center for Internet and Technology Addiction, say it can lead
to smartphone addiction. Some people are beginning to push back
socially by doing things like banning cellphones during dinner
parties.
After getting used to being unconnected for brief periods, I
became less attached to the device itself and found myself checking
my phone less often, even when I had service.
Scott McClain, who was paying Verizon for his home Internet and
his cellphone service, switched himself and his two children to
Wi-Fi last year. He said it seemed like a "no brainer."
"The thing that just drove me nuts was paying for the Internet
twice," said Mr. McClain, a 49-year-old electronics technician who
lives outside Pittsburgh. "No matter where you go, there's always
Wi-Fi."
His 13-year-old daughter Hailey says she doesn't plan to ever
pay Verizon or AT&T for cellphone service.
Four years ago, David Morken co-founded Republic Wireless, which
offers mobile service primarily over existing Wi-Fi. In places
where Wi-Fi is unavailable, the service uses Sprint's network. Mr.
Morken says he set out to create a cheaper alternative to carriers
once he realized he couldn't afford to pay the cellphone bills for
his six children.
About 38% of his customers choose a $10-a-month plan that gives
them unlimited calls and texts on the Sprint network but only Wi-Fi
for data traffic. The company now has several hundred thousand
subscribers and is growing by about 14% a month.
"We're carving a lane," Mr. Morken said.
Write to Ryan Knutson at ryan.knutson@wsj.com
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