What is the Cloud going to do with its money?

UK wireless broadband operator The Cloud dispelled any doubts over its future this month, and ended months of speculation about its future funding, when it received a package of money from 3i and Accel Partners. Techworld spoke to George Polk, chief executive of the Cloud, about the company's plans, which include expansion to other countries in Europe.

At the launch of the Cloud last year, Mr Polk told Techworld: "As long as I keep my ego out of the way, we have an interesting value proposition." Other Wi-Fi providers might attempt to raise their profile, deal directly with users, and create a new brand, but the Cloud would keep in the background, and enable other providers - who already have the brand and the billing technology - to deal with the customers, he said.

"My ego is still out of the way," he says this week. "The temptation is there to become a major service provider, but we will not be doing that."
He won't say how much the VCs have given him, except to say it isn't enough to take on the marketing budget of a Vodafone. "I'm sitting on a nice pile of cash, but not that kind of pile of cash... the cost of building an end-user service-provider brand is hundreds of millions, not tens of millions."
So the Cloud will continue to use its expertise to drive other providers' brands: "We are still very focussed on being a white label solutions provider," he says. "My proposition to the customer is - I am going to make you look better to your customers."

Going international
Despite that, the capital will change things at the Cloud. "Our business will be very different," says Polk."In fact it has already become very different."
The Cloud still plans to be, as he puts it: "the entity that makes things happen, that will cause wireless broadband adoption to increase". But to do that, he has found they need more than just coverage.
"Putting in the back end takes quite a lot of time," he says. "We have been drawn more and more into service creation, and service management to give service providers an on-ramp." The Cloud, he says, has become more of a solutions provider than he expected.
It is this aspect of the business that is going international, in the shape of the newly launched Cloud Carrier Services, a division set up to help service providers get into wireless broadband. "If you are doing something like that, you might as well do it in more countries than one," says Polk.
The services the Cloud will offer in different countries will vary: "We look at what is not being done, and if we can find a business case to do it, then we will do it. We are not taking a dogmatic approach to the rest of the world. We're going to understand what that market opportunity looks like."
Cloud Carrier Services' work will range from negotiating with owners of site estate, to negotiating with other service providers, or just providing advice and counsel.
And it should come fairly quickly: "Foreign business will be significant piece of the Cloud in the next six months, and will be increasingly large in the next year. We will be seeing network construction in a couple of countries by the end of the year."
What is holding back Wi-Fi usage?
Despite the excitement of moving to the next stage, he can't avoid the fact that public Wi-Fi use is not growing as fast as the most optimistic predictions and that Wi-Fi providers are not making money, yet (US providers including Cometa have gone out of business)
"The main problem is ease of use," says Polk. "This business becomes interesting when you have a device that knows how to connect to the network, when that device connects automatically to the network, and when you pay for usage on a bill you already have."
Wi-Fi is too hard to use he says, and the main reason is more to do with business processes than technology. That was the reason the Cloud spun off a Wi-Fi clearinghouse, RoamPoint, in April, which will take on the problem of hooking up providers back-end databases and policies.
The other problem is pricing: "The way access is priced is an ease of use issue. You don't want to pay for an hour-long block of time, you want to use the access, and pay for what you have used."
For example, after spending an hour on the plane, composing and answering emails, he only needs a couple of minutes access in the baggage hall, to send them. Access providers offer a card for two hours access. "I don't want that, I want to pay for four minutes."
A big lesson to learn from the mobile providers is to make it easy. Although international roaming costs are high, we go on using our phones abroad because it is easy to do so. "Someone goes to Spain, uses their mobile phone and gets a big bill. They say they won't use it abroad next year, but in the end they do," he says.
"Make Wi-Fi easy to use and they'll use it," he says. "If you don't, they won't."
Security is not a big block for Wi-Fi, he says, but it is something where perceptions differ: "It's quite funny. We did a roadshow where we went around and presented WiFi solutions to people in UK. A large number of enterprise IT people came. Something like 80-90 percent had WLANs at home, while only 5 percent had it in the enterprise.
"When we asked them, the users cited concerns about security as a reason for holding back Wi-Fi in the enterprise," says Polk. "When we asked them about Wi-Fi in the home, they said that problem had been solved."
Wi-Fi meets 3G
Wi-Fi and the cellphone world are set to collide, but the providers are nowhere near putting joint packages together. Before this happens, Wi-Fi needs to get its act together, says Polk: "GSM is a well-honed world, thanks to GSM clearing houses. The operator doesn't have to make 400 roaming deals round the world. In Wi-Fi, we don't have a clearing relationship and we don't have a technical relationship between providers."
Once again, he reckons RoamPoint will help get Wi-Fi into the right mode to meet up with the cell network. "We need someone who stands in the middle and translates." A lot of operators are connecting to RoamPoint he says.
The comparison between Wi-Fi and 3G is fundamental, he says: "Really it has to do with how valuable you think the network is. Even if you accept that the 3G network is going to be all singing and dancing, those networks are going to have a limited capacity. 3G will be 'broadband', but compared with GPRS, not compared with Ethernet."
"The WLAN is an Ethernet replacement," he says: "It can move large quantities of data much more efficiently and cheaper." With comparatively few people on the network, 3G can work he says, but that is expensive, and only suits a user with a big budget: "When you load on other services, it will lock up the network. Generic data traffic is cost inefficient to run on a 3G network" (see this White Paper for another view on the comparison between Wi-Fi and 3G).
Nevertheless, he thinks the two will work together. For routine work, users won't want to play 3G rates, but they will want the same client software to operates in the same way on both networks to give them the choice when they need connectivity.
"Two years ago all mobile ops would have said what I just said was crazy," he says. "Six months ago they had product guys working on it. Now they have a product team."
Voice on Wi-Fi"The public access voice Wi-Fi market, is like voice bypass in the telecoms world," he says. In other words, it's only for people who are really price sensitive and who are willing to put up with poor quality (we agree with this).
"Voice stuff is in its early days still," he says. "We are testing voice systems and will have some commercial products around voice, but it will be more fixed than mobile in next year or so. There are a lot of things still to come together."
For Wi-Fi voice to work, needs a combined handset which does both moving between hotspots and home Wi-Fi networks and the cellphone service. "It is almost certain that NTT DoCoMo will be a leader in this."

This story, "What is the Cloud going to do with its money?" was originally published by Techworld.com.


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