Public WiFi networks are popping up like mushrooms in crowded spots where always connected geeks seek shelter for a frappuccino and a facebook update. This should be good news for mobile operators desperate from capacity shortfalls: they can now offload part of their data traffic to less expensive wholesale WiFi bit pipes – or they can even catch a free ride. So should mobile operators embrace the symbiosis and integrate externally cultivated WiFi hotpots in their business models?

Biological parasites can often be useful for their host’s bodies. Likewise, clusters of public WiFi access points provide the obvious offload benefit. But hungry parasites having the urge to multiply can also have dare consequences on their hosts’ valuable organs. Will operators be shooting themselves in the foot if they allow WiFi to become the default radio access point in the most lucrative urban hotspots? Besides the obvious spectrum and infrastructure asset devaluation that this will entail, one can’t resist wondering: will they be willing to hand over customer relationship to WiFi players for saving a few bucks on the cost side? The offload business case rests on the assumption that it is significantly cheaper to provide hot-spot coverage and capacity by buying wholesale access from WiFi clouds than by investing into the self owned cellular infrastructure. But what if a new breed of home grown bacteria challenges this premise?

While it has got relatively little industry attention, cellular network platforms in the last few years have undergone a major evolutional jump. The new generations of previously refrigerator sized base stations now fit in the size of a DVD player. And even more importantly, in conjunction with their shrinking physical dimensions, the hardware cost of modern mobile network equipment has been in free fall during the recent years. Imagine if in the near future the hardware price of a high capacity, GSM – HSPA – LTE combo base station would fall below 10K Euro and small scale “micro” base stations would cost on the order of hundreds of Euros! Of course, that’s only the hardware, and gear makers need to maintain their top line revenues to pay the salaries of their R&D staff. So they keep on charging fortunes for the software licenses required to unlock the otherwise large hardware capacities.Software can now command more than 90% of the CAPEX price tag of a fully configured modern base station.

But luckily for operators, their hungriest suppliers are showing signs of succumbing to market realities and are adopting “gigabyte friendly” software pricing approaches. In such novel gear pricing models the licenses are linked not to the traffic but instead to the number of active customers, in essence squaring off the famous cost-revenue decoupling crisis.

What do you think? Will low cost hardware and “gigabyte friendly” software licensing models, combined with the inherent benefits of protected spectrum and controlled user experience, give an ultimate evolutionary advantage to “home grown” cellular gears over unsanded offload workarounds?