Comcast (NASDAQ:CMCSA), the cable and Internet service provider, has an aggressive plan to reach 8 million Xfinity Wi-Fi hotspots by the end of 2014, covering 19 of the country's 30 largest cities. Many of those hotpots are the traditional kind located in bookstores, cafes, and other retail locations. But the ISP also plans to add hotspots in a more controversial way.
The company has begun rolling out technology in parts of Texas and Washington that turns home wireless routers into public Internet hotspots by broadcasting a separate WiFi signal from the router that can be used by other Comcast/Xfinity customers. The maneuver has been receiving mixed feedback from customers. Some appreciate the added free access points while others are not pleased about having strangers accessing the Internet through their routers.
The feature can be turned off but Comcast released a statement, reported by GeekWire, urging customers not to do so.
"We encourage all subscribers to keep this feature enabled as it allows more people to enjoy the benefits of XFINITY WiFi around the neighborhood," it read, also including instructions for disabling.
The move may not be popular with customers but it gives Comcast huge additional reach. The company reported over 21 million high-speed Internet customers in the first quarter of 2014 and all of those represent a possible way for the company to expand its public Wi-Fi network.
What is Comcast trying to do and why is it doing it?
Comcast wants to protect its high-speed Internet customer base by offering those same customers a mobile Internet solution. The company has seen huge growth in out-of-home Internet sessions, estimating that nearly 200 million have been initiated on the Xfinity Wi-Fi network so far this year. That's a 700% increase from the same period last year.
The company also acknowledged in a press release that Cisco predicts that 88% of all U.S. data traffic on mobile and portable devices will travel over Wi-Fi by 2018.
"Wireless access is increasingly important to our customers, and we are building a network that not only meets today's needs but also stays ahead of tomorrow's demands," said Marcien Jenckes, Comcast's executive vice president of consumer services.
The company brought in $2.75 billion in revenue from high-speed Internet in the first quarter of 2014. If more and more Internet traffic is moving to Wi-Fi, it makes sense to offer increased access outside the home as a perk to customers or it risks losing them.
The challenge for Comcast is that offering lots of free hotspots only helps users if those spots are where they want to use the Internet. For the service to be valuable to customers it has to be as big as possible. Leveraging its massive customer base is an ingenious way to give the company the broadest possible reach.
Why are people angry?
While some people simply don't like the idea of people piggybacking on their Internet access and others are afraid their personal data may somehow be compromised. Still more are angry that Comcast made the service available on an opt-out rather than an opt-in basis.
Comcast dismisses the data breach fears saying that the hotspots – which appears as "xfinitywifi" for those searching – is completely separate from the home network. "Someone accessing the Net through the hotspot can't get to the computers, printers, mobile devices, streaming boxes, and more sitting on the host network," Dwight Silverman wrote in a Houston Chronicle blog post.
Silverman also reported that Comcast says the added users won't slow down Internet access for the people actually paying for the home connection. The visitors and the owners won't be sharing the same bandwidth. Instead additional capacity will be allocated by the ISP to handle the additional traffic.
Comcast did mail customers -- at least the ones affected in Texas -- a notice about the new service before it launched, but it did not ask their permission. That's certainly the fastest way to expand coverage, but the backlash could grow as people realize what is happening.
Smart, but a little evil
Very few companies are brazen enough to sell customers a service then piggyback its own product on top of it. But Comcast has not become one of the more disliked companies in the country by always playing nice.
This strategy may work because an awful lot of Comcast customers won't realize it's even happening. How many people read notices sent out by their ISP?
The company certainly could have handled the roll-out in a more above board way -- perhaps by making it opt-in, but only offering access to the added Wi-Fi spots to people who participate. Ultimately that may not matter because even if half of the company's 21 million customers opt out that would give the company 10.5 million new, free hotspots -- well more than its entire stated goal.
Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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