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Sky purchase of The Cloud steps up UK data race

Sky, Virgin and Vodafone all chase BT Openzone, while O2 invests in 3G capacity

By CAROLINE GABRIEL

Published: 25 January, 2011

READ MORE: M&A | UK | The Cloud | Hotspot | Wi-Fi

Cable and broadband suppliers are increasingly investing in networks of Wi-Fi hotspots, in order to keep customers loyal with bundled WLan access and provide a measure of wireless coverage. In the UK, the market is set to become very competitive, with Sky Broadband planning to acquire hotspot operator The Cloud.

This could position the provider, a unit of Rupert Murdoch's BSkyB, against BT Openzone (which has a partnership with The Cloud). Also targeting Openzone's lead is leading cableco Virgin Media, which recently outlined plans to build a network of hotspots across the country this year, and Vodafone, which has been testing its SureSignal femtocells as a possible public access solution.

BSkyB is expected to announce The Cloud deal this week and then to launch free Wi-Fi for its 2.8m subscribers, according to reports in The Sunday Times, which is owned by Sky's parent firm, News Corp.

The Cloud has about 22,000 hotspots in the UK alone, a network it has built up since it was founded on the crest of the public Wi-Fi boom in 2003. It was a pioneer of extending hotspots from the 'coffee shop' model to becoming the basis of a wide-ranging network that could support wholesale partners and roaming, putting pressure on the traditional 3G data providers, especially in the urban and business travel markets. The Cloud offers services under its own brand for £6.95 a month (unlimited), with more ad hoc rates too, and it has wholesale agreements with brands like McDonalds and Marriott, and several roaming arrangements.

The UK cellcos need to expand their own data platforms too. O2, which has extensive hotspot roaming deals itself, has doubled its infrastructure capex to support heavy duty mobile data devices such as iPhones and dongles. It is migrating 3G users from its 1.8GHz band to its 900MHz GSM spectrum, having been given permission to refarm those frequencies for 3G. UK regulator Ofcom recently ruled that O2 and Vodafone, the only holders of 900MHz licenses in the country, could retain these, rather than being forced to redistribute some to rivals.

O2 UK has confirmed that it is now spending an average of £2m (€2.35m) a day on deploying more 3G capacity in the 900MHz band to improve data throughput. "As part of our financial results we announced that we'll be increasing investment in our national mobile network by up to 25 per cent this year," the operator said in a statement. "Part of this investment will be realised through the migration to 900MHz spectrum, which was formally agreed by Ofcom last week".

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