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I have a 4G phone which in the corner of my house receives 4G signal, and using I get about 20Mbps, if I'm connected directly to my phone from my laptop and sitting next to it.

My bedroom is on the opposite side of the house and in it my phone doesn't receive 4G. So I bought a WiFi extender, with the hopes of leaving my phone in the corner that gets 4G and using my laptop in my bedroom.

If I sit next to my phone and connect to the extender (which is extending my phone's hotspot), then i get about 7Mbps. However if I sit in my room and connect to the WiFi extender I get 0.9Mbps. If I run the speediest on my phone I get 20Mbps still.

Why does the distance between my laptop and WiFi extender affect the speed of the internet? Meanwhile if I transfer stuff to my phone or VNC to it (i.e. local connections) whether I am in my bedroom or next to my phone and connected via the extender.

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This is a fairly basic explanation for why. Phone hotspots usually only have a <10' range due to power restrictions. Now your wifi extender may be much more effective with a clear line of sight, but from what I can gather you're trying to get a signal through at least 3+ walls, its not going to work very well unless you have a strong router. TLDR: More distance + obstacles requires more power to maintain a strong signal. – slow_excellence Jul 8 '14 at 4:11
My landlady's old router was a PoS and I barely got a 100kbps connection through the ceiling on a 10mbps rated network. I had to go out and buy my own router that was strong enough to penetrate the hardwood flooring and whatever was between in order to be able to get a solid connection. In short, you need a stronger router/range extender or you need to move your bedroom. – slow_excellence Jul 8 '14 at 4:14
@slow_excellence, I know the Phone hotspot's range is small, that's why I bought the extender. The signal from the extender itself is quite strong (as in my laptop shows all the bars). The walls are quite thin and basically just plaster board, and the house is quite small. I would completely understand if the WiFi signal from the extender was weak in bedroom, and the local connections were slow. But they aren't, it's only connections to the internet. – Jonathan. Jul 8 '14 at 11:42

It may be some issue with your extender. I use TPLink MR3420 router. It works great. My mobile phone is on first floor, I extended the phone's hotspot with my router and use the internet on ground floor. It's quite some distance but it works great.

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