SME/SOHO MBB propositions show a staggering lack of differentiation

I've been looking at SME/SOHO MBB propositions this week and it's flabbergasting how little MNOs in Europe are doing to differentiate the offers from those for consumers. Worried about being a bit pipe? How about just offering a single flat-rate tariff to all your customers, regardless of who they are. Crazy. Segmentation is the key to profitably providing MBB. Business users are prepared to pay for reliability and additional features, so make sure you're selling them those tariffs rather than just a rehashed version of consumer tariffs. Admittedly operators in some markets, such as France, are still focusing largely on an enterprise market, so there is little risk of consumerization of enterprise customers. But in markets like the UK where the MBB market is consumer focused, putting in place an appealing set of SME/SOHO tariffs is absolutely vital to mitigate ARPU decline. MNOs have always been bad at selling to SMEs and SOHOs but it surprises me that there is such a lack of dedicated SME/SOHO-oriented tariffs.

I'm not going to point any fingers here as everyone's about as bad as everyone else. My dissection of individual MNOs' offerings is reserved for the piece I'll be publishing via Analysys Mason in the next week or two. It'll be called "MNOs must differentiate SME/SOHO mobile broadband propositions" or words to that effect. I'll also include some detailed recommendations about how to do it. For instance SME/SOHO plans should make use of some or all of the following: time-based pricing, sharer plans, bundled WiFi, dedicated customer care, additional service features and ultimately differentiated grade of service.

Swedish MNOs agree standard definition of MBB data rates

Mobile network operators have been dogged by criticism that they make over-inflated claims about their mobile broadband speeds, particularly compared to DSL.

Swedish mobile operators Telia Sonera, Telenor, Tele2 and 3 have sought to head of this criticism by agreeing to a set of guidlines about how they can promote their mobile broadband speeds. As of 1 September they will promote the 'practical maximum' rather than the 'theoretical maximum'.

The speeds are as follows:

• 3G - (384Mbit/s) can be advertised as 0.3Mbit/s (surely that's the same!)


• Turbo 3G (3.6Mbit/s) can be advertised as 3Mbit/s


• Turbo 3G (7.2Mbit/s) can be advertised as 6Mbit/s


• Turbo 3G (14.4Mbit/s) can be advertised as 10Mbit/s


• Turbo 3G (21 Mbit/s) can be advertised as 16 Mbit/s

While this is a step in the right direction it doesn't go very far. In effect they've simply agreed to market the practical maximum as 70-80% of the theoretical. There's nothing more complicated than that. It's a gesture in the direction of reflecting reality, but it doesn't. In their defence, however, no definition is ever going to reflect reality as speeds are so dependent on local factors. The only way to do it is to let subscribers try it for themselves. That's facilitated by try-before-you-buy and, from now on, by bundling free connectivity with embedded laptops. This promises to be a massive marketing opportunity as outlined in the recent report from Analysys Mason: Mobile broadband devices: from USB modems to where?

New Commercial Models & Pricing Strategies For Operators 17-18 June

Another upcoming mobile broadband conference that may be of interest. I'm speaking on the first day at 4pm on the subject of "Forecasting Mobile Broadband Growth and the Evolution of Devices, Datacards and Dongles". Snappy title, I know, but it does what it says on the tin. I'm also chairing the whole of day 2.

With increasing pressure on the RAN it's critical for MNOs to manage the bandwidth demand of their subscribers, which makes pricing all the more important. There should be a lively discussion, helped by representatives of all the top mobile broadband operators including T-Mobile, 3, Vodafone, Mobilkom and Orange.

Vodafone UK set to revamp MBB roaming rates

I know, I know, this is turning into a Vodafone blog...but bear with me.

It looks like Vodafone UK is going roaming crazy. Having shaken things up with the abolition of roaming charges for voice across 35 markets it is turning its attention to MBB. According to an article in ISPReview VF UK is scrapping its current international tariffs, the £60/month Euro Travel and the £95/month World Travel, which carry 200MB of data, due to "lack of take up". I'll wait with interest to see what they'll replace them with.

Vodafone seems to be one of the few operators that's actually paying attention to the enterprise MBB market in the UK at the moment. A few days ago I commented on their revision of their standard enterprise tariff. Everyone else seems to have forgotten about the good old businessman in pursuit of the burgeoning consumer market. A lot of that is to do with the fact that all those good old businessmen are abandoning the expensive business tariffs and "consumerising", or "choosing the cheaper option" as I prefer to call it. As a result, signing up a business user doesn't generate a lot more revenue than a consumer and they tend to be more difficult to get.

What's required, of course, is some way to differentiate the business offering to get those price insensitive users to pay more. The obvious option is differentiated grade of service, but that will be a few years down the line. It'll be necessary though. In the meantime, MNOs need to look at features that business users appreciate. Roaming is clearly one and it could do with a revamp.

Over the next 3 months I'll be focusing quite a bit on both enterprise MBB and the ways to differentiate MBB services. Keep an eye out for the reports.

Vodafone Greece and HOL tie-up - the shape of things to come?

I was particularly interested to see the news that Vodafone Greece is in talks to merge with ISP Hellas On Line (HOL) to allow the company to jointly market fixed and mobile services. The timing of this indicates that VF GR has recognised that mobile alone won't be enough to tackle most subscribers broadband needs. They need to combine fixed and mobile propositions to provide the best service and minimise network congestion.

Has 3 upgraded its network in London?

Mine has been a mobile-only household for more than 6 months now and I'm rather reliant on it, which made it very interesting for me to see that according to my "Connection Information" on the modem client, my 3 mobile broadband service is now giving me a maximum 2MBit/s uplink and 8.6Mbit/s downlink. Of course the average speed crawls along at sub-50Kbit/s most of the time but previously the highest download speed was 3.6Mbit/s. A higher maximum would indicate some sort of network upgrade. I've tried disconnecting and reconnecting to see what maximum I get, but after 15 mins all I've had is (a par-for-the-course) 86Kbit/s uplink and 147Kbit/s downlink, during which time I've been downloading emails, browsing and uploading pictures to blogger. So the poor general performance of my mobile broadband prohibits me from double checking the results I received before. I'll investigate further.

Vodafone results reflect challenging environment

I’ve just got off a call with Andy Halford, CFO of Vodafone about the financial results for the year ending 31 March. Overall revenue growth of 15.6% to £41 billion, with EBITDA up 10% at £14.5 billion looks really good but the acquisition of its Indian subsidiary and exchange rate fluctuations have played merry hell with their results. Pro forma revenue, including India, was up 1.3%. EBITDA margin fell from 37.1% to 35.3%. To break the figures down by region a little:

• Europe: organic revenue down 1.7% reflecting economic issues and increased competition. EBITDA down 1.1 percentage points.
• Africa and Eastern Europe: Organic revenue of only 3.9%. Strong revenue growth at Vodacom offset by problems in Romania and Turkey, the sick man of Vodafone.
• Asia-Pac and Middle East – 19% pro forma increase in revenue, but lower growth expected in future and a reduced EBITDA margin.
• Verizon Wireless – Revenue up 10.5%. Now contributing 30% of the group’s adjusted profit. It seems the decision to hold on to VZW has been vindicated.
• Data revenue - increased from £2.1 billion to £3 billion, accounting for 8% of revenue, up from 6.4% the previous year. Notable because of the changing mix of subscribers, i.e. proportionately more revenue coming from emerging markets.

So, the figures don't look that great, but, the prospects are actually quite reasonable, with some interesting initiatives. At least, they’re talking the right language: acceleration of the £1bn cost reductions announced last year, new roaming business unit to exploit opportunities at a group level, new mobile data application development initiatives, extension of SuperFlat tariffs (which seem particularly appropriate to the current environment) to markets beyond Germany, and looking to exploit strength in the enterprise space.

As noted in my post yesterday, Vodafone needs to leverage its scale. It’s been good at doing that in terms of branding, but not much on the services side. It’s a shame it’s taken so long, but better late than never.

A few other issues also cropped up during discussions. It’s wait-and-see on LTE and they’re pleased to benefit from the learnings of Verizon when they deploy next year. There are no acquisition plans although they’ll keep an eye out. There aren’t many really distressed assets out there to hoover up although. they might look at opportunities as they come up. More focus on moves that can create value independent of acquisition, e.g. merger with 3 Australia.

I'm out of the country for 3 days and Vodafone gets very busy indeed

I was out of the country for most of the week and during that time Vodafone seems to have pretty much revamped everything they do. Some really exciting things in there:

• Removal of roaming charges. Link here. From 1st June until 31st August contract and prepay users will pay no roaming fees to make calls from 35 countries (i.e. those where VF is present). Yes, that's "no roaming fees". New cheap international call charges will also apply. A trial run in preparation for EU legislation? Or a more fundamental shift in strategy to exploit scale?
• New application development framework. Link here. A new developer-friendly central point of contact for developing applications for the whole Vodafone group and more access to APIs, such as location-based elements. Lower rev share too. Clearly a strike back against the recent flurry of apps stores and one that plays to Vodafone's advantages of scale, access to critical user data, such as location and availability of secure billing channel. I was tempted to refer to this as a new apps store, as many other commentator has, except that VF has had an app store since 2002. It's called Vodafone Live!
• Mobile advertising rolled out to 18 countries. Link here. They'll keep on rolling out mobile advertising, as it represents a significant revenue opportunity, although to be honest, probably not for 3-4 years.
• New enterprise mobile broadband tariffs. Link here. Much less earth shattering, but good that they're giving attention to an oft-neglected and potentially very profitable segment. Their counterparts seem to think that simply repackaging consumer tariffs for enterprise is enough. It's not. It's £18 for 5GB, but the removal of OOB charges makes for a more predictable tariff.

Over the course of the last 12 months I've been talking to MNOs a lot about mobile data opportunities. Put very simply the opportunity is in 3 parts: access, advertising and applications. With these announcements Vodafone has acted aggressively on all of these. Furthermore it seems that Vodafone is finally taking advantage of its scale, particularly with the international roaming offer. Thumbs up.

Of course, if I was being cynical I'd suspect that tomorrow's results won't be too good and this is an effort to distract attention from that. We'll see tomorrow!

I'll be writing at more length on these developments as part of the Analysys Mason research programmes.

Ukraine: a massive mobile broadband opportunity (eventually)

I’ve spent most of this week in Kiev (or should that be Kyiv?) talking to mobile network operators and various other interested parties. There’s a unique set of circumstances that makes it an interesting case study for mobile broadband. There’s only one UMTS licence awarded, to Ukrtelekom, incumbent PTO and now greenfield 3G operator. Meanwhile the other mobile operators are becoming increasingly frustrated, and rightly so, by the government dragging its heels over allocating the other 3G spectrum. This has had a real impact on 3G deployment as the economic downturn has hit the local currency hard with the result that infrastructure has become significantly more expensive. So the delays have had a possibly permanent impact on the deployment of UMTS.

As a result of the lack of 3G infrastructure is a very underdeveloped market for mobile broadband. Particularly depressing given the relative lack of fixed-line infrastructure. DSL is hampered by poor fixed line infrastructure. However, fibre-to-the-building deployments, both legal and questionable, are going ahead fairly rapidly. Kiev, for instance, is a city of tower blocks and fibre is a good way of addressing user demand.

So, does this leave mobile operators high and dry? Not at all. It just means that they have to be more creative. One operator, MTS, has reused its old NMT-450 spectrum for CDMA 1X-EVDO Rev A and deployed a mobile broadband (i.e. no voice) service using that spectrum. The others are squeezing the 2G network as much as they can.

Of course, they’re still crying out for more spectrum but given the current exchange rate it’ll be expensive to deploy mobile broadband. So we expect them – when the 3G licences are finally awarded – to focus on dense urban areas.

Despite all the problems, we’re fairly bullish about their potential. As outlined in the report Mobile broadband in Europe: forecasts and analysis 2009–2014 we’re expecting 10% penetration by 2014 and continuing growth after that.

Why WiFi doesn't work

I saw this report from Ofcom the other day on why WiFi doesn't work. Makes for interesting reading.

No time to comment right now. In the final throws of putting together my report on mobile broadband devices and off to Kiev tomorrow.

See you at Broadband World Forum Europe in Paris

Analysys Mason will be Analyst Sponsor of this year’s IEC Broadband World Forum Europe event in Paris, 7-9 September. Last year was my first taste of this perennial event (I’m a mobile guy venturing into broadband) and I found it very useful indeed. This year I’m looking forward to it even more. Mobile is now firmly established as a key issue for the broadband community so I’m expecting some fierce discussion.

But, mobile isn’t just a threat. It’s also a massive opportunity for broadband operators. It will be increasingly important for broadband providers to have a multiplatform approach spanning fixed, mobile and public WiFi. This is the subject of the session at which I’ll be speaking. The session, called "Capturing Value of Heterogeneous Networks with Smart Connectivity" (Wednesday 9th September 16.00-17.30) features luminaries from Nokia Siemens Networks, Ericsson and yours truly. I hope you can make it.

Exeter celebrates the digital switch-off (and promotion)

There were wild scenes of jubilation as Exeter became the first city in the UK to begin the switch off of analogue TV transmissions as the Stockland transmitter stopped broadcasting some analogue channels at midnight Wednesday. Full switchover will happen on the 20th May.

To celebrate the event, thousands of the city's residents (myself among them, Exeter is my home town) took the inexplicable step of trekking 250 miles to the Don Valley Stadium in Sheffield.

A football match was played as part of the entertainment, with Exeter running out 1-0 winners over Rotherham United, courtesy of a Richard Logan header in the 71st minute. As a result of the win Exeter achieved promotion to League 1, but clearly all the Exonians were really there to celebrate the switchover.

More UK consolidation rumours...but does it make sense?

This time it's Orange that the speculators have their eye on. According to a report in the Financial Times. Or 3, if you believe others.

The basis for the FT speculation was a comment by Rene Obermann that "We feel the UK market is competitive, and consolidation would do good for that market". True. A maturing market naturally consolidates. The question is how that is achieved?

At the network layer we're already seeing it, thanks to network sharing deals such as the MBNL jv between 3 and T-Mobile and outsourcing deals of which there have been many recently. Effectively this reduces the number of networks from 5 to 3 or 4. This makes operator level consolidation increasingly unlikely. If network operations are consolidated and outsourced, MNO operations focus on sales and marketing, creating "service providers" (SPs). There's certainly room for more than 3 or 4 SPs in any market.

The issue then is segmentation. MNOs/SPs tend to focus most of their attention on the same segment, high-end consumers, but in a very homogenous way. For there to be room for all the SPs they need to rethink their target segments, whether they be sub-segments of high-end consumers, or a different group altogether.

Further delays on 3G licence award in France

More government delay over the allocation of the fourth 3G licence in France. This time over whether too little is being charged for it. I guess there are procedures that need to be followed but it will be a blessed relief once it's finally awarded. If MBB is going to take off in France it needs a kick from someone disruptive. Free or Virgin are both frequently quoted as possible bidders. Both seem to fit the bill.