Tuesday, 30 June 2009

UK MBB tariff moves indicate a slowing market

I've been away for a few days. During that time, a stack of MBB tariff moves have been announced (or are rumoured) by the UK MNOs.
  • Vodafone introduces a 6 month contract at £15/month for 3GB. £29 upfront for the modem.
  • Orange has launched a new range of enterprise tariffs and a selection of new laptops.
  • 3 cut the price of some of their tariffs. Yet more evidence that growth is slowing down.
  • Not quite a tariff move this, but from late July O2 mobile broadband customers will be able to access BT Openzone's 3,000 hotspots as well as the 7,500 of The Cloud to which they previously had access. Article here.

The move from O2 isn't exactly a tariff announcement but it is a good move. O2 continues to work well to off-set the limitations of its HSPA network. The combination of attractive fixed/mobile BB bundles and WiFi should limit the user reliance on the macro network.

As for the other announcements, I'd applaud anything that offers greater segmentation opportunities, such as a 6 month plan. Also, the business segment has been frankly criminally neglected and needs addressing, although I don't really think Orange's announcement on that score is that earth-shattering. But, some of these moves are starting to look a little like desperation. Could it be that growth in the MBB segment is starting to slow and they're making up for it by slashing prices?

Glastonbury mourns the passing of a legend

I spent much of the last week having a great time getting muddy and sunburnt (as well as listening to some great bands) at Glastonbury Festival. Link here if you're unfamiliar.

If you've ever been, you'll know that various unfounded rumours usually do the rounds thanks to the lack of contact with the outside world. This year there was one monumentally earth-shattering rumour that no-one could believe. It seemed that a once beloved but recently tarnished superstar had met an untimely end.

A typical conversation went like this: "Have you heard the news?" says a teary-eyed reveller to a soon-to-be-blubbing friend: "T-Mobile may soon be bought out by Vodafone". I'm not sure we're all ready yet to mourn the passing of web'n'walk or Flext. It will take time.

I also heard a rumour that Michael Jackson died, but I'm not sure I believe it.

Tuesday, 23 June 2009

Vodafone to launch femtocells in the UK on 1st July

Vodafone is set to launch femtocells in the UK on the 1st July. Details here. The Vodafone Access Gateway can support up to 4 calls at a time and is compatible with all 3G handsets. The quote prices are a bit confusing but reading between the lines it's either bundled with certain price plans or for a stand-alone box it's either £160 up front or £5/month. Nothing specific on data but since it's 3G and the Vodafone press release promises the "full range of Vodafone services " I have to assume it includes browsing too.

Quite a bit of negative feedback on El Reg.

iPhone tethering creates headache for O2

Unsurprisingly a work-around has already been found for the need to buy an add-on for tethering the iPhone 3GS to use it as a modem. A downloadable app from benm.at will do the trick, although O2 have commented that this unofficial tethering is prohibited under its Ts&Cs.

In my recent report for Analysys Mason, Mobile broadband devices: from USB modems to where? I predicted that this handset-as-a-modem option would see only modest uptake for various reasons including the fact that it is rather too clunky to be user friendly and it's not in the interests of the MNO or vendor to push it. Of course, if it's free, that's a different matter.

The problem with the iPhone is the inclusion of unlimited data packages for free with all contracts. Where subscribers are being charged for flat-rate mobile internet tariffs the charges are typically more per-GB than for mobile broadband. So there's little problem for the MNO with tethering, permitted or otherwise. There's some minor revenue leakage as a result of users being able to share a bundle across MBB and mobile internet, but the implications are probably modest. However, there more of a problem where all the additional usage isn't generating any more revenue, particularly where the month fee is not that substantial and the plan is actually unlimited.

A typical iPhone 3GS user is paying £175 up front for a 600 minute/500 SMS/unlimited data package over 24 months at £34.26/month. This is only £15-ish/month more than the equivalent SIM-only offer which includes no free bundled data and (of course) no heavily discounted iPhone. This is fine for O2 as long as it isn't also cannibalising mobile broadband revenue which should also be generating £10-£15/month from the same subscriber.

Whether this becomes a problem depends on how stringently and effectively O2 implements their fair usage policy. It'll be an interesting test. T-Mobile has run into problems enforcing the no-Skype rule on its network and I suspect O2 might find itself in the same position.

Friday, 19 June 2009

Prospects for MiFi and other "home hub" MBB products

Over the last week I've met with a couple of interesting vendors. The first was Novatel that manufactures the natty MiFi device, which works as a WiFi router with HSPA/EVDO backhaul (left). Currently supplying to Verizon, Sprint and Telefonica. The latter were very enthusiastic about the prospects for the device the last time I spoke with them. Although it's a slick piece of kit and very user friendly, I can't avoid the thought that it's still a peripheral and ultimately peripheral devices become subsumed into the main device (think WiFi or Bluetooth card, screen, keyboard, mouse). So where's the opportunity for a standalone device? One interesting idea is that it offers a way for iPhone users in the US to roam onto other networks, using the iPhone's in-built WiFi to connect to the hub. Rather niche though. Another is to facilitate group connectivity through a single subscription, but ultimately MNOs can replicate this through group plans that are more flexible, e.g. because they allow the multiple users to be using their connectivity from different places. There is no immediately obvious killer application, although there are some juicy niches.

In my recent report Mobile broadband devices: from USB modems to where? (see here for Analysys Mason coverage of MBB devices) I was rather sceptical about the prospects for these "home hub" products making a breakthrough into the mass market. I have assumed that they will make only a minor dent in the dominance of the USB (and later embedded) modems.

More universal appeal depends on the usability. If it proves to offer a better user experience than the USB modem then it will gain traction. It can do this through offering a better user experience, not least by improving on the clunky PC client that is a frequent source of frustration to MBB users. Also, the fact that there is a built in Linux-based processor and expandable memory in the device itself adds to the potential use cases.

Monday, 15 June 2009

LTE, WiMAX and the end of history

For various reasons that I won't go into I spent a little while on Saturday afternoon sat in a beer garden in Notting Hill discussing the relatively positioning of LTE and WiMAX. Put very simply LTE will eventually win. It has a much more effective upgrade path for GSM/W-CDMA operators and has managed to rope in some of the most prominent 3GPP2/CDMA operators including Verizon Wireless. As a result it has huge benefits of scale which will eventually drive the price down to such a point that WiMAX won't be competitive. The big benefit that WiMAX has is time to market. It's available now and LTE will take a while to reach its full potential, not least because 3GPP operators can sweat their HSPA assets. What's increasingly apparent, however, is that the "4G" (for want of a better term) technology of choice will be LTE. WiMAX will have a niche role to play, predominantly providing DSL replacement services in emerging markets.

Excuse me switching from telecoms to political economics. This all sets me in mind of Francis Fukuyama's essay "The End of History?". As the Berlin Wall fell and liberal democracy (or capitalism, if you prefer) became all-consuming, the age old struggles between different forms of government were, according to Fukuyama, over. This was the "end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government". Leaving aside how presumptuous this theory is, the idea that a single philosophy can dominate the world mirrors what is occuring in wireless technology.

In both worlds, the ideological wars of the 1980s are over and old enemies have become fast friends. Global homogeneity is all but guaranteed. There are a few outposts of alternative thought, but for the most part LTE (or liberal capitalism) dominates. But, as with political philosophy, the picture isn't quite that simple. There has become an increasing fragmentation in method of implementation. Some hurtle full pelt towards a pure version, while others tinker with hybrid models and China, as ever, does its own thing. LTE has challenges, not least in diversity of frequency allocation, but it has, to all intents and purposes, won.

Thursday, 11 June 2009

MBB users in the UK get 900Kbit/s on average

According to a new study by Epitiro (no, me neither), the average mobile broadband download speed in the UK is 900Kbit/s. On average users are receiving 24% of the advertised speed, web browsing is 34% slower than on DSL and latency is such that game-playing is not possible. The test seems to have had a pretty robust methodology. 1.4 million tests from 1300 users.

A couple of things spring to mind. Firstly, 900Kbit/s sounds OK. Certainly good enough for browsing. Not quite enough to comfortably stream over-the-top video or play games, but my assumption was always that people who wanted to use high bandwidth services would need to maintain a DSL/cable connection anyway. For these users MBB is a complement, not a replacement.

Secondly, I'm sure there is wild variation within that average. If everyone received 900Kbit/s 90% of the time and there was very little variance there would be a strong argument for MNOs advertising THAT rate. As it is, the variance is massive. Personally, if I could get a guaranteed 100Kbit/s on my mobile broadband, I'd be happy. For this reason the only logical approach is to advertise the theoretical maximum and attach caveats that the signal is likely to degrade due to various factors and you won't always get that, as per the recent announcement by the UK Mobile Broadband Group. Attempting to advertise actual speeds is impossible.

Interestingly the recorded speeds increased by 11% over the period of the study (Dec 08 to May 09) indicating that fears of demand massively outstripping supply have been unfounded. On a related note, Kenneth Karlberg of TeliaSonera commented yesterday at the Open Mobile Summit that data networks will crash if MNOs continue to sell flat-rates. Hence, presumably TS's decision recently to increase prices. This does not seem to be the case in the UK.

Open Mobile Summit - Is "open" really all it's cracked up to be?

I was at the Open Mobile Summit in London yesterday. There was some really interesting discussions and a lot of disagreement, which always makes for a lively debate. Much of it focused on what we really mean by "open" and whether that is "a good thing".

Take for example Christopher Schlaeffer of Deutsche Telekom. His presentation outlined a vision of convergence between fixed and mobile for all elements of the triple play: voice, internet and TV, with the ultimate destination of "Connected Life & Work". He also highlighted that partnering is what MNOs do, challenging the idea that MNOs are constantly in conflict with other parties in the value chain. He also pointed out that the app store is a siloed approach which is the antithesis of the open model. So far, so valid and interesting. But he then raised the idea of a single address book which should be accessible from multiple screens. But, it seems, openness only goes so far. Opening up that shared address book for third party service providers is a no-no.

This is really the rub. Openness is still all about self-interest. Everyone wants everyone else's part of the value chain to be open because it's better for business. They are being pragmatic, which is really the only way to be. But more than that, they're ensuring the quality of the user experience. How has RIM secured such a large chunk of the enterprise email market? How come the iPhone is now soooo important? Not because they're "open". Sure, they have 3rd party app developers. But they maintain some control to ensure the quality of the user experience. In many cases they're even the app developer themselves. During the afternoon's panel session 3's Carl Taylor commented that third party application developers rarely generate any revenue for the operator and often end up costing them money. All their best innovations have been done in-house. This is either an argument that developers haven't been nurtured enough, or that mobile is such a restrictive platform, and so fragmented, that the open model for app development just doesn't work. I suspect the latter.

Tuesday, 9 June 2009

Were you due to attend the Mobile Broadband conference in London on 17-18 June?

If so, I'm sure you're as disappointed as I am that it has been cancelled. I had been due to speak and chair the event and was looking forward to some interesting discussions.

If you had been planning to attend and you're still going to be in London on those days, I'd be happy to meet up to talk mobile broadband. Drop me an email.

Monday, 8 June 2009

Orange unveils animal plan for business: the "Trojan Horse" £10/month 5GB MBB plan

Orange has signalled an aggressive pursuit of the business MBB market in the UK with the launch of a £10/month 5GB plan. Minimum term is 2 years and the offer lasts until the end of July. Details here. This represents a significantly better deal that their consumer users get. The consumer £10/month plan offers only 1GB/month (albeit on an 18 month contract).

This goes counter to a lot of the arguments in my soon-to-be published Perspective for Analysys Mason "MNOs must differentiate SME and SOHO mobile broadband propositions from consumer offers". MNOs must take advantage of business users lower price sensitivity and they need to differentiate their offerings to provide additional value that will be appropriate to business users, e.g. sharer plans, customer service and ultimately superior quality of service.

Orange has in recent years gained a lot of attention for its eye-catching animal plans. It's surprising that they haven't termed this one the Trojan Horse. By simply going for the lower price, Orange is using mobile broadband as a way to sell other business services in the UK. It is a loss-leader. The price reflects that. At £2/GB it is surely well below a sustainable level of profitability. So it is assuming a very low utilisation rate by business users. Not unreasonable given that enterprise apps tend to be lower bandwidth. But they are indulging, potentially, in below cost selling.

It also raises the question of how successful this strategy will be. Cross-selling is much more difficult to achieve than MNOs might hope, without pursuing aggressive cross-discounting. SME and SOHO users have a much more haphazard approach to telecom purchasing than Orange might hope.

Wednesday, 3 June 2009

Orange did not make an offer for T-Mobile

On Tuesday I reported the news, 2nd hand from the UK's Observer newspaper, that Orange had made an approach to buy T-Mobile's UK assets but had been rebuffed.

Orange is now denying that any offer was made. Report is here.

Nothing yet about whether Vodafone really did offer its Turkish subsidiary in a swap deal for T-Mobile UK. Seems rather unlikely though.

UK Mobile Broadband Group issues Principles of Good Practice for selling and promoting Mobile Broadband

Last week I posted on how the Swedish MNOs had adopted a common set of guidelines for how they can promote mobile broadband. As of this week the UK operators have implemented something similar. A press release put out by the Mobile Broadband Group (which includes all 5 MNOs + Virgin) established a new set of guidelines. Unlike Sweden, they don't include any consistency about what speeds can be advertised, just that they must be "achievable by the user".

It's hard to argue with any of the points. They go just about as far is it's possible to go in ensuring the product does what it says on the tin. Ensuring people have info on out-of-bundle usage is creditable, roaming charges ditto. Likewise giving real-world examples should be useful. Most of these were already features of operators' tariff promotions anyway but maybe useful to have this codified.

What they can't get around the fact that mobile broadband is unpredictable. At least these guidelines will ensure that MNOs admit that unpredictability and give some guidance on why it varies. That said, however, it's not going to be much use to the average user who will have little idea how close they are to a base station, no idea what the contention rate is and no way of knowing what path loss they may see due to the characteristics of their location.

The MBG press release, reproduced, just about, in its entirety:

Principles of Good Practice for selling and promoting Mobile Broadband

Uptake of mobile broadband (i.e a mobile data service providing Internet access via a 3G modem) services is increasing rapidly. Customers appreciate the widespread coverage and convenience of being able to connect wireless devices to a 3G mobile network.

As the market is in a relatively new phase and in order to promote consumer awareness of the potential of mobile broadband, the UK’s mobile operators have agreed some good practice principles that underpin the way in which they and their customer service staff communicate information that is relevant when purchasing and using mobile broadband services. The principles cover: Coverage, Factors that determine download speeds, Pricing Transparency.

1. Make coverage information available via a web site (e.g. a map or a post code checker).

Promotion of and factors that determine download speeds
2. Download and upload speeds that are given in advertising and promotional material must be achievable by end users and should be accompanied by an explanation that speeds are variable. An indicative range of download and upload speeds under normal conditions can be given.
3. The factors that determine download speeds should be explained (e.g. distance from mast, surrounding environment, number of other users, network connection).
4. A glossary should be made available describing technical mobile broadband terms used in customer literature and on on-screen indicators (e.g. 3G, HSDPA).
5. Translate raw data speeds into some real life examples such as: 2Megabits per second delivers a 5 minute music track in approximately 20 seconds.

Pricing transparency
6. Pricing information should set out the relevant tariff options, including a description of any fair usage limits. There must an explanation of the consequences of the usage limit or fair usage allowance being exceeded.
7. Where operators make references to Megabits, Megabytes and Gigabytes in close proximity, they should give an explanation of the differences. A description of what, for example, a Megabyte of data usage allows should be provided.

8. Pricing information should include either the roaming charges or a hyperlink to where the roaming charges are set out (which should also set out explanations of what a Mb of usage allows, description of fair usage limits and any other relevant information).

Tuesday, 2 June 2009

Orange launches £5 contract

A couple of weeks ago it was all Vodafone. This week it's already all about Orange.

I know it's nothing to do with mobile broadband, but headline-grabbing news #2 over the weekend was Orange UK's launch of a £5 3-year contract with 50 mins and 50 SMS. This recession-busting offer is the cheapest ever contract in the UK market. There are also new £10 (100 mins/300 SMS) and £15 (200 mins/unlimited SMS) options. This tells me two things. Firstly Orange is a little spooked by 3's £9 tariif and has felt the need to match (and indeed better) it. Secondly they're very worried about churn. Who wouldn't be. In a recessionary environment, inertia tends to evaporate. But is this really an option for contract customers? No, and they're already tied in. It's mostly a way to encourage prepay-contract migration.

Free handsets on the £5/£10/£15 plans are the Nokias 2630, 3600 and 6500 slider respectively. Subscribers will also get a free handset upgrade mid-way through the contract, although it'll hardly be in the interest of Orange to throw anything too expensive at these subscribers. It'll be interesting to see what devices these subs end up getting at the mid point. Seems a sensible way to clear stock of the 18m-old 6500 sliders which are gathering dust. Sales of mid tier devices (into which the 6500 fits v neatly) seem to have dried up a bit in the light of the recession. Orange probably have a lot to get rid of.

Orange bids for T-Mobile UK

Crashing piece of news #1 at the weekend was that Orange had bid unsuccessfully for T-Mobile UK. Sunday's Observer carried the news that Orange had been rebuffed and that Vodafone had also made advances, including proposing a swap deal for its Turkish operations (although even VF admit that Turkey needs a lot of work to turn it around). I have previously commented that I thought a UK consolidation was unlikely and I stick by that. It seems that the UK players aren't prepared to match DT's asking price. Unsurprising. Mind you, I would be surprised to hear that third parties hadn't at least made overtures about buying T-Mobile UK. It's worth knowing the sticker price.

Obviously this creates an interesting position for new incoming T-Mobile UK CEO Richard Moat, who was only installed a matter of weeks ago. No prizes for guessing where he came from. That's right, Orange. He was heading up their Romania operations after previous stints around the group including Denmark and Thailand.