Why Orange/T-Mobile merger means less subscriber choice

The big news today is undoubtedly that of the merger between Orange and T-Mobile, to create the UK's biggest operator with 28.4 million subscribers. Of course, the companies are lauding it as bringing "substantial benefits to UK customers", but will it really?

Consider this. Vodafone and O2 have already announced a network sharing deal (essentially this means that they will consolidate 2G and 3G cellsites, but they'll keep their own Node Bs, RNCs etc.). T-Mobile is similarly already the host for '3' and for MVNOs such as Virgin Mobile.

So, merge Orange and T-Mobile and the subscriber really is down to a choice of just two networks.

Sure, they'll have their own OSS/BSS and equipment at the edge of the network, but if mobile is about anything, it's about the RAN. It's about coverage, quality of service and (call me old fashioned) being able to get a dial-tone and make a call. You can have all the choice of price plans and shiny devices in the world, but if you keep dropping a call, can't get coverage in your home, or have a painfully slow mobile data experience, what's the point? And if you can't switch network to one with better coverage, where's the consumer choice?

As we saw earlier this year from OFCOM's coverage map, 3G coverage remains far from nationwide. Merging Orange and T-Mobile may save over £3.5 billion "over time" (a helpful comment that gives no indication of timescale), but will these savings be invested in extending mobile broadband coverage?

The simple situation seems to be that while UK subscribers may have lots of brand choice in terms of which operator they choose, ultimately they will have the choice of only two networks.

Doesn't this sound like something that should excite OFCOM?

OFCOM releases UK 3G coverage map

OFCOM has today released its first UK maps of 3G mobile network coverage, and it makes interesting reading.

The maps come with some caveats. The benchmark they've used is already pretty low, that is to say the signal strength needed to count as 'coverage' was just 10% of maximum transmit power and this had to be exceeded for 50% of the locations for 50% of the time. Oh, and it only measures outdoor coverage, not indoor where signal strength degrades even further. So it's a very conservative map, designed to give the operators the best chance of succeeding you might say.

And who comes out looking best? Well, H3G is the clear winner when it comes to nationwide coverage (although if you're Welsh, Scottish or from Norfolk you can still forget it). Orange comes a credible second. Quite frankly though, for all the naming and shaming, O2 is still pathetic. You can maybe drive from London to Liverpool and have 3G the whole way, but you'd have to pick your route damn carefully. The one that surprised me though was Vodafone. I expected better (and to use the same 'test' as for O2 as above, you can't even do London-Liverpool and stay within Voda 3G coverage because of a 'Not-Spot' that looks to be around the Northampton area!).

But all is not lost, because while the nationwide 3G coverage is still poor for many operators, the coastal coverage is excellent! That's right, if you want to sail from Margate to Falmouth, 8 out of 10 sailors say their yachts prefer Vodafone!

Femtocells go commercial

All of a sudden, the world seems to have gone femto-crazy ... or more accurately, operators have finally decided to bite the bullet and deploy services. Disapppointingly, this seems to mean that my big brave prediction for 2009 has been shot down only six months into the year. I still maintain that LTE will be the bigger opportunity for femtocells, but nevertheless the news that Vodafone and AT&T are launching commercial services this year goes to show that there is some immediate and real opportunity as well.

However, looking deeper into the news and you get a sense of some of the underlying themes which will now start to come to the fore.

1. Quality of Service: Suffice it to say, if I used a Voda femto in my flat in London, I would struggle to get more than three words out so bad is my Tiscali broadband. The simple fact is an operator can never guarantee QoS. In a conventional network, they can guarantee it throughout the core as far as the cell site, but as soon as it hits the RAN, there are so many environmental variables (pesky things like buildings that get in the way) that the operator can only then do a best effort. Now, in theory, femtocells solve this problem - it fixes the in-building RF problem. But, if operators such as Vodafone then use the subscribers' own DSL connection to backhaul the call, they have again surrendered control over QoS. In fact, they've taken a step back. While they can optimise the RAN, they have no control over the ISP.
2. The Form Factor: At the moment, AT&T and Vodafone are planning to go to market with standalone femtocells. The marketing wizards at AT&T have branded theirs a '3G microcell, clearly expecting the US consumer to be tech-savvy, while Vodafone have gone the route of calling it an 'Access Gateway' (access to what, you can already hear consumers asking). However, AT&T has also alluded to 'integrated femtocells' coming later, and this is perhaps where it becomes a real consumer market. I sat in a briefing by Continuous Computing* with Ovum this week and this point came up. Although a lot of the details are still under wraps, Continuous Computing said that not only are about half of their femtocell design wins are with set-top box manufacturers and the like, but that we should be seeing the first integrated femtocell products shipping around late 2009 / early 2010.
3. The Pricing: Well, this really is the big one, isn't it. The pricing from Voda has that the femtocell with be free on selected tariffs (so operator subsidised like handsets) and also bundled in some phone packages. If you buy the femtocell as a standalone, you're looking at £160 or £5 per month. I won't even try and digest the different phone packages since I've always maintained their are designed solely to confuse but it's clear that the subscriber is going to have to pay extra to solve a coverage problem which you can be pretty sure they weren't warned about when they first bought their shinny 3G handset.
   

But let's not be churlish. Femtocells are going commercial with two tier 1 operators and for an industry that has invested time, money and effort in creating the market, that can only be a good thing. Well, provided they work and deliver on the subscribers' expectations that is ...

* Continuous Computing is an AxiCom client

What's a network operator without a network?

It seems like a stupid question. I mean, if a network operator doesn't actually operate their own network, what's the point?

News today that Vodafone and O2 may be about to strike a network sharing deal means that there could in effect only be two mobile networks in the UK.

Such is the pressure on margins - and the cost of building and maintaining a network - the network sharing seems to be an innevitable endgame in markets such as the UK. With new spectrum auctions looming for '4G' services and the cost of LTE network build-out already causing nervousness among mobile operators, it seems the obvious thing to do.

But what does it all mean? One can't help thinking that by surrendering even a little control over the network, the operators are simultaneously surrendering some control over their own destinies. Will innovation run at the same pace? Will we end up stuck with a lowest common denominator network?

With evidence from people like Actix* suggesting that operators can slash OPEX by up to 30% through automating network status management and, ultimately, moving towards a self-optimising network, are things really so bad that operators have no alternative but to share networks?

OK, as in life, there may well be degrees of sharing (what's yours is mine, what's mine is mine etc.), but for network equipment vendors and landlords of tall buildings currently seeing a base station as their best bet for a tenant in the current economic climate, it's probably not the best of news.

* Actix is an AxiCom client

Top 10 Mobile Brands

Today, Mobile Communications International has published a list of the "most valuable operator brands". In many ways, it's a list of the usual suspects, Voda is #2, followed by the T-Mo's, Oranges and Verizon's of the world. However, seeing China Mobile at #1 struck me as interesting ... and I can't help thinking it's a bit skewed. Yes, China Mobile has got a growing list of subsidiaries around the world (for example in Pakistan), but ranking a brand by value when the quirk of fate has it operating in the largest market in the world does seem to distort things.

So, what's the unscientific 'top 10'? The list of the top 10 operators who are 'most interesting'?

#1 - T-Mobile US ... forced to act like the new entrant, their 3G roll-out has happened at world record speed and are using UMA technology to deliver aggressive homezone priving and services to grab market share. Oh, and don't forget they're right out there at the forefront with the Google phone.
#2 - Orange ... they're pioneering FMC strategies and, with services like Unik, at the bleeding edge of technology
#3 - Softbank ... to be honest, I don't know much about these guys apart from the fact that if there's something new to try (e.g. femtocells), they're bound to be at the head of the queue of operators trying to work out how the hell they can make money from it!
#4 - China Mobile ... ok, ok, I'll defer to the 'pros' and put them high up the list. They're big. They're the 800lb gorilla to watch. So they're on this list because we should forget about them at our peril!
#5 - Sprint Nextel ... bless 'em, they're trying to build a business case for WiMAX. They deserve points for at least trying, don't they? Certainly by the criteria of are they "interesting", they certainly make the list.
#6 - NTT DoCoMo ... the Frank Sinatra of the industry ... yep, you got it, they'll do it their way!
#7 - Reliance ... anyone of a host of the Indian operators could make the list, but Reliance have always been the ones to grab my attention at least. Real innovators in some of the services they're delivering, making massive strides in terms of growth and definitely one to watch.
#8 - O2, AT&T (and any other operator who took the iPhone) ... if you're making enough money to be able to give a huge chunk of change to Apple, good luck to you. But when you look at some of the stats coming back (certainly from AT&T whose network has been crushed by the data usage driven by the iPhone) they are demanding attention
#9 - Telefonica ...They could (they should?) be up there with Orange / FT ... they've got it all, the mobile, the fixed, the geographies ... a sleeping giant
#10 - Vodafone ... maybe I'm just deliberately contrary, but god are Vodafone boring. Technology innovators? Hell no. Most interesting as a brand because increasingly that seems to be all they are. And just who are they competing against?

You may quible (and I'm sure you will) with who's in the list and where, but the point is this... if you're looking at who the innovators are, who are the operators who are leading, rather than following, you start to see a different list.

Leadership can obviously be defined in all manner of ways. But what ever definition you use, when you put your PR hat on, there's only one measure that matters ... are you interesting!

India ... some good news on a bad news day

While the world's attention is focused on the shocking events in Mumbai, it's easy to be drawn into a spiral of doom and gloom. India is a country I know well and love even more. A country full of diversity in all the best and worst that that implies. But it's richness is something one can't deny.

The potential of the country is similarly unarguable.

The Telecoms Regulatory Authority of India (TRAI) has just announced that 10.42 million mobile subscribers were added in October alone. This follows on from 10+ million in September and over 9 million in August ... making a staggering 92.1 million new mobile subscribers in 2008 so far and a total of well over 325 million nationally.

It's easy to see both why the likes of Vodafone and Telenor are making big moves on the market ... and on the flip side why behemoths like Tata are now undisputed global companies.

Ultra-low cost handsets will undoubtedly further drive the unquenchable growth in Indian mobile subscribers. But is that enough? Is it enough to just add more and more subscribers ... especially when the ARPU per subscriber is going to get ever smaller as less well off communities become connected?

India, however, can also give us much to learn about mobile content ... a continent with such a passion for music, where Bollywood stars make the Hello Magazine faces of the West seem anonymous in comparison; with such a passion for sport, where cricketers are not only megastars in the true definition of the word but are reinventing a sport and, despite the poverty in parts of the country, contributing over 70 percent of the money in the sport globally ... such a market is going to offer up rich potential for mobile content.

Well, provided the networks can cope, the pricing and business models make sense, and the right sort devices are in the hands of subscribers.

So, while there is understandable concern about the recent violence in Mumbai (and don't get me started on that ... Indian history and politics is my first love and I could wax lyrical for hours!) the potential of India remains undimmed.