One2One to face UK regulation with US-style marketing plans

Mercury One2One is planning an ‘aggressive’ marketing push. But as George Pitcher warns, what works in the US may not in the UK George Pitcher is joint managing director of Media Consultancy Luther Pendragon

Anyone with an interest in telecoms that extends beyond bakelite reproduction handsets should note that Jan Peters, Mercury One2One’s gritty new chief executive, plans what is described as an “aggressive” marketing campaign next month that will push her mobile phones into retail outlets such as supermarkets, chemists and DIY stores.

One2One has, to date, been one of the slowest on the uptake in the fast-moving mobile communications market. It suffered a poor start three years ago when it launched local services in London and the Midlands, while rivals Vodafone, Cellnet and Orange were developing national networks.

Peters aims to change all that by importing US marketing techniques. She has something of a pedigree for doing so, having joined Mercury three months ago from a presidency at telecoms leviathan US West.

Her thesis is that, since only one person in ten in the UK currently has a mobile phone, there is huge scope for selling through a broader range of distribution channels than specialist telecoms shops and press ads.

She also has a charming line in American PC-speak. To the notion that mass-marketing implies low-value customers who would use little service and who would be more likely to welsh on their bills, Peters replies that the 90 per cent who do not have a mobile phone at present “are not all credit-challenged people”. And, I suppose, those of us who do not use hairspray are not all follicly-challenged people.

No matter. Peters is far from currently financially-challenged. One2One apparently has funds of some 2.2bn on call to support network expansion and marketing plans – 1bn from commitments from shareholders and the balance in debt finance. The recovery of One2One from its sputtering start is one to watch this autumn.

But there are a couple of broader, macrocosmic telecoms issues of which I am reminded by the microcosm of One2One. The first is fixed/mobile integration, on which Cable & Wireless (C&W), joint partner with US West in Mercury One2One, is extremely keen.

The key to really opening up and exploiting mobile-phone markets is arguably the development of services that fully integrate with fixed lines. Anyone who has wanted to transfer a call on a mobile to a colleague in the office will know what I mean. C&W is very conscious of these markets in seeking licences for its operations in emerging Far-Eastern markets. It remains to be seen whether C&W’s expertise in that arena has a bearing on Peters’ plans in the UK. As I say, it’s one to watch.

The other point brought to mind by the prospect of US-style marketing strategy of One2One is the cultural challenge of the transatlantic import. I don’t mean that there may be British resistance to US marketing techniques. Mobile phones are universal and largely unaffected by local cultures – in this regard, Peters is unlikely to suffer the same humiliation as, say, the chief executive of Dunkin Donuts.

The point is this, contrary to popular perception, the market in the UK is burdened by regulation, whereas the US market, by and large, is enhanced by it. Our US cousins would, of course, deny that – it is usually in the best interests of free markets to claim that they are shackled by draconian regulations. But it is generally true that there has to be a good reason for something to be stopped in the States, while there has to be a good reason for something to be allowed in Britain. You might say that we are regulatorily-challenged.

Take a couple of current examples in the telecoms sectors of both countries. Until last weekend, BT was poised to offer price incentives to smaller businesses signing up to a package providing access to the information superhighway. Late on Friday – just hours before the service would have come online – Oftel decided to withdraw its clearance for the price-cuts.

BT had already spent six-figure sums on advertising and lost revenue as customers held off in anticipation of the new service. This looks, as so often with utilities regulation in Britain, like petty point scoring between the regulator and the regulated. In whose best interests that may be remains a mystery.

Meanwhile, Microsoft in the US has attracted the attentions of anti-trust investigators for a third time over its marketing of Internet browser software. But Microsoft has previously escaped anti-trust inquiries with little more than a mild admonition and there is little to lead anyone to suppose that the new inquiry should stall Microsoft’s progress in this market. Certainly, the markets don’t think so – Microsoft’s shares finished at an all-time high last week.

Why? Well, it might have something to do with the fact that, in a matter of months, Microsoft has taken on its rival Netscape in this market, struck innovative alliances with Internet service-providers and given introductory software away free. And the winner? The consumer, of course.

Things are very different in the UK, as One2One’s Peters has doubtless noted. But then who turns out to be the main complainant about BT’s new Internet service? Step forward Mercury Communications. Ah, well, that’s competition, UK-style.

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