Mobile operators are looking to convergence – either by extending the capability of handsets or service ‘bundling’ – to keep profits on the rise and stay ahead of the competition. But content is what the most forward-thinking operators are exploring. Dominic Dudley and Robert Lester report
People who want a mobile phone have surely got their hands on one by now – which is a problem for network operators that want to keep growing. Getting the public to increase their usage of their phones is one way out of the dilemma, but the option operators are increasingly turning to is to expand into new areas, such as broadband internet access. It seems media convergence might be happening at last, but how it will work, and whether consumers want it, is a different matter.
The lack of clear answers has thrown up alternative strategies from operators. T-Mobile and 3 are focusing on providing more services over mobile. On the other hand, Vodafone, O2, Orange and Virgin Mobile are all moving towards new platforms. In essence, they are all placing their bets on whether convergence will happen around the device (so that other services such as television are available on your mobile), or around the brand (so that you buy your phone, internet and TV services from one provider).
O2, the UK’s biggest network, has revealed plans to set up a capability and innovation division, headed by former marketing director Russ Shaw (MW last week). It will try to address convergence, with the main underlying motivation of finding new ways to keep hold of its customer base. “We are looking pretty closely at the broadband area and the best way to get involved in that space,” says Shaw. “You hope along the way you’ll pick up some new customers, but we’ve got 16 million and our challenge is how to keep them happy.”
Virgin Mobile has, through its takeover by cable company NTL, been shifting into the multi-platform arena, promising a “quad-play” that offers TV, internet access, mobile and fixed-line telephony in one package.
This week, Vodafone set up a New Businesses unit to meet what it calls “customers’ total communications needs”. The new unit will focus on providing broadband services, integrating mobile phones with PCs and the internet, and developing new advertising-based services.
Meanwhile, France Telecom has been ramping up its marketing spend to tell consumers that it is replacing its Wanadoo internet brand with Orange. Further details are due this week, but reports suggest it will opt for a “free” broadband offer to persuade customers to take up multiple services. This could land it in hot water with the Advertising Standards Authority, just as Carphone Warehouse got into difficulty with the “free” broadband service it offered as part of its TalkTalk phone package.
“Orange, as part of France Telecom, is in an extremely strong position. We’re pioneering the idea of moving out of traditional mobile telephony towards converged services,” says Orange spokesman Stuart Jackson. “People want to be able to access what they want, when and how they want, and that’s what we’re providing.”
Watch for the changes
As to the nature of such services, there are several possibilities. “It will get to the point where you’ll be watching something on your TV at home and when you go out you’ll be able to continue watching it on the train on your mobile. That’s a long way in the future but it will happen,” says Jackson. He adds/ “You’re going to have one address book, one e-mail address and one contacts library stored on your network, which will be accessible through Orange on your mobile phone.”
Such predictions often prove inaccurate, but the general strategy is supported by Phil Kendall, director of global wireless practice at Strategy Analytics. “The days when you can be a provider of a single service are coming to an end. If everyone else is offering quad-play and all you can do is mobile voice and a few multi-media services you are going to struggle,” he says.
Not everyone agrees, though, and the sceptics point to other sectors such as the financial world, where people often go to different providers for their mortgage, insurance and banking services. It may be that customers will also prefer to buy TV, broadband access, mobile and fixed telephony from different companies.
HomeChoice has struggled to sign up many customers to its broadband-TV-phone service. Similarly, mobile TV has proved problematic, with O2’s trial in Oxford last year proving inconclusive about consumer demand.
T-Mobile technical director Emin Gurdenli questions whether consumers really want an all-in-one package. “Our philosophy is to put on mobile what you enjoy doing at home,” he says. “We’re not choosing to buy or partner with a broadband provider because we don’t think it is the right thing to do. Triple-play and quad-play is operator talk, it’s not customers asking for it.”
Third generation (3G) operator 3 is keeping a similar focus on mobile services, with no plans to offer multi-platform services. “Through 3G technology we are bringing the consumer the benefit of a converged service – premium media and communications services on one device,” says a spokeswoman. “Recent convergence agreements appear to be more about branding than offering the consumer something new and different.”
Whichever strategy they follow, the operators face the problem of how to persuade consumers to buy into these extra services. The mobile industry has a poor record in this regard. The last time it made a big bet on the future – with 3G networks – it came badly unstuck. A few years before that it oversold WAP services, promising the mobile internet years before it could really deliver. Shaw acknowledges that the industry needs to do better in the future. “We’ve got to learn how to introduce these services, to find what customers want,” he says.
Catching the imagination of consumers and getting them to take up these services is critical, as access itself becomes more of a commodity with little to differentiate the providers. “Do they move from being a network provider to being a content provider? That’s where the money seems to be,” says FutureBrand European chief executive Patrick Smith.
If they can get content right, mobile operators might find it easier to keep hold of their customers and attract new ones. But as they search for the best route forward they will have to keep an eye on companies that haven’t traditionally been their rivals trying to muscle into mobile services. Just as there are few barriers for mobile operators moving into internet access, so other media companies wouldn’t find it so difficult to move into mobile. Convergence could prove to be a double-edged sword for the UK’s mobile operators.
Vodafone has set up a New Business unit this week that will explore broadband, integrating mobile phones with PCs and new ad-based services
Orange is to replace the Wanadoo internet brand. Owner France Telecom is believed to be considering a ‘free’ broadband offer to encourage sign-up
Virgin Mobile, recently taken over by cable company NTL, is turning to multi-platform for growth, offering customers four services in a single package3 is focusing on mobile, believing that ‘recent convergence agreements appear to be more about branding than offering consumers something different’
T-Mobile, like 3, is avoiding the multi-platform route. ‘Triple-play and quad-play is operator talk, it’s not customers asking for it,’ says its technical chief
02 is to create an innovation division to address the issue of convergence, despite a trial in Oxford last year proving inconclusive about public demand