As the UK’s fourth player in the mobile phone market, 3UK (H3) has for several years developed a reputation for introducing innovative business models in a bid to attract subscribers from other providers. These have rocked the boat in ways which the other MNOs would doubtless prefer not to.
3UK’s parent company, Hutchison Whampoa, launched services in early 2003 having spent some €6 billion on its 3G licence and an additional €3 billion on network construction. The operator thus had every incentive to secure customers where it could, and save money where it could. As for innovation, 3UK was the first to allow mobile VoIP (through a deal with Skype): in 2008, it launched the Skypephone, featuring Skype calling and integrated instant messaging, and since mid-2009 it has allowed its subscribers free Skype to Skype calls without having to pay data charges. By early 2010, the operator reported having managed one billion minutes on its Skype service, estimating that the service had saved customers £120 million in calling costs.
3UK has also introduced an unlimited usage service, branded as the ‘One Plan’, which previously charged per 10 pence per MB for usage above 1GB per month. The plan provides sufficient minutes and SMS texts as can be realistically consumed in a month, as well as unlimited data. By contrast, the other MNOs have scaled back their data packages, imposing download restrictions (commonly 500MB per month) and throttling measures to curb consumer use of mobile data and so relieve the strain on their networks. O2 has notorious experience in this: it was the exclusive carrier of Apple’s iPhone in the UK market from late 2007 to late 2009, during which time the iPhone (considered an important customer acquisition tool) helped boost O2’s revenues by 10%. However, O2 soon earned the wrath of its customers after they found that their host network was incapable of delivering the data they called up or sent: in essence, the network was not up to scratch.
3UK’s confidence in its own network stems from its seven-year services agreement with Ericsson (to run to 2012) to manage its network and IT infrastructure. The agreement followed similar deals in place between the companies in Australia and Italy. By late 2010 3UK had completed the first phase of its £400 million 3G network upgrade as part of a project to expand its network to13,000 base stations nationwide year. The operator’s 3G coverage now reaches about 98% of the population. In addition, 3UK recently completed its network consolidation with that of T-Mobile (and, by extension, Orange through their new identity as Everything Everywhere). The network operating organisation Mobile Broadband Network (MBN) was set up to operate the joint network on behalf of both companies. The completed programme saw more than 3,000 redundant sites switched off, boosted HSPA coverage and provided 3UK with a stronger network on which to sell its new data plan. Although 3UK, with about 6.3 million subscribers, remains a small player compared to the three market leaders Vodafone (16.8 million), O2 (23 million) and Everything Everywhere (30.4 million) it is precisely this innovative business model which will enable it to survive and grow, at the expense of the big three. For consumers, churning to 3UK will soon become easier: porting mobile numbers is ‘donor-led’, in that consumers must ask operators to take their phone number to a new provider, and then pass on the Porting Authorisation Code (PAC). In 2011 portings must be completed in one day and the PAC must be issued by the provider within two hours by text message.
The promotion of the ‘One Plan’ focuses on its removing the possibility of bill shock when consumers use their smartphones (though the plan excludes iPhones and Blackberries). This will be particularly acute for those consumers who, often unwittingly, sometimes naively, racked up huge bills in their initial enthusiasm having bought a smartphone and plan from an MNO keen to make a sale in the first place. Bill shock for one month alone can instantly curb mobile data use, and cause resentment among consumers.
Bill shock of course also affects mobile roaming. At the EU level, the European Regulators Group (ERG) noted that the cost of sending an SMS message internationally was on average almost four times higher than if sent domestically, but with very low associated marginal cost. Data prices per MB are especially high and pose a significant price hurdle to the use of mobile Internet while abroad. Although margins on data roaming are high, mobile operators generally claim that data roaming represents only about 2-4 % of revenue. The EC has incrementally reduced excessive roaming charges through a number of regulatory measures, setting a wholesale cap for text messages at €0.04. In addition, since mid-2010 consumers have been able to set a limit to their data roaming bill: by default, MNOs must offer a monthly cut-off limit of €50 minimum and send users a warning when they reach 80% of their chosen limit. The EC also established a €1 per MB safeguard limit for wholesale data roaming fees, to make them more predictable for operators and so enable more transparent retail prices. The wholesale cap will be lowered to €0.50 by mid-2011.
See also:
United Kingdom – Mobile Market – 3G, Mobile Data and Forecasts;
United Kingdom – Mobile Market – Statistics and Forecasts.
