Off to a very slow start
It was good to see the alliance with Telecom NZ (see below) to further develop mobile services in the two Tasman countries. However, Hutchison had been unable to penetrate deep enough into the mobile market to secure itself a long-term position. The reason for this is a mixture of ongoing spectrum delays for new players during the mid-1990s, resulting in a late start, by which time the three incumbents were well and truly established. When the company was finally able to start, I indicated in early 2000, that I was not so sure about its assessment that it would be able to keep the CDMA-WLL system separate from the national GSM systems and therefore avoid cannibalisation. Hutchison maintained that it did not want to rock the boat, but I interpret this as an effort to avoid being seen by companies such as Optus and Telstra as major competitors to its national mobile services. Furthermore the company’s subsequent massive investment in spectrum is not pointing in a niche market direction.
However, the campaign to win customers over to its HomeZone services has only been a limited success, with nowhere near the number of subscribers needed to turn it into a profitable service
After the reorganisation in 2001, this concept was abandoned.
Ending up in niche markets
Hutchison had indicated at the time that it was aiming at the second or third line market – an interesting thought, but I was doubtful if that would be realistic. In my opinion a head-on clash would be unavoidable. Customers didn’t rush into the concept developed by the company. The sales message is more complex and the CDMA technology needed another explanation. Together this prevented a more rapid penetration into the mobile market.
The name of the game is the call charge that the customer will have to pay and with half a dozen players in the market, I have always found it hard to believe that companies will be able to keep the various services sheltered from each other (and thus charge higher prices). Both fixed and mobile calls are a commodity and trying to disguise this will not be accepted by customers.
Hutchison ended up in a niche market, while its investment was based on returns from a mass market. Although well supported by its parent company, at the same time it became clear that drastic action would be needed to turn the tables.
The 3G alliance
Already at its start Hutchison developed another strategy, aimed at the market of multiple occupants, such as students and other young people sharing apartments, etc. This certainly makes sense, especially with the untimed local call service. However, to be successful here, high-speed data is needed to make the service attractive for Internet/laptop services. That’s where its next move came in when the company bought spectrum to launch such a service based on GPRS standard over a separate GSM network. While from a technical point this might be possible, Hutchison has created a problematic situation by now having to operate two different networks. This will result in higher costs and confusion in the market place. This became even more complex with the acquisition of 3G spectrum that if fully employed would require yet another technology.
Initially the company indicated it would use the GPRS to introduce so called 2½G. But it also indicated this service would not be available until 2002 and others such as Telstra had already begun rolling out services in 2001, thereby obtaining the first movers advantage. But to make things worse, broadband business models for GPRS don’t exist. Fixed broadband will be many times faster and cheaper. I see GPRS as mobile data applications mainly in the business market. As an indication that the company is drifting, its GPRS plans were suddenly abandoned in favour of a more rapid rollout of 3G.
It will be interesting to see what the new alliance means with 3G applications? It avoided naming a range of ‘typical suspect – data services’ that are often quoted in relation to 3G. The future of 3G networks will be open networks where applications are developed by a range of content and service providers. New permission-based business models will have to be at the core of such developments. If Hutchison is successful with an early introduction of 3G in Australia, it will face an uphill battle in finding applications for which customers will pay. There are currently no proven 3G business models and most analysts around the globe have now agreed with me that such services would probably not be viable on this side of 2005.
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