3 embraces mobile internet model

Hong Kong conglomerate Hutchison Whampoa unveiled a mobile broadband service on Thursday, which the company intends to use to deliver a fixed line type experience.

From December 1, the company’s UK 3G operation, 3 UK, will offer services under the brand ‘X-Series’ which include unlimited IP telephony via Skype, instant messaging via Microsoft and Yahoo! and search services via Google, all for a flat monthly fee.

Further deals with Sling Media and Orb will allow users to watch home TV and video content on their handset as well as to access digital media stored on their PC remotely.

No pricing information has been made available as yet, but Christian Salbaing, managing director of the 3 Group told it would be “less than £30 per month”.

The X-Series platform will be priced like fixed line broadband and will initially be available on the Nokia N93 and the Sony Ericsson W950 handsets. 3 will launch the service in its other markets next year.

John Delaney, principal analyst at Ovum said that 3’s strategy goes against that followed by most of its peers. “Mobile operators in Western Europe have mostly been trying to avoid having their data business follow the internet business model. By that, we mean free services, no usage-related charges, no automatic visibility of the access-provider brand,” Delaney said. “3 now seems to be embracing the internet model – at least, to the extent that today’s technology can support it.”

Delaney said that everything about the internet that worries the mobile operators is present in 3’s offering. “Flat rate data tariffs remove the link between service usage and end user revenue. VoIP undermines mobile voice revenues. Instant messaging offers text messaging at a fraction of the price of SMS. The big portal brands are far more powerfully associated with internet services than the operators’ brands. Open internet access means you never have to see the operator’s portal again, if you don’t want to,” he said.

Delaney believes 3’s strategy of embracing the internet model is risky and in the worst case scenario, could see 3 end up having its role reduced simply to providing internet access. “But as the UK’s smallest operator, and the one with the least legacy stake in the traditional business of mobile telecoms, 3’s best hope of out-flanking the competition has always been to embrace disruption,” Delaney said.

Daren Siddall, analyst at Gartner, believes the success of the service lies not in the offering but in the price. “They are offering everything so they cannot go too far below their ARPU [£41.51 with non-voice ARPU at £10.16 per active user: source – 3UK]. They’ve positioned this as a sort of turbo-charged mobile service but all the research we have done over the years suggests consumers are extremely price elastic.” Siddall explained: “The first thing they ask about is cost and the question here is whether customers will be willing to pay for these internet-type services on their mobile when they are already paying for it in their homes.

“It’s certainly a bold move and I hope other operators will follow suit. It’s the only way people will use their phones for anything other than voice or text and if they don’t I can’t see how the mobile will go beyond what it is today.”

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