Tuesday, November 21, 2006

X-Series Do or Die for 3!

For those of you who have never heard 3, it’s a pan European 3G only Mobile operator owned by Hong Kong based Hutchison Whampoa Limited .3 announced last week that they are launching X-series Mobile broadband offering which allows consumers to unlimited data access at fixed price similar to what fixed broadband users are used to .I try to explain why this is such big thing and according to me has a potential to disrupt the existing business of mobile operators.
To begin with 3 was one of those who bid and bought 3G spectrum in Europe at bloated prices in late 1990s on top of it 3 was new entrant with plans to build pan European 3G only network .Basic Idea being that they thought that 3G and its services is going to be real killer and its worth investing huge capital to roll out the network and service. Of course it is true that all other mobile operators like Vodofone, Orange, and T-Mobile also banked on 3G while bidding for spectrum along with 3 but one major and crucial difference between 3 and others is that 3 is pure 3G operator while others are dominant 2G players with already successful 2G business. So what happened between late 1990,s and till now 2006 as it is evident now is that other than 3 other operators after the tech bust downgraded their 3G expectation and tried to concentrate on 2G at the same time rolling out 3G in much more conservative way. But 3 which had relied on 3G had to rollout network and services in more aggressive way like bundling huge voice minutes in their basic 3G plans and also trying to lure customers with its own data services .As it turned out that all these actions didn’t help their bottom line and their own 3G services uptake being low and forced to improve their financials fast they were forced to think differently to lure customers and one important initiative in that direction is X-series launch.
Today most of the mobile operators who have launched data services have launched data plans which is based on the concept of charging users based on how much traffic they generate.(i.e. users have to pay a fixed price per MB of data they send or receive )similar to early days of fixed broadband plans. Basic Idea or strategy is that operators would like to offer their own services at fixed price per service which would include data costs example: In US Cingular, Nextel and other have launched mobile phone based navigation service which cost user 6-9 $ per month which includes data costs, By using this strategy they would like to control the services that are delivered to consumers and also have good margins. In short in future as and when most of the mobile services including voice are going to be delivered on packet network they wouldn’t like to be like end up like Internet service providers (ISP) just providing data pipes at fixed cost. So this is a kind of common strategy the entire mobile industry agrees and adopts including 3 till recently.
Due to the reasons mentioned earlier as 3 was forced to change their strategy they launched X-series .which basically provides unlimited data access to consumers at fixed price, ofcourse 3 is also bundling some of common internet services by partnering with Google, Yahoo, Skype and other big internet brand name so that these partnered services work seamlessly out of box. But the crucial thing from consumer perspective is it is unlimited data meaning that consumers can pick and choose their own service and even replace some of the rebounded service at no extra cost .So basically allowing access to internet same way as we do with fixed broadband believe me its big change compared to the present state .
Finally if this service is successful it will bring down 3 margins further but at the same time it increases its revenue and customer base to which if it is innovative can provide its own services and make margins.
Most importantly if it successes then it force other operators at least in Europe to offer similar services meaning forcing them to abandon walled garden approach to data and embrace open internet approach to data. It is also beneficial for handset vendors like Nokia who have invested in open mobile SW platform like S60 and smart phone development as it is most likely that smart phones would be the phone of choice for consumers using unlimited data plans. Most importantly it gives consumers freedom and choice to services.

1 comment:

Vesa said...

Nice article, thanks for sharing.

I think Nokia has also a controversial role in this change towards open "Internet" based services and _networks_.

Nokia so far seems to be quite focused on operator market (righteously), and most operators very much fear the role of being "just pipe" to internet.

I assume that it was of operators demand, that nokia did not sell it's regular E series phones in US, but it had to take away the Wi-fi components from the phones.

For me it seems quite evident that Internet based approach will win eventually. Operators just try to make everything they could to slow this down...