Fixed Operators Fight Back
By Steve Wallage, Wed Mar 16 08:30:00 GMT 2005

Mobile operators now resemble the fixed operators they've successfully battled -- so much so that fixed operators are now moving to steal some business back.

Are the mobile operators getting ever more similar to the fixed operators? Certainly the pricing and competitive pressure has many similarities. The fixed operators now no longer fear the me-too players but instead the death by a thousand cuts of lots of small competitors targeting different, and the most profitable, parts of its business.

In the same way, the challenge for the mobile operators is changing from the me-too MVNOs to more specialized players targeting particular markets, whether it be mobile data, gamers, international calls or whatever. The increasing involvement of regulators is also shifting from fixed to mobile, and the potential for new business models -- particularly VoIP -- to transform the economics of the market and usher in new players.

The bottom line is that the downward pressure on mobile pricing is relentless, and even the supposed savior for the mobile operators, 3G, is subject to heavily discounted phones and price competition as a voice service from newer operators.

Fixed operators are trying flex some muscle again, too. BT has launched its Callwise service in the UK, based on a product from UK company Intelli-call, which looks to take back a chunk of mobile operators' hefty international call revenues.

The thinking behind Callwise is that a weak spot for the mobile operators is international voice tariffs. They are very expensive, often confusing users and highly profitable for the operators. The service is effectively an international bypass service, which dials a standard UK number and shifts the call over to the BT fixed network. Smartphone users can download on automated version to their handsets, while there's a Java version in testing and a manual alternative as well.

Callwise enables UK users to make international calls at BT standard rates (plus the cost of a UK call), equating to savings of up to 96%, according to BT estimates -- for example, around EUR 0.07 a minute for calls to the US. Billing is done through a prepaid account, and the service details per-minute charges before a call and provides a total cost immediately after it's finished, making charges very clear to users.

One drawback is that it can't be used for roaming when the user is outside the UK, with international roaming charges still being one area where high prices are the mobile-industry standard. But Intell-call, the vendor behind the service, is just getting started: it has has also identified roaming, cross-network and SMS calls as other mobile-tariff soft points it wants to attack. CEO Nick Hancock is also talking to several other European fixed operators who are keen to, in his words, "fight back against the challenge from mobile operators."

The mobile operators have also followed some of the old tricks of fixed operators in trying to bamboozle competitors and consumers. First among these has always been complexity, but this is increasingly difficult to sustain as new players stress the simplicity of their tariffs. The second approach has often been bundling -- look at the success of the fixed operators across Europe who typically have managed to sign up something like 50-70% of residential users onto bundled line rental and calls packages, which both reduce churn and make price comparisons difficult.

Certainly bundling will become more important in the mobile arena. Surveys show businesses and home users like the simplicity and convenience, although they are wary as to missing some of the best deals. We already have operators talking about triple or quadruple play and there is no doubt an operator somewhere working out how to market the six-play (or will that be six pack?) -- that is, fixed voice, fixed data, Internet, mobile, television and Wi-Fi.

An interesting point here is whether Vodafone will increasingly be seen as being at a disadvantage for just having a mobile side. It is always had a premium rating from investors for its focus on mobile, and not having any exposure to the "no-growth" area of fixed. Yet, in a bundled world, how does Vodafone stack up against, say, France Telecom with Orange and Wanadoo in its stable? Or, how well can Vodafone At Home or O2 Genion compete against other bundled offerings?

The mobile operators will need to get used to the steady erosion of prices and the proliferation of services such as Callwise, with differentiation, improved customer service and more enhanced services are increasingly becoming their buzzwords. And we will start to see ever greater differences between the mobile operators, as they increasingly focus their businesses on particular areas.