Ofcom market survey for UK reveals demand for telecom services to be recession-proof

Even in a down economy, consumers are unwilling to let go of telecom services

Ofcom, the UK regulator, released a study of national telecommunications use bringing some interesting facts up for discussion. Telecom services play a greater role in our lives and when it comes to prioritizing spending in difficult economic times, users are more keen to view their mobile phones, broadband Internet connections, and digital TV subscriptions as necessities rather than luxuries.

When it comes to prioritizing spending:

Consumers were more likely to cut back on dining out (47%) and holidays (41%), over cutting back on mobile phone use (19%), TV subscriptions (16%) or broadband services (10%).

Mobile broadband means innovation can come from all over the globe

There will be 250 million mobile Internet subscribers by the end of 2009. A post on GigaOm goes into great depth about the state of wireless broadband. By September of this year EMEA (Europe, M. East, Africa) will have 60 million subscribers, North America 37 million, and Asia-Pacific will have 56 million mobile broadband users. All indicative of the reality that mobile broadband will be a key gateway for users to get onto the Internet.

These are all signs that the emerging wireless broadband network — regardless of the networking protocol is good for innovators and innovation. More entrepreneurs should be thinking about leveraging this wireless broadband platform in a more meaningful fashion. In developing and emerging markets, this could see technology helping people overcome everyday struggles and generate whole new sectors to economies.

The graphic below helps put the emergence of mobile broadband in context:

Click to view in High-Resolution

FCC turns up heat on mobile operators in US

Regulatory authorities in the United States are taking a closer look at anti-competitive business practices. Mobile operators now find themselves being scrutinized for practices involving exclusivity arrangements signed with phone manufacturers. Also coming under examination are roaming and interconnection arrangements for data services. Operators like AT&T and Verizon own considerable segments of land-line networks and it is widely felt that this creates a conflict-of-interest, delaying the wider rollout of mobile Internet services.

2009 market study confirms functional separation has been good for competition in New Zealand

A new market research report for the telecoms sector in New Zealand has been released on the website companiesandmarkets.com. The title for the publication is “2009 New Zealand – Telecoms and Overview & Analysis” and the executive summary can be found here.

The report provides a great deal of insight into the telecoms sector in New Zealand. It finds that the total New Zealand market grew by 2% to $7.1 billion for the year up to June 2008. BuddeComm predicts that the total New Zealand telco market will grow around 2.3% in 2008/09 and 3.5% in 2009/10, although these growth rates could be up to 1% lower, depending on the severity of the global financial crisis.

New Zealand and the United Kingdom are the only countries in the world that have enacted functional separation as a regulatory tool. Citing many of the same reasons given on this site, the report states emphatically that implementation of this regulatory measure has benefitted users in New Zealand tremendously:

Even Telecom New Zealand has itself admitted that functional separation has already begun to stimulate competition in New Zealand. Existing participants now have the opportunity to extend their activities, and additional competitors now have more opportunity to enter the market which has previously been dominated far too much by Telecom. Smaller competitors now have more attractive wholesale arrangements coming into place and this will put further pressure on prices, which have historically been far too high due to Telecom’s overwhelming market dominance.

In Fiji, it’s FINTEL’s dominance over the international gateway that most closely resembles our New Zealand counterparts. The first stages of sharing under liberalisation are being implemented. However, until the prescription of functional separation is handed down from regulators, we will not reap the kind of benefit that New Zealand is experiencing now. Interestingly, even the incumbent operator in NZ acknowledges that the regulatory measure has been a positive development. How long before we see these steps being taken in Fiji?

Will mobile and fixed broadband Internet offerings converge?

In developed countries with high rates of broadband Internet usage in homes, mobile Internet will be seen as a separate category from fixed broadband offerings. In the UK, incumbent operator BT is adding mobile broadband to its consumer packages, positioning the technology as a complement to fixed broadband:

BT Total Broadband customers can now get up to 8Mbps cellular broadband including 1GB of monthly data usage. The lowest option costs £15.65 per month over 18 months for both fixed and mobile broadband, with BT claiming HSDPA download speeds of 7.2Mbps.

In developing/majority world countries, where broadband Internet usage rates are low, consumers are less likely to see the services as complementary. As speeds on next-generation wireless networks catch up to what is typically expected of wired connections like cable, there will be less of a distinction between the two types of service. Already there are devices on the market that blur the distinction between fixed and mobile Internet service and hint at the exciting possibilities convergence will offer down the road.

Novatel’s MiFi 2200, a 3G Wi-Fi router.

The New York Times recently covered the Novatel MiFi 2200, a device that will be made available from Verizon in North America in mid-May.  It is a new take on existing cellular-modems as  the device uses a cellular 3g signal from a mobile network to create a portable Wi-Fi hotspot anywhere you take the device. The Wi-Fi signal covers about a 30ft. radius and can be shared with up to 5 users.

What is incredible about this device is that Verizon even suggests that the MiFi device could be used as a primary family Internet service at home. Just two short years ago, sharing a cellular-modem account was discouraged by the same provider–a real sign of the maturation of the ability of 3g networks to carry greater traffic.

Mobile Internet offerings from operators like Vodafone and Digicel are to be expected and do not come as a surprise for anyone. Leadership at TFL should take notice of the BT case. Combining mobile Internet, fixed Internet, voice, and IPTV in a consumer package could make TFL Fiji’s first triple-play or quad-play threat.

Prices fall as Skype enters mobile VoIP

Overseas, things are heating up in the world of mobile VoIP. Two related announcements indicate that the segment is about to undergo some serious competition. Skype has confirmed release of its software for Apple’s iPhone device. Additionally, TruPhone, a London-based mobile VoIP startup is expected to announce new service offerings.

In what is largely seen as a preemptive move against Skype’s release for the iPhone, TruPhone is expected to introduce two new calling options:

… a flat-rate plan (TruUnlimited for Landlines) that would allow its customers unlimited calls to landlines in 38 countries for just over $14 a month. In some countries — the U.S., Canada, China and Hong Kong, for example — the plan would also allow unlimited calls to mobile phones as well. Truphone is also offering another plan (TruUnlimited for Mobiles) that would allow unlimited calls to mobiles and landlines in 64 countries for about $35 a month.

According to GigaOm, the Skype mobile application will utilize WiFi networks and calls to landlines will cost 2.1 cents a minute.  So, Skype calls will not be placed over AT&T’s data network, but through the iPhone device’s WIFI connection.

So much for all the vaunted talk about the power and capability of 3G networks. The iPhone Skype application’s use of WiFi indicates that 3G networks in North America could not deal with the additional pressure of increased VoIP traffic.

The iPhone’s popularity has been a crucial part of TruPhone’s success.  With Skype now entering the picture, TruPhone and other competitors have begun lowering prices to maintain market share.  Falling prices can only entice more users to consider using mobile VoIP services.

Next-generation wireless networks for mobile and broadband Internet

Emerging economies face all sorts of opportunities to leapfrog entire stages of economic development.  Mobile phone usage is leading to the demise of wired line service.  Similarly, wireless broadband service offers the same potential for disruptive impact.  Regulatory bodies must stay on top of these developments to ensure a variety of outcomes:

• investment in next-generation network infrastructure and services
  
• promoting competition in services
  
• ensuring the technology is propagated as widely as possible

For Fiji, we can pretty safely say that wireless networks will deliver broadband Internet in the future.  This is because the country lacks the population density to justify the expenditure in fiber-optic cable, the new standard in wired internet service.  As wireless technologies close the performance gap and become cheaper from wider use, they will become more viable.

With regular Internet usage estimated at less than 5% of the population, the challenge is to create wireless networks that cover as much of the population as possible, and have service plans that are within reach of the average person.

Here is a comparison of WiMAX and LTE, competing standards for 4G or next-generation networks:

So despite their differences in origin and current availability, the two siblings may grow closer with time, especially as newer iterations on the standard emerge. Wright said 85 percent of the work and technology for WiMax equipment will be reused in Motorola’s LTE equipment designs. The true battle isn’t between the competing 4G networks, but between wireless and wired broadband.

“The performance and capabilities of WiMax and LTE will only get better over time, and will represent a direct competitive threat to the existing broadband services,” Wright says. “People will make a choice, just like today when people are disconnecting their wired lines for voice.”

This should help put the competing standards into perspective.  In Fiji, the WiMAX providers are Kidanet and Unwired.  Since LTE is very closely affiliated with mobile phone operators and manufacturers, Digicel and Vodafone are in that camp.

Understanding what these standards mean for each other, as well as to wired and wireless broadband connections will be a key part of how regulators ensure sufficient competition to spur investment in the technology and guarantee service to as wide a segment of the population.  The blurring of the lines between mobile and mobile Internet is also something regulators need to be aware of.

Deploying these networks is an expensive and as yet, untested proposition.  WiMAX is available now and has been successfully tested and deployed in many locations.  You can read about a pilot project in Spain, testing capabilities of the latest generation WiMAX Rev-e standard. LTE is undergoing early field testing by Fujitsu in Japan.

Both WiMAX and LTE are IP-based networks, which poses a real test for mobile phone operators as they figure out how to handle the switching technology to best deal with voice as well as data.  That is part of the reason why LTE deployment is not expected to arrive until 2012.

In earlier posts, I discussed how sharing infrastructure in a public-private partnership arrangement might be the best way to guarantee that service is available to as wide an area as possible.  Well, news out of the UK suggests that mobile phone operators are seeking partnerships to share network infrastructure with each other, in a bid to reduce operating costs:

British broadsheet The Guardian is reporting that UK cellcos Vodafone and O2 are planning to combine their network infrastructures. Talks between the two operators are reported to be at an ‘advanced stage’ and an announcement on the tie-up is expected within the next few weeks. Additionally, it is believed that Orange, which already has a network sharing agreement with Vodafone, may ask T-Mobile and Hutchison 3G UK for permission to join the two operator’s network sharing venture, Mobile Broadband Network Ltd (MBNL). All five operators, despite the rumoured link-ups, will continue using their own brand names. The sharing agreements could see a reduction in the approximately 51,000 base stations across the UK, in turn reducing operating costs for all of the cellcos.

via UK cellcos mulling network sharing agreements: CommsUpdate : TeleGeography Research.

Regulators are now faced with an even more difficult task of ensuring successful competition policy.  Still, emerging economies are offered the potential to leapfrog yet another stage of development entirely.  It might make sense for regulators to do a market analysis to see if such an agreement between operators and government would bring about successful outcomes of lowered costs to the consumer and wide availability of service.  In my estimation, avoiding the costly duplication of service should be something that is explored furhter.   Lowered initial investment expenditure and reduced operating costs would make companies more willing to deploy wireless technology quickly and more widely.

Mobile banking in Kenya spurs mini economic revolution

The ingenuity of users to take up offerings and adapt them to their own needs can mean technology is used in a way the designers might not have anticipated.  That’s really the definition of disruptive technology.

As Digicel and Vodafone begin early rounds of jostling for market share, it might help consumers in Fiji to understand what the possibilities for the technology are. Consider the example of mobile banking in Kenya.  The incumbent operator Safaricom (a Vodafone partner) launched a service that would allow for prepaid cell phone plan users to send minutes to family members.  The service was immensely popular and allowed users to apply the technology to solve other problems:

According to Eagle, local incumbent Safaricom had started a minute-sharing service for its prepaid cell phone plans a few years back. The idea was to enable users to send minutes to family members in rural areas, who weren’t otherwise able to buy prepaid phone cards. However, Kenyans quickly came up with other uses. “Lots and lots of people were using it as a surrogate for currency,” Eagle said. “[You] could literally pay for taxi cab rides using cell phone credit.”

The use of mobile phones in this manner has been a key part of how technological innovation has transformed Kenyan society for the better.    Unlocking the keys to these kinds of possibilities requires the ability to be responsive to the needs of customers .  Can we count on our local mobile operators to come up with such ingenious offerings?   It might be helpful to look at the types of promotions being put out by Digicel and Vodafone  and see if it offers us a glimpse of future possibilities.

Digicel clearly is looking down the road and recognizes that wide take-up of mobile internet service offers a lucrative revenue stream.  Their current offering includes access to 1 gigabyte of internet use.  They must get praise for offering promotions that propagate cutting-edge technology to users.

Over at Vodafone, their messaging seems to suggest that they are willing to concede first-mover status to Digicel.  They are aware of the fact that few people are willing to actually make the switch between providers and that Digicel’s early inroads will come from previously unreached users.

Word of their offering came to me via an article on Fijilive:

“The reduced call charges of 5 cents a unit can also be enjoyed from 12am (midnight) to 5am every other day of the week for the month of March,” Prasad said.

Come on Vodafone, that’s the best you can do? Offering for two weeks, the chance to make  phone calls  at reduced rate, in the middle of the night?  To be fair, that was just one part of the promotion.  Text messages have also been reduced to 5 cents, but its unclear if that is also just for the two weeks of the promotion.

We’re left with questions like, “on what days is the promotion actually valid?” Undoubtedly Mr. Prasad will straighten it all out in upcoming letters to the editor of the newspapers.  It is concerning to see that Vodafone’s marketing effort still has the markings of  the bad-old monopoly days.  Maybe they have chosen to see what kind of progress Digicel makes before they get serious about making offers on new services?

A new type of mindset is needed to foster the development of innovative ideas.  We see progress coming from so many different parts of the world.  If we are to plot a course from today to the point where services like the one in Kenya become commonplace in our own country, then we need to be able to count on our operators to show some vision.

Safaricom users can use their mobile phones for a wide range of banking services

A new day will dawn

For 14 long years, Fiji has suffered under a telecommunications arrangement that granted exclusive licenses to operators and prevented the entry of new companies to challenge these monopoly agreements.  As a result, Fiji has had to endure terrible service, non-existent customer support, prohibitive pricing, and a host of other issues that one would expect when monopolies rule the day.

No longer.  With the entry of Digicel into the mobile market in Fiji today, there will be real competition in the mobile market.  Benefits to the consumer will be immediate.  Already, Vodafone has started slashing rates to compete and in unprecendented moves, has even responded to widespread customer complaints about SMS promotions. Offering competitive pricing, excellent customer support, and the genuine motivation to shake up the market, it will not take long for Digicel to make a serious dent into Vodafone’s business.

Digicel stores in Suva open at 8 AM and the company is putting on a free concert at Albert Park, where a crowd of 60,000 is expected.  The show will feature Sean Kingston, NZ-based Katchafire, and several local artists who get the thrill of playing for the largest crowd ever to gather in Fiji (for a non-religious event). The people of Fiji are not used  to being shown any sign of appreciation from the companies they deal with.  For a company to thank them with a free concert, before they have even started operations is a clear sign of great things to come.There are areas of concern.  While the mobile sector has been opened up to competition, the internet gateway/backhaul function under the control of FINTEL will not be challenged anytime soon.  This is an issue that has been dealt with extensively on this blog.

Change in internet will be more gradual and even there, Digicel will be a key mover.  As it signs up more people to its data services, expect Digicel to show more interest in investing in internet backhaul capacity.  It is only at this point that we can really expect internet service, quality, and pricing to show any movement in Fiji.

 

Today is a step in that direction.

Digicel a step closer to Mobile License

FijiLive provides the back story:

In February this year, the Government approved a licence for Digicel to operate a mobile phone service in Fiji in October, bringing in competition to Fiji’s monopolised mobile phone sector.

In May, when asked about Digicel’s licence, Ricketts had told fijilive.com/business that Digicel (Fiji) was expected to get its licence after the Government and the operator “sorted out a few details”.

A month later, the two parties are still ‘negotiating details”.

Ricketts had also said then that Digicel hadn’t yet paid its $US10.25 million (F$15.44m) bid offer (following which the company would be issued the licence).

“Once these details are sorted out, they will pay that (the amount) and will get the licence,” Ricketts said in May.

Today, Digicel’s business development manager, Thomas Underwood said that the meeting was just closing issues.