Back in 2002, that is before the 3G era, there was an understandable sense of anxiety floating in shareholders’ and investment banks’ boards of directors: when would the sheer level of investment needed for the deployment of this new technology start to pay off?
In the summer of that year, I was invited by a management consultancy to participate in a debate about the fate of European mobile operators.
Armed with sophisticated spreadsheets, the consultants were betting that only a few mobile operators would survive the approaching onslaught. Their key argument was that economies of scale would favour the largest operators since they allowed them to flex their bargaining power with handset manufacturers and network infrastructure vendors. In other words, cost advantage would be far more critical than value advantage (note that, already at this stage, some were sceptical about operators’ capacity to provide differentiated and un-commoditized services).
Four ingredients have been crucial in the adoption of 3G:
1 The provision of high bandwidth connection is stable and geographically well-covered , through not only cellular technology but also wifi. Most of the users can surf the Net regardless of their location, which was obviously not the case when 3G was launched;
2 Tariffs on data/media transfer are flat and thus entice customers to . There is no more “next-month bill syndrome” which was prevalent when we used to pay digital downloads by the megabyte;
3 Handsets now have large, high-resolution and touchable screens, which is essential if one wants to use her/his mobile phone not just as a telephone;
4 Last, there is a rich and varied availability of useful content and services, mostly provided by third parties.
In the graph below, you can now see which industry sector (Mobile Network Operator; Handset Manufacturer; 3rd party) impacts on which corner of the square:
As you can see, the battlefield seems to be situated at the bottom left of the square. All parties are willing to provide digital services and content that are not only superior, but, if possible, exclusive. It is difficult to predict which of the three industry categories will end up with the largest share of the profit pool, and within each category, which companies will dominate – although at the moment, Apple’s App Store is ahead. That could change, but it will take time to conceive the best service or provide ongoing exclusive content with the right partner.
Interestingly, there is an area where changes have more of a short-term impact on revenue and market share: tariffs (the top right corner of the square).
The aim would not be to enter a price war that would solely be driven by discounts, but to conceive, in a creative way, new types of tariffs that would perfectly match the sheer variety of customers’ needs.
In other words, by launching a new breed of competitive and adequate tariffs, operators would in effect provide tangible added-value. In time of economic crisis, this move would constitute a real competitive advantage.
There are different ways to think laterally about tariffs plans (Chris Anderson’s Long Tail theory could be of help in some instances, as well as the “group buying” initiatives that flourish on digital platforms). But there is one area where most of Europe’s mobile operators have been reluctant to explore: Europe itself.
In a global and “digitized” world, where people can consume, share and connect above any physical frontier, it seems paradoxical that the tool that very much epitomises mobility does still function within a country-by-country system.
Think about the millions of Europeans who live close to borders, and thus tend to frequently cross them; think about the numbers of expats who keep in touch with family and friends; think about the number of people who have relatives outside their home country; think about the percentage of EU citizens who travel each year within our Continent and still need to log on their email or Facebook account… Surely, a unique pan-European tariff on calls and Internet access would be welcome, and could even, as a by-product, make landline phones obsolete (isn’t it a key goal for operators?).
8 years ago, the predicted bloodshed did not happen.
In 2010, will it be the same story?
