Global Economics

BusinessWeek


Telecom industry trends included consolidation and the rise of operators offering mobile, fixed line, broadband access, and pay TV services

For the mobile and wireless world, 2006 was the year when convergence finally took hold and 'quad-players' were born. It also saw the launch of mobile TV, some fetching handsets and plenty of 'free' services. Jo Best looks back - and makes some predictions for 2007.

When we started this year off, we all knew where we stood. We knew mobile operators sold mobile connectivity, broadband suppliers provided internet access and we paid through the nose for the whole lot. And now? The industry has consolidated so fast there are just a few nuggets of telecoms white dwarves left, dispensing 'free' services.

This year, it seems, telecoms has seen its traces kicked over by the consumer players. Carphone Warehouse and Sky are arguably the two main protagonists in this movement to consolidate services, with both launching 'free' broadband services and VoIP within weeks of each other and stepping firmly outside of their comfort zones. Orange also followed with a 'free' offer of its own, which while it didn't prompt the stellar take-up its rivals saw, also didn't get those rivals' wooden spoons for customer service, either.

Others were also keen to capitalise on convergence this year. Most notable was the behemoth NTL:Telewest which swallowed Virgin Mobile and by offering mobile, fixed line, broadband access and pay TV, became the UK's first quad-play operator, though doubtless not the last. BT pulled a reverse Sky move, adding pay-TV to its service line-up while O2 is starting to look a little more like BT after buying ISP Be, among other manoeuvres.

While convergence and consolidation seem to have been around forever, it's likely that we're looking at a duck on the move: at a glance, floating along serenely, under the water, frantic activity. Expect more to come. The indications are showing already - the entity formerly known as NTL:Telewest:Virgin Mobile had previously been cosying up to ITV, before Sky stepped in, bought a 17 per cent share of the broadcaster and effectively stamped all over NTL's dreams.

Convergence of a different sort has also been the flavour of the year, as FMC - or fixed-mobile convergence - caused operators to talk big. Vodafone promised it would get involved, as did Orange with its Unique offering and C&W, which even splashed out on a licence. O2 also talked up FMC but said it believed reversed-engineered GSM base stations would be a better carrier technology than the wi-fi now used by others.

If using your mobile to make VoIP phone calls wasn't enough on the functionality front to get you excited, mobile TV finally - finally - went commercial in the UK this year courtesy of mobile recidivist BT.

The telco launched its Movio service over DAB-IP, with Virgin Mobile as the first customer. Mobile TV fans carried on moaning about lack of spectrum or plugging clip downloads over 3G.

Mobile operator 3 proved this year it's still capable of pulling a rabbit out of a hat with the announcement it's borrowing broadband's flat-rate pricing model for its web services, and also controversially embracing VoIP for its X-Series product. It's not launched yet, so whether it's a hit or a miss is yet to be determined, but it's certainly shaken up the market.

Vodafone too has had something of an image makeover in 2006, prompted by serious shareholder dissatisfaction. It's outsourced some of its IT, acquired companies and sold a few of its overseas operations.

Over the past 12 months the mobile market has seen some notable departures, including MVNO easyMobile and handset maker BenQ Mobile, as well as ISP Bulldog, which exited the market and sold its customer base to Pipex.

Other departures of note include Connexion by Boeing, a venture set up by the plane maker to sell in-flight broadband. Connexion shut its doors in August but since then, others have been falling over themselves to start selling airborne mobile connectivity, including Air France, BMI and Ryanair.

At the moment, most believe that simple calls and text messages will be the killer app for mobiles although the data element of BlackBerrys and other mobile email handsets could soon come into play.

On the handset front, a couple of interesting devices arrived during 2006: Palm's 3G Treo for Europe; RIM's consumer offering, the BlackBerry Pearl; and Motorola's Razr take on the business device, the Q. One device that many hoped would make an appearance but didn't was the much-rumoured Apple iPhone.

Apple, of course, has made no public commitment to making such a device but we all know that does not rule out a launch. The latest rumour is that the device has been delayed, although it's believed to be on the way for 2007. The rumour mill has a few turns left in it yet.

Another long, drawn-out saga that will develop in 2007 is that of roaming charges. EC information commissioner Viviane Reding started out talking tough with recalcitrant operators about roaming rates, threatening to force operators to cut the prices they charge consumers. Unsurprisingly, the move provoked disquiet among the operators who are working to stymie the drive towards regulation, dragging their feet and grumbling about the whole process.

One analyst aptly described the process as getting an unwilling teenager to tidy his room - he knows he has to do it and it's good for him but he'll do it as slowly and miserably as he can. It's a stance that the operators are unlikely to shed during 2007.


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