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UK first battleground for European convergence

Gauntlet laid

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The UK is shaping up to be a key battleground as the major operators start to put their convergence theories into practise.

As Vodafone casts around for a way to add broadband access to its mixture of services, the wired-wireless incumbents have put the elements of the quadruple play in place already and are now taking their first steps towards unified service bundles.

Orange has thrown down the gauntlet by offering free fixed broadband to customers who spend a certain amount on its mobile services – making the long anticipated shift to free broadband a reality, and one to which the other operators will have to respond. Orange is also the common brand now adopted by its parent France Telecom for all its quad play (and enterprise) services including broadband access, ISP services, IPTV, VoIP and mobile.

With other France Telecom brands such as Wanadoo, Equant, Etrali and eventually MaLigne IPTV now disappeared, this is only the start of the real shift – towards genuinely converged bundles of services (not to mention the gargantuan effort of combining sales and service organisations, websites and helpdesks).

The Orange free broadband offer extends significantly the principle laid down by T-Mobile – that cellular revenue and customer retention can be driven by offering another service at low cost, even if it is lossmaking to the operator (in T-Mobile's case, this was the Wi-Fi hotspot subscription). Some smaller operators are already taking the same approach, notably Carphone Warehouse (also in the UK), and the other majors are likely to copy – leaving those cellcos with no broadband network at a severe disadvantage.

Vodafone is the best example, and all the mobile-only providers, and the larger MVNOs, will have to consider how to obtain broadband partners, or offer an alternative way to lure and retain customers. Free mobile minutes, in return for watching adverts on the cellphone, is one of the most promising options, building on the internet model, and this has already been introduced by Virgin Mobile USA and hinted at by Vodafone.

MVNO response

Many of these more innovative approaches to offering free services are being driven by the MVNOs, which do not have the same capex and opex considerations as the network owners.

For instance, Xero Mobile has attracted considerable attention in the US with its soon-to-be launched advertising-based service. It plans to give away up to 5m handsets, mainly to college students, and then subsidise their bills by pushing adverts to those phones.

Now, Xero is looking to franchise this model to operators in other countries, claiming it "owns and has licenses for the technology, IP and expertise necessary to deploy this model in multiple countries".

For those with broadband to offer, however, the pressure to move to converged bundles has been stepped up by Orange's move. This is the first blow in the long awaited confrontation between France Telecom, Deutsche Telekom, Telecom Italia, British Telecom and to a lesser extent Telefonica, which is likely to change the telecoms landscape and take in all the new Europeans to the east. It is a war that is based on using a quadruple play where unbundling of the local loop and broadband wholesaling legislation across all of Europe has made it possible for ISPs to enter other broadband markets.

The UK convergence fight

This is a fight that's been brewing for some time and although Orange's rebranding has most impact in its native France, the opening shots are fired in the UK, fairly and squarely at British Telecom.

Orange UK has announced its free 8Mbps line to mobile monthly contract customers who spend more than £30 ($56). Orange has also launched new VoIP services including one called Anytime, which offers free evening and weekend calls to UK landlines and has free calls to Orange mobiles for just £6 ($11) a month.

Eventually, Orange will bring in a "One Phone" offering, a dual-mode handset that hands off between the broadband and cellular networks using Wi-Fi, taking on BT Fusion; and it has promised to merge address books across mobile and broadband telephony.

Orange has also said that it will launch music, gaming, communication and security services in the near future, but we would expect even more from the company, and an onslaught in hybrid IPTV services will be launched right across Europe.

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Next page: Acquisition of BT?

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