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O2: risks are for losers

Outlines cagey approach, snubs WiMAX

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Supersexy mobile operator O2 revealed its glamourous secret to growing a dynamic converged communications operation: proceed with caution.

O2 UK execs have watched with glee as Orange and TalkTalk's "free" broadband offerings have been widely reported as backfiring. Since it bought small ISP Be in June, O2 says it has been quietly working on local loop unbundling to ensure it works when it finally launches bundled mobile and broadband in the middle of next year. It announced that Be had unbundled 300 exchanges, covering under a quarter of the population.

The plan was detailed at O2's annual strategy knees-up in London following results on Tuesday which must have had rivals at Deutsche Telekom and Vodafone sobbing into their cornflakes. The roll-out should be as free of cock-ups as possible, O2 says, and shoot for straight-up value rather than tricksy "free" marketing.

O2 UK CEO Matthew Key said: "Customers are rebelling against free broadband. They associate free with substandard."

Vodafone will be targeting the same perceived customer service weak spot in existing bundles after its recent about-face on broadband by announcing a bundle to launch in the new year. It had previously pontificated about its plans to be a "pure-play" mobile outfit.

O2's calculated entry into the broadband market will be mirrored in its apporach to new technologies. Outside the Czech Republic, O2 has only dipped its toe into IPTV. Contrast that with BT, which is set to dive right into the market with BT Vision anytime now.

Similarly in mobile TV, while Virgin has already launched the Lobster phone to a muted reception, O2 yesterday refused to be drawn on when it would enter the fray. The firm is conducting trials across its territories concentrating on building interactivity into the experience by combining DVB-H TV with 3G services.

HSDPA has the beating of WiMAX, according to O2 CTO Dave Williams. When it begins punting converged mobile/broadband at consumers and businesses, O2 will offer shrunken 2G and 3G base stations as wireless routers rather than getting involved in unlicensed spectrum.

O2 group CEO Peter Erskine said: "We back winners."

That's despite apparently betting on web 2.0-style services to get paid-for content into user's pockets. The firm demonstrated its LookAtMe YouTube-style video service, which charges 35 pence per clip.

Accepting the hype bubble surrounding long-tail monetisation of frat boy-generated video will burst sooner-or-later, Erskine denied O2 could suffer in the fallout. He told The Register: "We're not exposed to that at all." ®

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