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Mobile networks: It's a risky business, says 3

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Three confirmed the risky nature of its infrastructure JV operation today, and dropped some hints about how 3 customers could get their hands on an iPhone later this year.

3 has spent big on expanding its network, partnering with T-Mobile to create a joint infrastructure venture called MVNL, the operation of which is wholly outsourced to Ericsson. But with T-Mobile joining forces with Orange, either party may pull out.

CEO Kevin Russell said the exit conditions would not be triggered for some time. He made it clear that a pukka data network was of strategic importance to 3, the outsider in the UK market.

Russell admitted that a poor rap lingered from the early days, when the Hutchison network launched in 2003. "The legacy perception was deserved in many ways, because early handsets didn't work, and 7000 sites wasn't enough." A high quality network is 3's way of grabbing customers.

So Russell was touting a huge expansion of the network, bringing it up to 12,855 sites by the end of 2010. All of these will carry HSDPA+ data at 7.2Mbit/s and the upgrade, which he described as painful, will give 3 a crack at 10.5m potential punters who will be able to receive a signal indoors for the first time.

3 CTO Graham Baxter said 3 carries 75TB of data a day, which has doubled from a year ago. 3's dongles carry 7.5x the traffic of 3's smartphones. For about a year, 3 was alone in offering pay-as-you-go mobile broadband dongles, giving it the largest (37 per cent) share of this UK market.

3 also said throughput had improved - acknowledging it was trailing its rivals a year ago at around 600kbps, but it's now a more respectable (although not leading) 1.2Mbps.

Russell had a few other points to flag. 3 was concerned that the merged "T-Orange" behemoth would have over 80Mhz of bandwidth, far more than the competition, and this was a crucial advantage in the LTE era. The merged entity is not going to give up spectrum without a fight.

He also wants number portability to be eased, so a departing customer didn't have to call the network they were leaving to get a PAC code. Russell felt this extra step helped customers more than diminishing the waiting time.

And he hoped the Termination Rate would be revisited, with regulators reducing it to under a penny. 3 has coordinated a campaign to review the rate, which sees customers pay a 5p per call tax to phone a landline, with the money returned to help the er, fledgling and precarious new mobile phone industry. Russell said short-term considerations were being put above growing the market - with lower termination rates, more people would replaced fixed lines with mobiles.

As for the iPhone, he told us that it would be available as a retention tool - it already is today but you have to be a big spender, and get very stroppy - but it was good not to rely on one phone for its data appeal.

I asked if Russell could envisage the day when mobile networks were like commercial radio stations, and outsourced the carriage to some grey and faceless infrastructure company, like Arqiva? Wasn't the JV a step down that road?

He had quite a thoughtful reply. Ultimately it was about services and branding, but for the forseeable future there was much to be gained by retaining a close influence over the infrastructure. Baxter added that it wasn't possible to find those sites. 3 already had relationship with people ranging from Arqiva itself to single farmers.

Eventually, the economics must surely favour the networks becoming services and marketing companies and outsourcing the lot, but that doesn't look like it's going to be soon. ®

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