24 hours later it was still misbehaving, but by that time I’d finally snapped and decided to look into it. A call to O2 resulted in a recorded message that was played before the usual welcome message; “We are experiencing some difficulties,” an overly sympathetic voice cooed, “We apologize to our customers for any inconvenience this might have caused.” (I’m paraphrasing, of course).

I didn’t stop there — I asked the mighty Google for more information, and it turns out those ‘difficulties’ affected quite a number of O2′s customers, both iPhone and otherwise, judging by the 20-odd page discussion that was raging on O2′s official support pages.

Tech news site V3.co.uk published several notices from O2 during the outages, which began rather hopefully:

We’re sorry that some mobile customers have had problems with data today – these services will be back up tonight.

…but ended on a decidedly more sullen note;

The system fault has been fixed and internet connections are gradually being restored. MMS and Visual Voicemail remain affected. We’re working on these as a priority.

Thankfully the problem was cleared up reasonably swiftly. Something to do with incorrectly assigned IP addresses, or leaves on the line (trust me, if you’re British that’s hilarious!)

While some tech sites are reporting on the data outages in London in much the same tone they would AT&T’s lackluster services in New York or San Francisco, I must offer my own (admittedly anecdotal) evidence to the contrary; my partner and I are both iPhone-toting, data-hungry technophiles who just happen to live in London. And this is the first time this year we’ve experienced any truly memorable disruption to O2′s data network. For clarity: I’m not saying we haven’t suffered the occasional dropped-call here and there. We have — at a rate of perhaps one dropped call every other month. You see, when all is said and done, the O2 network is normally exemplary (as it should be, considering how much we pay them).

Still, O2 has been reaching out to its customers, cap in hand, doing that quintessentially British thing…apologizing. In a Reuters report published today O2′s Chief Executive Ronan Dunne is quoted saying:

Where we haven’t met our own high standards then there’s no question, we apologize to customers for that fact. But it would be wrong to say O2 has failed its customers en masse.

The story is much the same here in the UK for O2 as it is for AT&T in the States; smartphone ownership is on the rise and smartphone owners use a lot of data, relative to the amount consumed by so-called ‘feature phone’ customers. The network carriers simply aren’t prepared for this. Historically they’ve never had to provide this much bandwidth and their business models (typically structured into five year plans that don’t change much in-between revisions) simply don’t make adequate (if any) provisions for the scale of network investment and improvement that data-hungry devices like the iPhone demand.

Still, that doesn’t stop their execs bragging about the upgrades that have taken place. From Reuters;

The company [O2] had invested 30 million pounds ($48 million) in its London network to meet demand [...] and 200 extra mobile base stations had been installed.

Sounds impressive, no? But I wonder… that’s an awful lot of money, and an awful lot of new base stations. That sort of massive investment into network expansion was likely planned years ago as part of the company’s long-term growth strategy. Indeed, such a huge investment plan could easily have predated the 2007 introduction of the iPhone, and the subsequent explosion in smartphone adoption.

However, I’m not beating up on O2. It might be feeling the same pain AT&T has so publically suffered in recent months, but at least it’s not reacting the same way AT&T’s CEO Ralph De La Vega did, with barely-concealed threats of data-caps and tiered pricing plans for smartphone users.

AT&T’s message (at least how it comes across to me) has mostly been along the lines of, “You iPhone customers are a nuisance, you’re to blame for all our network problems, so you’ll have to pay us more money!” Conversely, O2′s message reads, “You iPhone customers chew through a terribly high volume of data that sometimes causes us problems – we’re sorry we weren’t ready for that, and we’re working on it”

Color me biased. But tell me you don’t think AT&T could learn something about good PR from their British counterparts.

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Well, forget it. Ain’t gonna happen. Not if the UK’s mobile market is anything to go by.

Vodafone UK has today announced the launch date of the iPhone on their network (it’s January 14, by the way) but once you’ve picked your way through their online pricing minefield, it’s hardly anything to write home about.

According to the Financial Times, Guy Laurence of Vodafone UK said the carrier has been busy preparing their network for the iPhone for the last twelve months;

We started preparing our network over a year ago so that iPhone customers will really feel the advantage of being with Vodafone. We will offer an outstanding iPhone experience wherever our customers live, work and travel, delivering speed and reliability – something our customers have told us they really value.

Yeah. We also value more competitive deals, Mr Laurence.

I did a very brief comparison of the three cheapest contract deals (not pay-as-you-go) offered by the three biggest operators in the UK: O2, Orange and Vodafone. Here’s what I found.

The cheapest contracts are all pretty lengthy –two years, in fact. That doesn’t sound unusual for those of you in America, I know, but here in the UK mobile contracts are often no longer than twelve months. Being locked-in for two long years is a ponderous proposition for many Brits who might be graduating (tentatively) to the exciting world of modern smartphones from their old Nokia 3310′s!

In addition, none of the carriers offers a competitive price for the latest model, the iPhone 3GS. The most affordable iPhones happen to be the elderly 2008 model. The stingy 8 gigabyte 2008 model, at that. So if you opt for a two year contract you’re getting a model that, in about six months (barely one quarter into the lifetime of your new contract) is going to be two models behind the latest and greatest from Apple. I’m just sayin’, is all.

Here’s how it breaks down, assuming the recession has hit you as hard as it hit everyone else and you’re looking to buy the most affordable iPhone package with one of the major UK network operators;

O2
For £34.26 ($55.22) a month you’ll get 600 free minutes of talk time and 500 free text messages. Data is unlimited. Assuming you never use more than the free talktime/SMS, this will cost you £822 ($1,324) over the course of the contract.

Orange
£29.36 ($47.32) each and every month gets you a measly 150 minutes of talktime and 250 text messages. The lifetime cost – £704.64, or 1,131.37 of your shiny American dollars.

Vodafone
For a few pennies more than O2, you can get last year’s low-end iPhone for £35 ($56.20) each month. For your money you’ll get 600 free minutes and unlimited text messages. The lifetime cost – £840, or $1,348.70.

Please don’t forget – and I can’t stress this enough – this is an unusually-long contract for the UK, and yet it’s last year’s phone.  Add to that the fact that, of course, no one ever stays within the allotted talktime and SMS quotas – everyone has a bill that costs the monthly fee plus additional talk time and messages. Frankly, it all adds up to quite an expensive deal, given the age and limited storage capacity of the model on offer.

I should add, too, that “unlimited” doesn’t actually mean “unlimited”. It means you’re allowed to consume as much data as the network provider deems “appropriate” for normal use. This tends to hover between 500 MB and 1 GB per month, which isn’t too bad unless you use your phone for watching YouTube videos eight hours a day. (Still, I take offense at the way network operators so casually use the word “unlimited” when it means nothing of the sort.) The trouble is that, if our providers start behaving like AT&T, their idea of “acceptable data usage” is going to change, and not in our favor.

The 3GS, on the other hand, is astonishingly more expensive than the 3G with little appreciable difference between the providers in terms of handset costs and tariffs. I wonder if this is because of the already-steep up-front costs they’ve shouldered in order to offer Apple’s handsets in the first place. If that’s the case, perhaps I should be more disappointed in with Apple’s aggressive pricing policies that those of my nationwide cellular network operators. In any case, at this point in time, I see no compelling reason to move away from O2 at the end of my current contract.

Was I expecting too much in terms of competitive pricing? Are these prices fair, given the investments which must be made by operators to offer the iPhone ‘experience’? Or is this a shining example of unfettered network operator greed? Share your thoughts in the comments.

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The news, which comes via The iPhone Blog, is a promising sign for all iPhone users. If Apple is at all a party to the decision to allow unlocking of its devices in countries where the iPhone is available on multiple networks, then hope exists for countries like Canada, too, where the iPhone recently became available on Bell and Telus, as well as Rogers, the original carrier.

O2 CEO Matthew Key describes in an interview with the Times Online how customers will be able to unlock, though that won’t relieve them of their contractual obligations:

Once the iPhone becomes available on other UK networks, we will allow O2 customers to unlock their iPhones, although of course they will still need to honor any outstanding contract period they have. At the end of their contract period, they are entirely free to move to another operator — though naturally we hope they won’t want to!

It isn’t clear how the unlocking procedure will actually work. Will users have to physically visit an O2 store, or can it be done over the phone using iTunes at home? Whatever the method, O2 is doing the right thing by providing its customers a choice, which is a good faith gesture which should end up building customer loyalty and avoiding resentment. No word yet on whether or not other UK carriers will be offering the same service for their iPhone devices.

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The BBC noticed something a little off when it investigated the new pricing structure and terms of use for the iPhone deals Orange is about to begin offering on Nov. 10. First, it turns out that far from sparking a price war, Orange has basically adopted the same deal that O2 currently offers, with some minor changes meant to sway customers its way.

Secondly, and this is the real kicker, Orange’s “unlimited” apparently means up to a maximum of 750MB per month, if you look at the fine print. When asked to clarify, Orange stated that the cap was for its 3G network, and that another 750MB cap existed for use at the hotspots of its Wi-Fi partner BT Openzone. Finally, another clause in the Orange Terms and Conditions states that data is…

Not to be used for other activities (e.g., using your handset as a modem, non-Orange Internet-based streaming services, voice or video over the internet, instant messaging, peer-to-peer file sharing, non-Orange Internet-based video). Should such use be detected notice may be given and network protection controls applied to all services which Orange does not believe constitutes mobile browsing.

I don’t know about you, but I’m pretty certain I do almost all of those things on my iPhone over my carrier’s data connection on at least a daily basis. If true, this clause could block the use of programs like Beejive IM, Facebook, Spotify, and the BBC iPlayer.

By contrast, O2, when asked to clarify its fair use limits, said this:

We reserve the right…to contact customers about their usage if we believe it adversely affects the service of our other customers, e.g., if a customer uses their SIM in another device for which it is not intended.

So what advantage is left to Orange, then? Basically only network coverage and quality. This just goes to show that the iPhone is a cruel mistress no matter which carrier she appears on, and that the end of exclusivity might have less positive ramifications for customers than previously expected.

Data is the key to the iPhone’s success, as it is positioned as one of the few devices on the market that users increasingly use for Internet access first, and phone functionality second. This presents a dilemma (subscription required) for wireless operators, since keeping up with demand can considerably tax network quality and dependability. AT&T in the U.S. is constantly under fire for its 3G network stability, for example.

Orange later said it would be reviewing the cap following the large volume of negative emails it received regarding its use of the word “unlimited.” Hopefully, the company will also look at those ridiculous restrictions regarding data usage, since the real appeal of the iPhone for most users is the ability to do precisely those things which that clause specifically prohibits.

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That’s the day following the end of O2′s exclusivity contract with Apple, so it literally couldn’t begin offering it any earlier. No word yet on when specifically Vodafone will begin offering the device, though it will eventually join its two rivals in selling the 3GS sometime in the new year.

According to The Guardian, despite the iPhone’s strong performance to date, interest in the device in the UK isn’t showing signs of stopping anytime soon:

Certainly interest in the iPhone among UK consumers shows no signs of abating. Already Orange has had over 200,000 customers register their interest in getting the device, before the company has even said what it will charge for it.

While the timing seems ideal in terms of sparking a holiday price war for Christmas consumer dollars, that scenario is actually fairly unlikely, since Orange UK has made statements to the contrary, claiming that instead of offering a lower price on the device than O2, it will try to attract customers with added value. That might take the form of accessories, temporary contract incentives, or pre-loaded applications, which is the mobile equivalent of bloatware, if you ask me.

It’s a disheartening sign for those who were expecting a more open field with regards to the sale of the iPhone to result in more affordable prices, but remember that this is only the beginning. Vodafone will enter the fray in 2010, as will the smallest UK carrier, 3, according to recent statements by the company’s CEO, Kevin Russell:

I would expect the iPhone to be on the 3 network sometime during 2010. At the moment, we don’t have the iPhone. We don’t really have any smartphones, but if we improve our range of smartphones and introduce the iPhone then our data traffic will grow massively.

If networks want to use the iPhone to do more than just retain existing subscribers, they’ll have to begin offering clearly defined advantages, and nothing attracts attention more than lower prices. Remember that the iPhone is already among the most heavily subsidized devices on the market, though, so it isn’t clear how much further providers can go without seriously affecting profitability.

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Vodafone also will be selling the device in Ireland. It will begin selling the phone in both places at the end of this year. Analysts see the move as a huge boon for Vodafone’s business, which had been suffering in the British market because of O2′s exclusivity deal. If you’re not keen on waiting, you can already pre-register online for iPhone updates through Vodafone’s web site.

Once it becomes available on Orange and Vodafone, the iPhone will be officially offered by three of Britain’s five mobile operators. The exponential increase in competition could have significant benefits for the consumer, if price wars ensue. The iPhone is already one of the most heavily subsidized devices on the market, though, so it’ll be interesting to see how far into profits cellular network operators are willing to cut to win consumer favor.

The iPhone is such a valuable property because of its data-intensive nature. Cellular providers are seeing profits from talk and text steadily decreasing as talk time becomes cheaper and plans become more competitive. Look at the U.S., where Sprint recently introduced free calling to any mobile on any network for those subscribed to its top-of-the-line Everything plans. Data use has become the real money maker for wireless companies, since customers still regard it as a premium and are willing to pay more for it.

Bernstein analyst Robin Bienenstock emphasized the role of the iPhone in O2′s recent success:

We estimate that the iPhone represents more than 100 percent of O2 UK’s growth, 6 percent of subscribers, 14 percent of service revenues and 13 percent of earnings before interest, tax, depreciation and amortization. In the UK, O2 has consistently taken contract share from competitors (in particular Vodafone) since its sole distribution of this iconic brand began.

Clearly, Vodafone wants to take that contract share back, and now it has the means to do so, when it begins to offer the iPhone 3G and 3GS through 13 of its operating companies early next year. Hopefully, this is a taste of what’s to come for U.S. markets somewhere down the line. As Liam mentioned yesterday, the real show will take place when these three vie for consumer attention following the launch of whatever iPhone iteration Apple has in store for 2010.

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Orange UK and Apple have reached an agreement to bring iPhone 3G and 3GS to Orange UK customers later this year. Orange globally now offers iPhone in 28 countries and territories.

Orange, which has the largest 3G network covering more people in the UK than any other operator, will sell iPhone in all Orange direct channels including Orange shops, the Orange webshop and Orange telesales channels, as well as selected high street partners.

Orange doesn’t say anything about pricing, plans or even the date the iPhone will become available, but does offer a webpage where customers can register their interest.

At the time of writing this article, O2’s home page, news pages and much of their usual website is “temporarily unavailable”, but Macworld UK has the text of a statement issued by O2 (though they don’t offer a link to the source):

According to Macworld, O2 says:

We’re proud that we’ve been able to offer an exclusive iPhone deal to our 20 million customers for the last two years. We always knew that iPhone exclusivity was for a limited period of time, but our relationship with Apple continues and will be an ongoing success. We have over 1million iPhone customers and they remain very important to us.

Interestingly, while speaking of a continued relationship with Apple, O2 has (somewhat paradoxically) used the opportunity to talk-up the Palm Pre.

We aim to offer our customers the best devices on the market, including becoming the home of Smartphones and we are really pleased to now add another device in the Palm Pre.

Home of smartphones, eh? In the dark ages before the iPhone, I was, for many years, a Windows Mobile customer with O2. And life was hard. Those phones were expensive and inexpertly supported by O2 who, it seemed to me, treated its premium-paying smartphone customers at best as something of an oddity, and, at worst, second-class citizens. It might have been the home of smartphones, but in my experience, it wasn’t a happy home.

And yet, life as an iPhone customer with O2 hasn’t been so bad — and certainly not as appalling as our American friends’ experiences with AT&T. We’re lucky not to have been plagued with dropped calls and painfully limited service. We also got MMS months ago, pretty much when Apple announced it, and not many months later.

But life on O2 has been expensive. Unlimited data comes with a fairly high price when compared with more reasonable data plans available elsewhere. (O2, apparently, knows it can squeeze its iPhone customers for the extra pennies.)

Hopefully the competition from Orange (and, potentially, other operators down the line) means that prices will start to fall, not only on the tariffs themselves but also on the actual handsets. We may also see an end to insanely expensive upgrade ‘settlements’ such as the one UK customers faced earlier this year, when the only way to ‘upgrade’ from the iPhone 3G to 3GS was for a customer to “buy out” their contract as well as pay the premium price for the new handset. (For anyone mid-way through their eighteen month contract, that was far more expensive than simply buying a 3GS handset sans-contract and simply swapping the SIM cards.)

Of course, competition-induced lower prices doesn’t necessarily mean the return of the attractive subsidy pricing we saw when the 3G was released, but it surely should mean lower prices across the board than those we have endured since 2007.

I can’t wait to see how the competition affects the pricing and promotion of Apple’s next iPhone revision in 2010…

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As someone who has played with the betas of the iPhone 3.0 OS, I was excited to see the availability of tethering that would allow me to share the Internet connection between my iPhone and my Mac. With 3.0 around the corner, the feature is coming, but not in the United States.

Wired or Wireless?

Tethering works via Bluetooth for wireless connectivity or via your dock connector and USB cable (which also conveniently charges your iPhone at the same time). Once you pair your devices and turn the feature on, there’s no more setup. Plus, you can still send and receive data and make phone calls on your device while it is tethered! Tethering is not a feature specific to the new iPhone 3G S and will run on both Macs and PCs.

Extra Fees

Apple is working with different carriers independently to work out plans for tethering options. At the moment, Apple has announced over 20 carriers that will support tethering, including bharti, Telefonica, Tim, Hutchinson Telecom, ‘yes’ Optus, Orange, TeliaSonera, true move, maxis, Rogers, SFR, O2, SingTel, T-Mobile, Turkcell, Glove, Vodafone, VimpelCom, Luxgsm, Chunghwa Telecom, Telkomsel and Telenor. Most carriers will be announcing specific pricing for this feature that is unique to them. Across the pond, O2 in the UK is offering a package based on the amount of data used with options at 3GB for 14.68 pounds ($23.45) per month and 10GB for 29.36 pounds per month.

No Love for the U.S.?

AT&T, mysteriously absent from the aforementioned list, is not allowing tethering on its 3G network in the United States. While tethering disappeared from recent betas, the underground community brought support back through jailbreaking. It’s reasonable to assume that, while AT&T has not announced pricing or plans for tethering, it will still be possible to tether in the United States either via jailbreaking or via a future deal announced by Apple and AT&T.

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A subsidized laptop offering from Apple would help alleviate complaints arising from the October 14 event that pricing on their new notebooks remained too high. Thompson also thinks that Apple is keen to avoid a netbook, as it might cannibalize MacBook sales, so discounting an existing product through a third-party allows them to essentially have their cake and eat it too.

The model to be discounted is thought to be the $999 entry-level white MacBook, a likely choice because it would require a much smaller subsidy than any of the new aluminum models. Many other computer manufacturers, like Dell and Asus, currently offer netbook/subscription packages with wireless carriers like the one proposed between Apple and O2, though such bundles have failed to attract much interest in North America.

O2 is already the exclusive carrier of the iPhone in the U.K., making it the natural choice for a laptop subsidy partnership. Vodafone and Orange currently offer netbooks bundled with mobile broadband subscriptions in the U.K. Vodafone has both £25 and a £30 per month plans, offering 1GB and 3GB of data transfer, each of which includes an Inspiron Mini, free of charge. Orange offers 3GB at £25 per month, and throws in an Eee PC 900 (WinXP, 16GB SSD) for no further cost. Both providers require a two year minimum subscription to get the free hardware. If Apple does go ahead and offer a similar deal in partnership with O2, expect similar monthly pricing and bandwidth limits, and not free, but deeply discounted hardware.

Would you sign a contract to pick up an Apple notebook for a low initial cost? Or are mobile broadband bundles just another example of the cheap razor/expensive blades school of marketing misdirection?

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