It works like this: customers sign up for separate phone and airtime plans at the same time, with the duration of the plans being 24 months. If the customer wants to upgrade their phone within that period, they can simply pay off the remainder of the phone plan, with no further penalty. O2 will then unlock their phone, unless the device is exclusive to O2′s network.

Similarly, if customers hit the end of the two years and don’t want a new handset, they only have to pay the monthly airtime fee from that point on. This is a lot fairer to the user than the traditional system, where the benefit to the operator of not having to provide an expensive new device after two years isn’t necessarily passed on to the customer in full.

Bye-bye “free”

By adopting this sort of interest-free financing scheme, O2 is effectively moving away from the traditional, opaque model of subsidising the handset up-front, then burying the true cost of the device in monthly contract payments. That’s not to say customers will pay more under the Refresh scheme — it just means they will more accurately see what they’re paying for, and will no longer be under the illusion that the handset they’re buying is “free”.

In the words of an O2 spokesman today:

“This isn’t about subsidies. Our main reason for doing this is to give people more freedom to get the latest phone whenever they want without paying any extra charges — our customers are telling us they don’t want to be tied to their current phone for up to two years.

“By allowing customers to pay for their phone and tariff in this way, we are also able to more responsibly manage our costs, which will mean a better service for our customers and greater investment in future products and services.”

That is indeed a problem carriers have these days with the subsidized model: people are increasingly adopting smartphones, which are complex and therefore quite expensive. By encouraging people to upgrade more often, O2 is making it likely that customers will pay it back for their phones more quickly than previously. It is surely no coincidence that the Refresh focus is on high-end devices such as the iPhone 5 and Samsung Galaxy S4.

The move also handily pre-empts Ofcom’s probable introduction of new rules for carriers around price hikes and letting customers leave early. The telecoms regulator is annoyed with the operators for raising their prices, then penalizing people who subsequently want to end their contracts before the term is up.

The Refresh airtime plans start at £12 ($18.43) a month, which will get you 600 minutes of call time, unlimited texts and 750MB of data. The phone plan pricing depends on the phone, obviously, but O2 said by way of example that the HTC One would cost £49.99 up-front, then £20 a month. The carrier said customers would end up paying the same amount as they would on a combined tariff.

So how will this pan out for O2 and its customers? For that, we can turn to an admirably frank post on O2′s The Lab blog from last month, written in response to T-Mobile USA’s similar move, and bearing in mind the experience of O2 parent Telefonica in Spain, where subscriber numbers subsequently increased:

“Could it work in the UK? Would customers be willing to pay up-front for their handsets? Would customers rather take out a loan from their mobile network and pay for the handset separately? Would customers compare prices across networks and simply choose the one which is cheapest today rather than looking at the [total cost of ownership]?

“I think moving to removing subsidies is great for consumers. It lowers the price they pay and means that they’re not beholden to an evil operator gouging them for two years. And, if at any point the customer wants the latest phone – they don’t have to go through a complicated upgrade procedure – just slap down the cash.

“For the operator, I think it’s also good news. It forces them to concentrate on customer service. They don’t need to extend large loans to the customer, nor do they need to compete on up-front cost. The downside, of course, is that the monthly revenue generated by the customer could be lower.”

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Virgin Media has been providing internet access in Tube stations since the Olympics in mid-2012. The service was initially free for all, but after the Games, Virgin started charging on a daily, weekly or monthly basis for those who aren’t customers of Virgin Mobile or the company’s fixed-line services. EE and Vodafone – respectively, the UK’s first and third-largest mobile carriers — signed up as wholesale partners in November, ensuring that their customers would also get free access.

O2, the second-largest mobile operator, has now done the same, with its customers getting access from June. According to Virgin, those three carriers account for 89 percent of London’s population, leaving only overseas tourists and subscribers of other carriers – notably the smallest of the big four, Three – having to pay up for access.

“Having O2 on board is excellent news for the thousands of people that use the Tube every day,” London Underground strategy chief Gareth Powell said in a statement. “Most customers will now be able to access live travel information or use social media to plan their social life while on the move.”

London Underground also used the announcement to reveal 12 more stations that will be Wi-Fi-enabled, including Baker Street, Bank, Earl’s Court and Sloane Square. The total number of stations bearing connectivity is now 120 (the Tube network has 270 stations, although many aren’t in central London, as the Wi-Fi-enabled ones tend to be).

I’ve asked Three whether it’s talking to Virgin about getting its customers into the scheme, and will add the response in when I get it.

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The deal, which is subject to regulatory clearance, should close in April. If that goes ahead, the customers will be moved off the O2 and BE Broadband brands and become Sky customers. Sky (40 percent of which is owned by Rupert Murdoch’s News Corp) would then become the UK’s second-largest ISP, behind BT and ahead of Virgin Media.

Telefónica will get £180 million for its broadband business, plus an extra amount — up to £20 million — upon the “successful delivery and completion of the customer migration process”.

Here’s what Sky CEO Jeremy Darroch had to say:

“Sky has been the UK’s fastest-growing broadband and telephony provider since we entered the market six years ago. From a standing start in 2006, we have added more than 4.2 million broadband customers. The acquisition of Telefónica UK’s consumer broadband and fixed-line telephony business will help us accelerate this growth.

“We believe that the O2 and BE consumer broadband and telephony business is a great fit, with customers used to high-quality products and strong levels of customer service. We look forward to welcoming these new customers to Sky and giving them access to our wide range of high-quality products, great value and industry-leading customer service.”

This deal is not hugely surprising, in that O2/BE has a shrinking customer base (as ISP Review notes, that base peaked at 671,000 customers and currently sits at around 560,000). However, it may prove to represent more than consolidation in the UK’s fixed-line market.

European mobile carriers are itching to carry out more mergers, particularly in highly competitive markets. The UK is about as competitive as it gets. With Deutsche Telekom and France Telecom having already merged their UK operations (formerly T-Mobile and Orange) into EE, I would now frankly be surprised if we didn’t see the newly mobile-only O2 UK merge with one of the others. Based on the complementary nature of their recent 4G spectrum wins, Vodafone would be a good fit.

This is shaping up to be a very exciting year in the UK communications market.

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The reason EE has been able to roll out LTE first is that the regulator, Ofcom, gave it permission to ‘refarm’ its existing 2G and 3G spectrum for the super-fast new breed of mobile broadband. Its rivals are now bidding alongside EE for newly-freed-up spectrum in the 800MHz and 2.6GHz bands, which will allow them to deploy 4G networks around the middle of this year.

But that’s not good enough, apparently. On Friday, Ofcom said it was responding to complaints from Vodafone and Three in which those carriers said they also wanted to be able to refarm their existing 2G and 3G spectrum. Telefonica (O2) and Vodafone have also asked to be allowed to turn up the power on their 2G base stations for 3G use.

Ofcom already has to allow all this due to a directive from the European Commission, but until now it’s been granting ‘liberalization’ licenses on a case-by-case basis. If the consultation launched today (PDF warning) doesn’t run into big difficulties – and the operators’ rare unity suggests it won’t – this will change very soon.

According to Ofcom, the proposed changes will “align the permitted technologies across all mobile spectrum licences, including the existing licences at 900MHz, 1800MHz and 2100MHz and the licences to be awarded by auction in the 800MHz and 2.6GHz bands”.

“This will meet a long standing objective to liberalise all mobile licences so that there are no regulatory barriers to the deployment of the latest available mobile technology,” the regulator said.

It will be interesting to see how this affects the bidding in the spectrum auction. The consultation closes on 29 March, by which time that auction process should be over with.

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Vodafone and Telefónica-owned O2 announced on Thursday that they plan to merge their infrastructure, pooling together resources to create a grid of more than 18,000 mobile masts across Britain.

Under the agreement, a new joint venture known as Cornerstone will operate the back end of the two networks — but they will remain entirely separate businesses, in competition with each other. And although they will share their grids, they won’t share their spectrum.

This is actually a more formal approach to something the two companies have been doing for some time, since they first announced a network-sharing agreement back in 2009 as an attempt to reduce costs.

Still, the upside for consumers is that they think it will hasten the arrival of 4G connectivity, which has been beset by delays and isn’t expected to arrive for several years.

In a statement, O2 boss Ronan Dunne said that joining forces meant both companies could potentially deliver 4G speeds by 2015 — slow in comparison with some other countries, but not bad given that the official 4G spectrum auction hasn’t even happened yet.

“This partnership is about working smarter as an industry, so that we can focus on what really matters to our customers – delivering a superfast network up to two years faster than Ofcom envisages and to as many people as possible. One physical grid, running independent networks, will mean greater efficiency, fewer site builds, broader coverage and, crucially, investment in innovation and better competition for the customer.”

Update: A Vodafone spokesman told me that this essentially relies on the two companies being able to prepare the ground for 4G together — meaning that once the spectrum auction finally takes place, maybe late next year, they’ll be able to switch on faster than they could individually. In the meantime, it will also give them broader and deeper penetration of 2G and 3G networks, the company added.

But while the promise of 4G is grabbing headlines, the more obvious reason behind the deal is competitive: rivals T-Mobile and Orange recently merged to create a single operator known as Everything Everywhere, which effectively gives them a single infrastructure across Britain’s market of 62 million people.

In particular, a faster 4G rollout is something that Vodafone and O2 are being spooked into: Everything Everywhere has already received permission to operate an LTE network on its shared 3G infrastructure. That wasn’t just something that upset Vodafone and O2 — it was something they officially complained about.

Here’s O2 from March:

“We are concerned that Ofcom’s other proposal to allow one operator to launch 4G early on its existing spectrum is contradictory to its objective of delivering a competitive market environment with four competing players. This could expose the process to further risk of delay.”

Although the Cornerstone deal isn’t as deep a merger as Everything Everywhere, and it won’t use non-4G spectrum, it seems like a case of learning tactics from your competitors: if you can’t beat them, copy them.

The other hidden question here is who isn’t being brought in on one of these deals. Britain has five major mobile networks and this agreement leaves one of them, 3, out in the cold. I’ve got a call in to the company: it will be interesting to see how it responds.

Update: A spokesman for 3 got in touch to point out that it has been in a network-sharing agreement with T-Mobile for several years, operating under the name MBNL; of which Orange is now part of following the Everything Everywhere deal.

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The exercise was partly designed to test how the company might respond to disruption caused by the arrival of the Olympics in nearby London this summer, but the results of the experiment again illustrate the benefits of flexible working even if thousands of world-class athletes aren’t about to invade your city. O2 found:

• Telecommuting staff saved a £9,000 (currently $14,000 and change) in reduced commuting costs
• 1,000 hours that was usually spent commuting was instead spent working, while staff also got an additional 1,000 hours of sleep
• 14 percent said they saw more of their families
• More than one in three (36 percent) said they were more productive than when at work
• 12.2t of CO2 was saved in one day — that’s equal to CO2 emissions from driving 42,000 miles in a medium-sized diesel car

IT World offers some explanation of the technical details, which apparently produced no major issues: “In preparation, O2 upgraded its virtual private network (VPN) as well as its network infrastructure, which saw a 155 percent increase in users on the day, and a 110 percent increase in VPN data sent across the network. The company automatically redirected traffic between servers in the north and south of its offices to ensure that the load was spread efficiently and that there were no local bottlenecks.”

“The success of O2′s experiment extends much further than just allowing some of the workforce to stay at home and work. It proves that with the right thinking and planning, even the largest organizations can protect themselves from the most severe disruptions to their business,” Ben Dowd, business director at O2, is reported as saying in IT Wor. He also stressed the importance of proper preparation.

“Four weeks of intense preparation across the business – everywhere from HR and internal comms to IT and property services – laid the ground for an almost completely empty building and a widely distributed workforce,” he said.

Might a one-day trial of telecommuting be a good step towards remote work for your business?

Image courtesy of Flickr user team|b.

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Maybe not. Even big companies without a particular reputation for cutting-edge practices are slowly starting to realize that the real estate savings and employee morale benefits of remote work make it an attractive option. Take UK telecoms giant O2 for example, which closed its headquarters in Slough this week, sending all 3,000 staff home to work for an initiative designed to test the company’s ability to manage remote workers.

“We believe a cultural step-change is underway affecting staff and businesses, as work increasingly becomes something we do, rather than a place that we go,” O2 business manager Ben Dowd told UK tech news site, V3. “Today’s office-wide flexible working initiative is an opportunity for us to tangibly demonstrate the opportunity and potential available to British businesses today.”

Of course, O2 has a horse in this race as it sells a platform to support remote workers, so the firm is hardly the least likely to push the practice. Dowd acknowledges that this week’s experiment had obvious marketing benefits for the company. “By sharing experiences from across our business, from business divisions to operations, we hope to encourage more organizations to help their workforce become mobile,” he said.

But on the other hand Slough (home to Wernham Hogg Paper Company in the British version of The Office) is hardly Silicon Valley or SoHo either, so the large-scale experiment still offers some evidence that telecommuting is seeping out of trendy enclaves and into the business mainstream.

Image courtesy of Flickr user teamjb.

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– Future Publishing: News International senior digital trader Nick King is becoming the magazine publisher’s new digital commercial director, heading up digital sales and ad ops teams across Future’s Bath and London hubs from February 6.

– Financial Times: FT.com managing director Rob Grimshaw has relocated from London to run the publisher’s digital operation from New York.

– Moo.com: The Silicon Roundabout-based business card printer is adding Dan Rubin as its new global creative director.

– O2 Media: The mobile telco is adding IPC Media audience insights head Andy Marrs as market insights manager, to better understand future trends by working with analysts and industry bodies.

– Emap: The business publisher’s Insight division – giving analysis and forecasting in retail, fashion, cars, built environment, media and politics – is adding Thomas Reuters’ Stephen Wilson as CEO.

– BBC: The corporation’s cross-platform productions head Martin Trickey is leaving to be production house TwoFour’s digital creative director, NMA reports.

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In a blog post, it said that the phone numbers were revealed between January 10 and January 25, as a result of “technical changes” around “routine maintenance”. It was unintended.

The company further writes: “In addition to the usual trusted partners, there has been the potential for disclosure of customers’ mobile phone numbers to further website owners.” Who are the ‘usual trusted partners’? O2 writes that normally it shares numbers “only where absolutely required by trusted partners who work with us on age verification, premium content billing, such as for downloads, and O2′s own services,” but does not give more details of who exactly goes on that whitelist. It should be noted that this is also in contradiction to O2′s initial response, which implied that showing the number was a normal part of mobile web browsing, not an accident.

More disclosure about the whitelist, and how O2 shares a user’s phone number, may be forthcoming: O2 says it is now in conversation with the Information Commissioners’ Office and Ofcom about the matter — not to mention the many angry customers criticizing O2 on Wednesday and threatening to take their mobile business elsewhere.

Original post with more details on this story follows below.

O2, one of the largest mobile operators in Europe, says that it is currently investigating accusations that it is sharing its customers’ mobile numbers with websites visited while surfing on the carrier’s mobile data network.

The allegations come amid growing questions of user privacy both at the regulatory level and among consumers. These have been highlighted over a spread of cases in the last several months covering companies like Facebook, Google (NSDQ: GOOG) and Microsoft (NSDQ: MSFT) — as well as device makers and carriers working with companies like CarrierIQ.

And they come on the same day that the European Commission published new rules regarding data privacy, with companies that breach them facing fines of up to two percent of their annual turnover. These laws would only come into effect at the end of 2013.

Lewis Peckover, a web systems administrator in London, said he first noticed the issue on Tuesday, when he was looking for “ways to verify a user is on a mobile device/network” and discovered that his own mobile number was getting displayed as part of the header information.

To explore the matter further, he set up a simple website — which he named “Bad O2!” — that lets users see what information gets passed to that website when they visit it from a particular browser or device. He encouraged users to try this out for themselves.

The result has been that several other people have also found their number appearing on the site — meaning that there is a likelihood that others going to other websites via O2′s wireless data network were also having their numbers revealed elsewhere.

From what we have seen so far, it looks like it is only O2 and not other carriers sharing this information: a test with Three and another via T-Mobile did not yield our numbers showing up on the diagnostic page. O2 also runs MNVO services, such as its own GiffGaff, and Tesco Mobile, and their customers are also having their numbers revealed.

Nor does it seem like O2 numbers appear every time: some have pointed out that their O2 numbers are not coming up in their own header tests.

However, when it does pick up the number, it appears to be happening on both iPhones as well as Android devices. Here’s one example that we were sent:

Chris Welton, who sent us the image, noted that he turned off his WiFi before testing, so this does not seem to be connected to the free WiFi network that O2 rolled out last year, as part of its push into mobile advertising.

O2 last night told Peckover, via Twitter, “The mobile number in the HTML is linked to how the site determines that you’re browsing from a mobile device.”

But it’s not clear, still, why it would be that the numbers are appearing inconsistently, and why O2 is sharing this information when our tests with other mobile operators have not come up with the same results: that implies there are ways around this that O2 is not taking. We have reached out to O2 for a response to these allegations, and, if they prove accurate — why it is that this information is getting passed along, and for what purpose.

Alexander Hanff, a privacy advocate and consultant for Privacy International, tells paidContent that sharing information like a telephone number to indicate mobile browsing could be a “very serious breach” of privacy regulations:

“It indicates a fundamental lack of understanding of privacy and security within O2 as there are many other ways to illustrate that there is a mobile device accessing a web site (such as the User Agent string),” he told us via email. “This is a serious breach with potentially serious consequences with regards to the harvesting of these numbers and phishing (for example if you open an email on your device with images embedded, the second you open that email, your phone number will be sent to the server where those images are being sent from).”

He also points out that there could be a “real cost to consumers”: “I am currently overseas, if my cell number is harvested and I receive cold calls whilst overseas I have to pay roaming charges for those calls – furthermore, O2 would profit from those calls (if I were an O2 customer) and the numbers could be significant.”

Perhaps most damagingly he notes: “This is a clear breach of the Data Protection Act as phone numbers are classed as PII for legitimate reasons, it is also likely that this is a breach of Privacy and Electronic Communications (EC Directive) Regulations and possibly a criminal breach of Regulation of Investigatory Powers Act (RIPA) which since early 2011 has carried penalties for “unintentional” interception of communications.”

Given that O2 in the UK alone has several million customers this could become a very serious issue indeed. If you are an O2 customer outside the UK, please let us know if you are also finding similar results with your own test. You can use the link here to try it out.

The UK’s Information Commissioner’s Office (ICO) has told paidContent that a mobile number on its own is not a data breach per se, but when it is coupled with any other identifying information it can constitute a data breach. Also, she pointed out that because O2 is apparently revealing its own customers’ numbers, that raises questions. The ICO also emailed a prepared statement on the situation:

“Keeping people’s personal information secure is a fundamental principle that sits at the heart of the Data Protection Act and the Privacy and Electronic Communications Regulations. When people visit a website via their mobile phone they would not expect their number to be made available to that website. We will now speak to O2 to remind them of their data breach notification obligations, and to better understand what has happened, before we decide how to proceed.”

Meanwhile TNW takes a look at how this one bit of information — your number — can subsequently then get used for more serious activities, such as phishing and other spam practices.

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