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O2 UK moves away from handset subsidies with decoupled Refresh tariffs

David Meyer — Fri, 12 Apr 2013 12:26:54 +0000

Much as various carriers have done in other European countries, and as T-Mobile has done in the U.S., O2 has become the first in the UK to decouple the cost of the handset from its service contracts. The operator has done so through a new option called O2 Refresh, which will launch this coming Tuesday.

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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T-Mobile-MetroPCS merger: Now all that’s left is shareholder approval

David Meyer — Thu, 21 Mar 2013 11:58:23 +0000

The MetroPCS-T-Mobile USA merger has cleared its final regulatory hurdle, leaving just MetroPCS shareholder approval standing in the way of completion.

That final piece of regulatory approval came from the Committee on Foreign Investment in the United States, which, according to a statement, told the two operators on Wednesday that “there are no unresolved national security concerns with respect to the transaction and that [the committee] has therefore concluded its review”.

The merger has already sailed through other regulatory pitstops, first the Justice Department then the FCC (without the commission even seeing the need to hold a vote). Some institutional MetroPCS shareholders oppose the deal, however, so it’s still not a sure thing – we will see the final outcome after a MetroPCS board meeting on April 12.

If the merger goes ahead, Deutsche Telekom will hold a 74 percent stake in the combined company. It is therefore unsurprising that incoming Deutsche Telekom CEO Timotheus Höttges would become chairman of the board, as MetroPCS revealed on Tuesday.

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A look back at mobile in the third quarter

Wed, 17 Oct 2012 06:55:10 +0000

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Mobile 2012 and beyond

Thu, 20 Sep 2012 06:55:31 +0000

Few industries change at the pace mobile does. Whether it’s the iPhone 5, the importance of LTE, or BYOD trends disrupting the enterprise, there are always new technologies, trends, and companies changing the way we define mobile. Here, GigaOM Pro highlights a few segments of the mobile industry that will be important to watch in the coming months, from location-based shopping to wireless networks, and new business models for carriers.

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A look back at mobile in Q1

Tue, 17 Apr 2012 06:55:53 +0000

The first three months of 2012 proved eventful for the mobile space. Smartphone sales surged both in the U.S. and worldwide, carriers struggled to cope with the ever-increasing consumption of mobile data, and the fight for spectrum remained front and center. Apple continued its lead in the tablet space with the launch of the iPad 3, though Android is gaining traction, thanks largely to the Kindle Fire. New developments also abounded, with Millennial Media’s IPO as well as carriers’ building out their LTE networks. And as Microsoft and Nokia prepare to bring Windows Phone to the next level with an impressive new version of the operating system that could challenge iOS and Android, we are primed for a dynamic 2012. We analyze these trends and more in this report, as well as provide a near-term outlook for the next few months and beyond.

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How T-Mobile’s roaming data caps would affect you

Kevin Fitchard — Tue, 31 Jan 2012 22:05:49 +0000

Tmo News has it that T-Mobile is about to restrict roaming data usage to cut down on the amount of packets its customers consume when off the carrier’s networks. If true, the new restrictions could affect a lot of T-Mobile’s customers, though the size of the impact on each customer may be small.

Like every other operator, T-Mobile uses a combination of its own and other operators’ networks to provide nationwide coverage, which in T-Mobile’s case means 96 percent of the U.S. population. But T-Mobile is also the smallest of the U.S. national carriers and has the smallest in-house network, meaning it relies more heavily on roaming than its competitors. While T-Mobile has filled in its metro market footprint extensively much of the vast areas in between cities and towns lack the carrier’s infrastructure.

For customers that work in a city but commute in from the countryside, or for road warriors who make extensive use of the nation’s highways, this could have a big impact. Not only will their data at home be capped at between 10 MB and 200 MB a month, depending on their data plans, but they would have no option to boost their monthly allotment once they hit their caps, according to Tmo News – their data service would simply stop until they re-entered T-Mobile coverage or a new billing cycle kicked in.

That said, these customers weren’t exactly getting great data service in the first place. T-Mobile’s HSPA+ networks are confined to its own footprint, and while some of its partners have 3G networks, they don’t necessarily sell T-Mobile access to them. Once leaving T-Mobile’s coverage footprint, most customers usually can tap mere 2G speeds: GPRS or, at best, EDGE. Trying to use a smartphone with dial-up modem speeds is often an exercise in futility.

Still, a lot of customers have probably come to rely on those 2G roaming networks for basic connectivity when outside of the T-Mobile footprint. The operator has given them some leeway in their caps, but you can easily eat up 10 MB in about 30 minutes with a 30 kbps connection.

T-Mobile currently doesn’t distinguish between its own networks and those of its roaming partners on its coverage maps. If these new caps go into affect, though, it will have to.

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2012: Data, spectrum and the race to LTE

Thu, 29 Dec 2011 08:01:37 +0000

The past year in mobile has been even more eventful than most of us would have predicted. Our appetite for mobile data grew dramatically; Google’s Android continued its march to worldwide dominance; Amazon joined the tablet bandwagon; and AT&T tried and failed to acquire T-Mobile USA, among many other things. All of that activity lays the groundwork for a very promising — and very challenging — 2012. This research note serves both as a review of the major trends and events of 2011 as well as a forecast for the coming year. Companies mentioned in this report include Millennial Media, Quattro Wireless and Samsung. For a full list of companies, and to read the full research note, sign up for a free trial.

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The time is finally right for MVNOs in the U.S.

Colin Gibbs — Wed, 07 Dec 2011 22:00:39 +0000

The U.S. MVNO market is now largely a niche where a handful of companies provide phones and services on the cheap. But several notable new players are joining the space next year and will provide a different, more-specialized kind of service; network operators could benefit in a big way.

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Proposed: German cloud fortress for security-conscious shops

Barb Darrow — Mon, 19 Sep 2011 21:50:41 +0000

It almost seems tit for tat. Last week, a Deutsche Telekom exec publicly pushed for a German cloud that would be safe from U.S. snooping. His revelation came just weeks after the U.S Department of Justice sandbagged the proposed sale of Deutsche Telekom’s T-Mobile USA unit to AT&T.

Reinhard Clemens, CEO of Deutsche Telekom’s T-systems group, wants regulators to create a new certification to enable super-secure clouds to be built in Germany or elsewhere in Europe. There’s much pent-up demand for such offerings among customers that don’t want to expose their data to U.S. government scrutiny, as the U.S. Patriot Act requires, he said.

As Clemens told Bloomberg News:

The Americans say that no matter what happens ‘I’ll release the data to the government if I’m forced to do so, from anywhere in the world’ … Certain German companies don’t want others to access their systems. That’s why we’re well-positioned if we can say we’re a European provider in a European legal sphere and no American can get to them.

That idea of local restrictions on data-handling based on privacy concerns is not new: Germany, Argentina and Switzerland field the most-stringent privacy laws. (See Forrester Research’s CloudPrivacy Heatmap.)

But the momentum has been toward updating and modernizing laws so that the reality of where the data physically resides isn’t nearly as important as what is done with that data, said Dana Gardner, principal analyst with Interarbor Solutions. “This [DTE proposal] is going in the other direction.”

(More on enabling transnational data flows.)

Any movement to fracture the Internet around legal and/or geographic lines is a concern for cloud computing–the premise of which is to abstract out the notion of geographical location when it comes to IT.

“I don’t think it’s realistic to set up a bunch of sub-Internets based on geographical boundaries,” Gardner said. ”That starts to fracture the Internet around legal jurisdictions and that defeats the very purpose of cloud computing.”

Image courtesy of Flickr user mrpbps.

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Deutsche Telekom can’t afford to wait for a decision on T-Mobile USA

Colin Gibbs — Wed, 07 Sep 2011 20:00:22 +0000

The Justice Department’s effort to block AT&T’s acquisition of T-Mobile USA has sparked a flurry of stories claiming the smaller carrier will be living on borrowed time if the deal isn’t approved. CNNMoney claims that T-Mobile without AT&T “is a wireless white elephant,” StreetInsider.com says failure to [...]

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