January 8th, 2010 · Mobile
I’ve always been very skeptical about the success of femtocells with mobile operators as I just couldn’t see how MNOs will convince customer s to put up an “antenna” at home and maybe even pay for it. Basically all of this just just to “help” the operator to improve its coverage, which customer take for granted, or reduce its cost. Not considering the maintenance effort for femtocells, which ADSL providers have struggled long enough and mobile operators always were happy not to have to take care of, equipment in private homes.
But there is one usage scenario that I always envisioned to be very attractive for customers, but considered against spectrum regulation. And that is putting up a femtocell at home connected to your ADSL without the mobile operator involved. And by this, not only bypassing any additional fees, but making you mobile phone charges disappear for calls with your mobile while at home!
It seems that there is one company now that tries to make the argument that the spectrum license of the operators does not extend into private homes! (see MagicJack using GSM femtocell technology for VoIP and MagicJack’s next act: Making cellphone fees disappear for home users)
If they succeed femtocells finally might have found there market and I might be convinced to put up a little atenna at home next to my WiFi microwave antenna.
Considering that a very high percentage of mobile phoen calls are made at home …
Any expert on European spectrum licenses with an opinion if this could be legal in Europe as well? seems US mobile operators so far haven’t responded.
Recently I had several discussions with telco operators and experts about the future of fixed broadband, the importance of wireless spectrum and the future of mobile broadband.
Let’s start with a consumer question instead of having the telco engineers doing their pitch: “How much bandwidth do I possibly need?” 3Mbs? 10Mbs? 50Mbs? 100Mbs? or more? for what? which applications?
Probably the most bandwidth intensive application that we can today think of is video or better high definition video, after the electronics industry convinced us (by the way, how did they do that?) that we need Blue-ray DVD players and have to buy HDTV.
Until now telecommunication companies complained that P2P file sharing is filling up their networks. But now we have Spotify and there is no need anymore to download music. Tomorrow we will have Videofy (the legal version of Spotify for Video) and we will stream our high-definition movies, TV shows to our laptops, TVs and smartphones.
Streaming high-definition video is as much bandwidth as we probably need for the next years. You can do that today over mobile broadband 3,6Mbs (or higher) as long as the mobile operators guarantee a minimum quality of service. What do we do with the 50Mbs that fixed operators are selling us? the typical argument I get is “If you have a family every memeber will want to watch somethign different”.
If we need 10, 50 or 100Mbs, mobile broadband will be able to deliver this within short period of time, probably faster than movie labels and TV producers can agree to license their content.
Mobile broadband is kept artificially expensive by the big operators (e.g. 25€ per month w/o VAT for 1 GB) in order to not endanger their high-margin fixed-line adsl business (flat-rates in Spain of 30€ per month (w/o VAT) in addition to the regular telephone line). Looking again to more competitive markets with pure mobile-only players, we see mobile broadband flat-rate offers for 25€ per month (VAT included) from Drei in Austria. In Spain only MVNOs with 25€ (w/o VAT) for 5 GB offer real fixed broadband (adsl) substitution.
In countries like Austria and the Nordics mobile broadband has already a share of more than 30% of all broadband connections. In Denmark 5 out of 6 new broadband customers choose mobile vs. fixed !! (see also “Who decides what the future broadband market will look like?” from John Strand)
Engineers will now tell you that current mobile infrastructure could not support all this traffic. Yes, but upgrading wireless infrastructure should be cheaper and more flexible than putting in place fibre. And, so far Moore’s law has proven to be even more valid for broadband speed and capacity than it has been for computing and storage chips. Technology evolves typically faster than consumer usage adoption. Even so the increase in demand for mobile broadband has been the biggest growth story of the last years by far.
Probably fixed broadband and wifi will not be dead, but let’s hope for more competition in the Spanish broadband market to bring high prices down and allow Spanish consumers to access the Internet at more reasonable prices, like in other European countries and so close the gap in Internet usage and eCommerce.
December 2nd, 2009 · Mobile
Two weeks ago I was asked by a journalist ‘what’s the lowest price a MVNO can support?’ caused by the latest decline of MVNO’s (MObile Virtual Network Operators) per minute prices in Spain.
One and a half years ago when we launched simyo in Spain with 9ct/min with 15ct call setup fee (note: Spain requires per second charging) people told me we’re crazy, the lowest price at that point was 12ct with 12ct call setup from Yoigo.
After an interim move of the low-cost market to 8ct, in the recent months MVNOs lowered their prices to 6ct/min and pepephone the low-cost leader even to 5,5ct/min (with call setup of 15ct) and last week their launched a promotional tarif with 9ct/min with NO call setup fee.
So what’s the lowest tariff an MVNO can support?
Let’s take a look at the mobile market in Austria, probably one of the most competitive markets. Yess offers a tariff with 2,9ct/min No call setup fee, but 60s/30s rounding. They now also launched a flat-rate including 1.000 minutes and 1.000 SMS for just 8,80 Euros/month!
The main cost driver for voice per minute prices are the regulated mobile termination cost. The latest reduction of prices in Spain is actually driven by the reduction of these regulated cost: octubre 2009 – april 2010 of 6,127ct/min to 5,507 ct/min for april ‘10 – october ‘10. Considering these cost and for example the 9ct/min of pepephone with no rounding and no call setup, so they have 3ct margin left on mobile-to-mobile calls to pay the mobile host network and contribute to their operations cost.
In Austria the mobile termination cost are lower, currently at 4ct and starting 2010 at 3,5ct. So theoretically at MVNO prices of 2.9ct, they don’t make money on these calls. But considering rounding, incoming calls, minimum consumption (for example 15 Euros in the case of Yess’s 2,9ct tariff) in total there is still enough margin to support their lean cost structure.
The key for all these low tariff mobile virtual operators is to have extremely low operating cost, which allows the business to be profitable even on smallest margins. No or minimal overhead and operating cost that allow them to support customers with extremely low contribution margins.
The business philosophy of these low-cost companies is to run at or close to break-even, so it’s impossible for anybody to undercut without running at a deficit (see also Tom Evslin’s law of networks) and give the benefit to the customer in form of lower tariffs. Growing based on customer satisfaction and word-of-mouth rather than expensive marketing campaigns and high handset subsidies.
Considering the huge margin mobile operator make at their prices today, gives us an idea of the overhead cost they are running in their business model. as long as an MVNO manages to really keep it’s operating cost low and stable even with a growing customer base prices in Spain will get a lot lower before MVNOs can’t support them anymore.
This decline will be especially hard for lower cost M(V)NOs that have already a significant customer base with double-digit millions of revenues. They run the risk to get stuck in the middle between the lowest-cost MVNOs and the marketing-subsidy oriented MNO offers and are left with only two options:
a) following the trend decreasing their current price for the whole customer base and accepting to loose out in 10% or more of their revenue
b) keep introducing new tariffs with lower nominal price points, but ever higher commitments and cross-subsidizing from other call scenarios. letting their customers wonder, why they are not benefiting from these new tariffs.
consumer awareness and migration to low-cost offers is still relatively small in Spain, but has accelerated significantly during the last year driven by the economic crisis. MNOs are estimating that around 20-30% of new mobile gross adds are already signing up with low-cost tariffs. They are fighting hard against this migration with the typical non-transparent offers, heavy marketing campaigns and free handsets.
Let’s wait and see if 2010 will get Spain anywhere near the price levels of Austria.
October 29th, 2009 · Mobile
your post http://consultantvalueadded.com/2009/10/26/unregistered-prepaid-clients-switch-off-no-business-sense/ made me post a comment, so objective achieved.
While agreeing with you that the law lacks common business sense, I don’t agree with some of your conclusions.
1. the law exists in all European countries, just in different degrees. Other European countries require registration of prepaid cards, but don’t require verification of DNI.
2. I don’t agree that Spanish MNOs will loose 9 mio customers. what will happen is that the Spanish market is finally cleaned up of it’s inactive SIMs and market penetration gets closer to reality
3. I think ARPU could in contrary go up for above mentioned effect. less inactive.
4. Actually I think it’s a great opportunity for teh new alternative MVNOs, because they will capture a big junk of customers that so far just for inertia have not switched operator and are now forced to do so.
So, while the implementation makes no business sense for lot’s of reasons, e.g. disadvantages for MVNOs with alternative distribution channels, for the market it could in fact be healthy.
just a different point of view ;-)
I was quite surprised today to read the headline of the deal between ebay and a private equity about the sale of the majority of skype. But I was even more surprised about the price they achieved, which values skype at $2.75billion. ebay paid including payouts to founders about $3.1bn, but had written down later $900millions.
Obviously ebay could neither find the benefits or integrate skype, nor were they able to grow the business with a clear vision.
This deal could be a real win-win-win. Considering that ebay got a good price, kept a participation to still get an upside and the investors obviously see more value in Skype. At a level of estimated $600 million revenues this year, more than 405 million registered users and generating profits (source spiegel.de: talks about a growth of 25% of benefits to $170 million in the 2nd quarter).
I share the vision of the investors that skype with the increasing penetration of powerful smartphones like Google Android or iphones has a great opportunity to establish itself as the leading VoIP tool for the mobile market as well.
The Telco operator start feeling the pressure and might realize that the iphone is more of a value destroyer than creator (see also Strand Consult latest report “The moment of truth, a portrait of the iphone”)
Mobile data prices are plummeting as you can see in Spain with pay-as-you-go prices of 3ct/MB and e.g. UK/Italy/Austria (basically 3 Three territory) with 15€/mes for 15GB !!!
What do you think, are we getting to a mayor disruption in telecommunications with the shift to VoIP happening acceleratingly fast and mobile operators will one morning just wake up with no high-margin circuit-switched calls left?!
From a consumer and innovation perspective we can only hope so. It will enable us to communicate free with friendss all over the world wherever we are.
[Also the latest beta versions of skype have great collaboration features like sharing the desktop on video calls! try it out]
[just saw that Enrique Dans is commenting on the cost of international calls. "Will be FREE"]