In September 2008, O2 UK revealed a new pricing plan for its combined fixed and mobile broadband services. As discussed in a report recently published by Analysys Mason, Strategies for mobile broadband pricing and packaging, O2 UK has set a precedent for mobile network operators (MNOs) with fixed operations by using DSL as a valuable addition to mobile broadband.
O2 UK’s new tariff gives subscribers one year of free 8Mbit/s DSL when they sign up for the MNO’s standard mobile broadband service. The package costs GBP20 per month and has a data usage limit of 3GB per month. Most mobile broadband contracts in the UK have a data limit of 3GB per month, but competing plans cost GBP15 per month. In effect, O2 UK is charging GBP5 per month for the fixed DSL connection, plus access to The Cloud’s 7500 Wi-Fi hotspots.
Before September’s announcement, O2 UK was failing to sign up mobile-broadband customers as quickly as its competitors, particularly 3 UK and Vodafone UK, and had to do something to take a share of the growing market. Unfortunately, O2 UK’s 3G coverage and capacity are worse than its competitors, making it difficult to attract subscribers and support a large mobile-broadband subscriber base.
Most MNOs – rightly – continue to be concerned that the traffic generated by the rapidly increasing numbers of mobile-broadband subscribers will make unsustainable demands on their network. MNOs should be considering ways to offload as much traffic from the wide-area network as possible. Combining mobile broadband with DSL brings benefits in the form of reducing traffic load on the wide-area network. Bundling DSL and Wi-Fi with mobile broadband subscriptions should allow a large volume of ‘mobile-broadband’ data traffic to be offloaded from the macro network. Furthermore, as we have seen with voice contracts, most bundling will encourage customer loyalty and reduce churn, albeit with a risk of cannibalising revenue.
Combined fixed–mobile operators would do well to follow O2’s lead and build much-needed scale in their fixed businesses, which until now have been only modestly successful.