3 UK Strategy a Contradiction

[3GScottishUser]

Thinking about 3's UK strategy the following is apparrent.

Sellling on price attracts price concious customers who are the least likely to be tempted to spend money on expensive content even if they could afford it (and most of them probably can't).

So 3 have to subsidise a handset and handsomely pay a dealer to get a customer who gets lots of inclusive talk time and is unlikely to spend much outwith their contract price plan. The only saving gace for 3 is ingress (incoming call revenue) which is priced substantially higher than the other networks presently. The sting in the tail though is that OFCOM are now on 3's case and are looking at extending termination rate controls to 3G networks, the only thing holding them back is 'market significance'. With a previously reported UK base of 3 million subscribers 'significance' it could be argued has now been reached. What happens when they cant generate revenues by 'the back door'?

It looks likely that 3UK will try another full scale assult in Q4 2005 with new 3G products on both contract and pre-pay. One has to hope the service will be able to sell on merit and compete alongside the rest at realistic price levels or one can see little future for 3UK.

It's going to be an interesting second half of 2005 for sure.

[Ben]

Thinking about price-consciousness, there is a chance that customers moving to Three UK from far more expensive tariffs on other networks will be encouraged to 'make up the difference', or at least some of it, on the premium intranet services. I know that I at least only ever save money to spend it!

There is definitely a bottom to the current strategy where low-spend is going to be the case, but, although it's early days, they seem to be ticking over at the moment. It'd be nice to see some factual statistics released to see how they're really getting on. Have you got a link to details of OFCOM being on 3's case for termination rates?

I agree that it's very likely we'll see a full scale assault this Christmas. I'm hoping Vodafone are going to wade into the battle too - it looks like a possibility (http://www.mobiletoday.co.uk/artman-test/publish/article_548.shtml) - but, though Orange may try, I fear that's as far as the main 3G competition will go this year.

One thing I can't see happening now is Three's tariff prices going up. I think the rest of the industry will gradually fall in line, but only as the market dictates. At the moment some seem to be managing just fine (http://www.abcmoney.co.uk/news/202005494.htm).

[3GScottishUser]

Have a look here to see what Ofcom are planning. its quite a minefield having price controls on one mobile technology and none on another. It looks certain that some change will follow to ensure competition thrives.

http://www.ofcom.org.uk/consult/condocs/termination/

[Ben]

It looks, from that at least, that the investigation still fails to include Three UK - concentrating on "voice call termination on the 2G networks of Vodafone, O2, Orange and T-Mobile (the “2G MNOs”)". This will have to be extended to include Three in due course, obviously, but I think they've got termination rates as a cash cow for some time yet. Effectively the other telcos are subsidising the new entrant... it's an interesting situation!