The games are seen as a major driver for mobile roaming

At the recent Roaming World Congress hosted by IIR an animated panel session highlighted a number of challenges and opportunities imminent in the forthcoming London Olympics. These Olympics have been heralded as a major opportunity for medals to be won and sport to be celebrated but there are also a number of reasons to celebrate the games as a major driver for mobile roaming.

Millions of inbound roamers (forecast at around seven million) will enter the UK market as a result of the games while the countries operators will see their networks having to deal with billions of additional voice minutes and MB of data over the duration of the games and within the relatively small footprint of London and a number of regional centres. This demand is also likely to be ‘bursty’ being tied to particular events (finals) and the respective national sporting obsessions of the Olympic visitors. This issue was highlighted at a recent IIR Roaming Summit held in Barcelona when discussing the last roaming mega event, the World Cup held in South Africa. At key points during this event operator’s experienced dramatic increase in demand related to key matches and specific events within them. Jaques Bonifay CEO of Transatel, went on to state that it would have been better from a roaming perspective if France had won as international calls were expected to have ‘gone through the roof’. This aside there are serious ramifications of mega-events, like the Olympics for roaming service providers and London 2012 is of particular concern as the first mega-event in which smartphones and data will be an integral part.

Operators have taken a proactive stance in preparing for the event with capacity planning and additional cell tower support. However the panellist were quick to point out that when Germany hosted the UEFA European Football Championship (2008) Deutsche Telekom was somewhat over-prepared with an abundance of repeaters and portable cell towers but a decided lack of roaming. This approach has been emulated with London 2012 with temporary cell towers popping up at both staging centres and sporting sites. In respect of the UEFA experience the consensus was that roaming prices were still prohibitively high when the event was held which would have dissuaded use. However, it was felt that this would be less of an issue with London 2012, at least if roamers were from the European Union, due to the price cuts legislated in this region.

The agreements reached on May 10 regarding Roaming III regulation have come at a particularly fortuitous time. The radically reduced roaming rates will provide a strong incentive to experiment with roaming at the London 2012 event with both roaming voice and data service set to benefit.

It was the panellists view that cellular use would be huge over the period of the Olympics, indeed panellist member Duncan Hill of Europa technologies stated they were rolling out additional support for their coverage mapping service to clients and end customers in Olympic hotspots; as Europa’s main customers are operators there is obviously some concern regarding coverage. Duncan went on to share the fact they are also providing wifi mapping adding further credence to this assumption. Paolo Silvi of Keynote SIGOS argued that coverage for roamers during the Olympics was the tip of the iceberg. He argued that without demonstrable quality of service roamers would simply not make use of cellular services claiming that QoS as well as coverage needed to be guaranteed to facilitate such mega-events.

The panellists agreed that capacity planning for the summer months already incorporated expected increases based on vacationing patterns but they were divided as to whether this would be enough to cope with both holidaymakers and the inspected influx of Olympic visitors. Edward Van Kuijk, EVP Sales and Marketing Hub services for Vodafone roaming was relatively downbeat on the potential for roaming during the Olympics. His assertions came on the back of his own analysis of the number of international roamers expected and their likely avoidance of high tariff international roaming charges.

A challenge from an unexpected quarter was highlighted by Jaques Bonifay who stated MVNOs could potential impact the roaming opportunity at London 212. Bonifay highlighted a particular approach his company was taking in cooperation with the Chinese Olympic delegation in which they are partnering with China Unicom. Transatel will be setting up an MVNO for the duration of the event providing a local calling alternative for the Chinese Olympic delegation and Chinese nationals. The service is being marketed via China Unicom. Fielding questions Jaques agreed that while he sees this approach as a highly attractive one for users visiting international mega-events it does require a pre-existing relationship to be in place between the roamers home network operators and any potential partner MVNO. Without this it is not a cost effective based on the setup costs, COA and relatively short time in which the MVNO can generate revenues.

Whether the Olympics will be a great opportunity for all roaming players bearing in mind preferred partners and steering will be remain in place is debateable.  Whether roaming data use will increase over the Olympics or impact the consumption habits of roaming users is also unknown. What is known is the London 2012 Olympic Games will be an important testing ground for data roaming in a regulated market and an opportunity for data usage profile testing within an international mega-event.

The launch is also important in that it reflects two trends that we see currently playing out in the UK market. The first is the rise of ethnic MVNOs that target a specific community; this is in contrast to the more generalist players that have traditionally dominated the ethnic segment, Lebara Mobile and LycaMobile. Although Lyca and Lebara have been able to use their multi-country, multi-operator strategies to keep prices low, players like CTExcelbiz are able to offer services specific to their target markets, such as customer service in the user’s native language.

This is particularly important in a country like the UK, which has a large and diverse population, with a great many separate ethnic groups that may need different services from their mobile provider. In the case of CTExcelbiz, Chinese-language voicemail and customer service are essential for tourists who may not know English or know which SIM to buy to call home.

The other trend the launch of CTExcelbiz reflects is that of foreign operators setting up MVNOs in the UK to target their fellow citizens living abroad. This gives foreign telcos a way to reconnect with expatriates and give them a cheaper way of staying in contact with relatives back home. A notable example is in Germany, where Turk Telecom and Turkcell have both set up MVNOs catering to Germany’s large Turkish community, while Vodafone offers discounted rates on prepaid calls to its Turkish network (this is not limited to mobile operators, of course, as German-based fans of Turkish football club Fenerbahce can make calls on the Fenercell network). In the UK Vizz Mobile has signed agreements with Sri Lankan operator Dialog and Afghan operator Roshan to target those communities.

We expect this trend to continue, as immigration, tourism and student or business travel increase. It gives travellers the chance to pick up a local SIM that they can use for the duration of their stay, and lets the existing UK MNOs get traffic from customers they would normally not have access to. Call it part of the move toward globalization: a patchwork of MVNOs reflecting the UK’s cultural mix.

Smart Signal Share project is part of a £1.5bn network evolution

The UK parent of T-Mobile and Orange, Everything Everywhere, said Wednesday that it has completed its signal sharing project, dubbed Smart Signal Share. Wireless devices such as smartphones, tablets and dongles, will now switch seamlessly between the two networks, depending on which signal is strongest.

Olaf Swantee, CEO of Everything Everywhere, said: “Smart Signal Sharing marks the completion of the Orange and T-Mobile signal integration project, which provides our 27.5million customers with the widest 2G and 3G coverage available in Britain today.” The company said that the Smart Signal Share project is part of a £1.5bn network evolution, with £1.4m being invested every day.

Everything Everywhere said that HSPA+ 21, now reaches 95 per cent of the UK population. But if no 3G coverage is available, all Orange and T-Mobile devices will seamlessly switch to 2G signal and back on to 3G when either network comes back into range – even if a customer is browsing the internet. Customer charges remain the same when using the other network’s signal.

3UK reveals it could strike agreement with Everything Everywhere

3UK’s CEO David Dyson has suggested that the operator could strike an agreement with Everything Everywhere to launch LTE using the T-Mobile/Orange JV’s spectrum in advance of the UK’s 4G auction.

Everything Everywhere has appealed to Ofcom for permission to re-farm its existing 1800MHz spectrum in order launch LTE services by the end of the year. If successful it could establish a significant lead over its competitors.

However, the MBNL 3G network that it uses is co-owned by 3UK, and Dyson suggested that the nature of the two firms’ relationship might be extendable to include LTE.

“We’ve got an opportunity to potentially wholesale capacity from that LTE network, but we haven’t come to any definitive financial terms,” said Dyson. “There could be a way of getting access to [Everything Everywhere’s LTE] network, which the other networks – O2 and Vodafone – don’t have.”

Dyson added that if Everything Everywhere were the only player to be offering LTE before dedicated spectrum is allocated, the market would become uncompetitive. “The sooner this country gets into the next level of technology, the better it will be for consumers, provided there is competition. I think that’s the bit that is missing from Everything Everywhere’s campaign. Given that it’s the biggest player in the market, with that proposition, I’m not sure it’s in the best interest of consumers – it gives them a head start.”

The government target of 100 per cent coverage by basic broadband by 2015 is likely to be met

A report from the London School of Economics predicts that the UK government’s plans for universal access to fast broadband will face a £1.1bn ($ 1.8bn) shortfall unless private investors step in.

The report states that the likely cost of meeting the targets (which stipulate 100 per cent access to fast broadband and 90 per cent access to superfast broadband by 2015) will come to £2.4bn, but funding from all public sources will come to £1.3bn.

“The government target of 100 per cent coverage by basic broadband by 2015 is likely to be met, but it is less clear when the government targets of 90 per cent coverage by superfast broadband, and 100 per cent coverage by fast broadband, are likely to be met,” said the report.

The LSE defines “basic” broadband as services offering speeds of up to 2 Mbps, “fast” broadband as ranging from 2Mbps to 24Mbps, and “superfast” as exceeding 24Mbps.

Content delivery network Akamai issued its latest quarterly State of the Internet report last week (here), in which the UK did not place among the world’s top ten countries for household penetration of broadband services.

Everything Everywhere says that service revenues would have grown were it not for the impact of MTR cuts in the UK

Everything Everywhere, the company formed by the merger of Orange and T-Mobile in the UK, has posted a drop in service revenue of 2.5 per cent to fall to £1.5bn in its first quarter earnings statement.

The firm blamed the drop on the impact of regulated mobile termination rate (MTR) cuts. Last year, the UK’s Competition Commission decided to increase the speed at which mobile termination rates must fall, from 4 pence per minute to just 0.65 pence per minute by 1 April 2014. It said that, excluding the impact of these cuts, revenue would have grown by 2.9 per cent.

Nonetheless, CEO Olaf Swantee was buoyed by the performance, and described its current churn rate, which stands at 1.2 per cent as “industry-leading”.

“We are seeing improved underlying service revenues, driven by rapid data revenue growth, as we successfully upgrade customers to smartphones and higher value postpaid agreements,” he said.

He added that the firm expects to make “major strides” improving its network experience, such as better signal sharing and faster 3G data services, when it launches its LTE services, which it is hoping to bring to market by the end of this year by refarming its 1800MHz, pending approval from regulator Ofcom.

“We continue to make progress in reducing costs and simplifying the business.  In the first quarter we initiated our network optimisation programme to streamline the number of network masts.

During the quarter, Everything Everywhere also completed on a series of other business integration projects including restructuring its head offic, the consolidation of the Orange and T-Mobile warehouses and handset supply chain and improved product availability. The firm plans to reduce its head office space by 38 per cent and Swantree said the operator remains on track to achieve its targeted £3.5bn  net present value (NPV) in cost savings by 2014.

The O2 Wallet home screen

Telefónica subsidiary O2 has become the first operator in the UK market to launch a mobile wallet offering. The service offers price comparison for online shopping, person to person money transfer and allows the user to digitise cards linked to existing bank accounts, or load money onto an O2 stored value account.

The service is available as an app for iOS, Android and RIM devices but has not been optimised for the iPad, and is not available for Windows Phone. Mobile and desktop web versions of the service are also on offer. James Le Brocq, managing director of O2 Money said that the absence of a WP version of the app was  a resource issue and that there was “finite capital” available for development.

Le Brocq categorised the service as “e-commerce on a mobile”, with O2 planning to deploy a contactless payment element to the service at some point in the future.

O2 is establishing partnerships with the UK’s top 120 online retailers (with offers from four available at launch) and will charge those retailers a per transaction fee, a strategy that Fred Huet of Greenwhich Consulting described as “cleverly devised”.

P2P money transfer will be free for an initial six-month period but O2 is considering a £0.15 transaction fee thereafter. The solution allows users to share details of P2P transactions on social networking sites, which Le Brocq suggested would help drive awareness and uptake of the service.

This will be crucial in helping O2 meet one of its goals for the service, which is to drive uptake among users of competitor mobile networks. O2 has stolen a march on the other UK operators, as their proposed mobile money joint venture, Project Oscar, undergoes an “in-depth” investigation by the EC over possible contravention of merger regulations.

Earlier this month the EC said that its initial investigation “revealed that the joint venture and its three parent companies [O2, Everything Everywhere and Vodafone] may have the technical and commercial ability and incentive to block future competitors from offering their own mobile wallet services to customers in the UK, or to degrade the quality of these competing mobile wallets so that they become less attractive.”

Asked about this at the launch of O2 Wallet, Le Brocq dismissed the possibility that the EC’s investigation might prove to be a significant obstacle for Oscar, and said that the project was simply “awaiting approval”. He said that O2’s Wallet did not reflect any internal concern about Oscar’s realisation.

But Ovum analyst Eden Zoller suggested that O2’s early move into the space while its JV remains side-lined by regulatory investigation might create difficulties. “There could be challenges going forward in terms of positioning O2 Wallet alongside the collaborative mobile payments service that O2 is planning with Vodafone and Everything Everywhere,” she said.

This makes the Future of Mobile 2012 Westminster e-Forum sound a little more dramatic than it was – nobody threw any chairs, or punches, and the tone was collegial throughout – but it was certainly fascinating to see O2, Everything Everywhere and Three discuss the impending 4G auction and proposals to let Everything Everywhere launch 4G over its existing 1800MHz spectrum.

David Dyson, Three’s CEO, called on Ofcom to reinstate a guarantee for access to sub-1GHz spectrum. This guarantee, which had been included in last year’s first consultation document but was missing from the second consultation released in January, would have helped Three get a portion of the 800 and 900MHz spectrum that Vodafone and O2 currently hold; lower frequencies would improve Three’s coverage and signal strength by quite a bit.

Naturally, Nicholas Blades, who heads Telefonica O2 UK’s bid team, was less enthralled by the idea of his company losing some of its low-frequency spectrum to a rival. He did agree, however, with Dyson’s concerns about Everything Everywhere getting to launch 4G before all the other operators, framing his argument in terms of “haves” and “have-nots”.

Meanwhile, Everything Everywhere’s Kip Meek defended his company’s plan to roll out LTE using the existing 1800MHz spectrum by saying it is inappropriate to deny LTE access to customers when so much of the rest of Europe has it, and attributing the disagreement to fundamental clashing economic interests between operators. Meek had his own suggestions for Ofcom, saying the regulator should “step back” and simplify the auction; the company has had to divest some of its existing 1800MHz spectrum, and Meek said the regulator had made this process more complicated too.

The morning’s first session was a little less contentious, focusing as it did on m-commerce, mobile payments and NFC. The most interesting discussion in this session came from Russell Sheffield, of Paythru, whose m-commerce platform is designed to allow secure financial transactions over customers’ mobiles. A drawback of existing m-commerce services, Sheffield suggested, was that they rely too much on changing customer behavior – not all retailers will be willing or able to add NFC card readers to their shops, nor will all customers be willing to load money onto a mobile wallet, if it requires the extra step of moving their money from their bank account. Paythru calls its solution frictionless, as it is designed to work across all handsets, networks and banks, without requiring special card readers or apps to be installed.

Of course, m-commerce is a sector where most of the UK’s operators have already set aside their differences, given that Everything Everywhere, O2 and Vodafone have teamed for a joint venture to enable mobile payments and mobile marketing. Just don’t expect the arguments about spectrum allocations to be resolved so easily.

The Patent Box aims to stimulate UK innovation

The last couple of years have seen a rapid escalation in the number of patent disputes in the telecoms sector, prompting many big names to call for changes to software patent law to better allow the industry to break out profits derived from patents.

On Friday, the UK Government will close its consultation on the Patent Box draft legislation due to come into force on April 1 2013. The legislation aims to reduce corporation tax from 26 per cent to ten per cent for profits made on patented technologies. By offering this tax break, the aim is to increase high-tech manufacturing innovation in the UK and to encourage more telecom companies to set up on UK shores and increase investment.

Yet with the implementation of the legislation only a year away, if companies are to benefit from the reduced rates of corporation tax on patent profits, they need to understand which patents are owned – an arduous process that needs to be started now, according to legal experts in the field.

Jeremy Morton, patent lawyer and partner at CMS Cameron McKenna LLP, said the development should mean that some smaller businesses should now take a greater interest in filing patents, while others will want to review their established R&D, patent management and transfer pricing arrangements so as to make best use of available tax regimes internationally.

“What all this means is that patent battles are not just seen in court but also in the auction house. Old-school technology businesses like Kodak are seeking to pay off debt by offloading under-exploited patents that could have strategic value to others as bargaining chips,” Morton said.

Read the opinion piece from Jeremy Morton

“Patent Box will allow companies to apply the reduced tax rate to relevant profits from the sale or licensing of patents, the sale of products that owe value to patents, and compensation won in patent litigation. The regime is generous when it comes to products, because there need only be one European or UK patent underlying the product in order to be able to include the whole of the income from the product as the starting point for the calculations.”

Yet while this is a potentially attractive new regime, it has not been developed with the telecoms sector particularly in mind, so to take best advantage companies will need to review not only their tax and transfer pricing arrangements, but also the terms of joint ventures, licensing arrangements, business disposals and acquisitions, and plans for group reorganisations.

Ofcom has proposed revised plans for the UK 4G auction scheduled for the end of the year

UK regulator Ofcom has announced revised plans to promote competition in the country ahead of the country’s 4G spectrum auction.

The spectrum in the 800MHz band that is becoming available, freed up from the nationwide switchover from analogue to digital TV,  is equivalent to three quarters of the mobile spectrum in use today. The refarmed 800MHz band will be auctioned along with higher frequency airwaves in the 2.6GHz band at the end of 2012.

Ofcom believes that consumers are likely to receive better services at lower prices in the future if there are at least four operators in the market and without the right quality and mix of spectrum, an operator might struggle to compete with other national wholesale providers. So ahead of the second round of consultation with telcos, Telecoms.com takes a look at the impact Ofcom’s revised plans will have on operators in the UK.

Everything Everywhere

Everything Everywhere, the company formed by the merger of T-Mobile and Orange in the UK, currently has no spectrum in the 900MHz band, but owns a lot of spectrum in the 1800MHz bands, which it is currently using for 2G services.

When the two firms decided to merge, the European Commission (EC) assessed the merger and one of the conditions  proposed in order for the deal to get the go-ahead was that the operator had to give up some of the 1800MHz spectrum that the two firms owned – a total of 2x15MHz of 1800MHz spectrum.

Ofcom had previously said that it would guarantee both Everything Everywhere and 3UK, or a new entrant to the market, sub-1GHz spectrum in order for them to deploy LTE. However, the new proposals see the regulator withdraw that guarantee from Everything Everywhere.

“Ofcom had to do something to make everyone else happier and Everything Everywhere less happy, so that they could get this through without legal challenge,” said Matthew Howett, analyst at Ovum.

“On balance, Ofcom decided that Everything Everywhere’s holding of 1800MHz is sufficient for the operator to use in order to deploy LTE, rather than worry about it getting access to 800MHz for that. Ofcom has said it believes the benefits of operating LTE at 1800MHz, in some instances, are higher than operating at 800MHz. That’s because 1800MHz allows more capacity, which is important.”

Of course the operator itself was not happy to hear the news and a spokesperson told Telecoms.com: “Everything Everywhere is very disappointed to see that Ofcom has again reversed its proposal to ensure all mobile operators hold a minimum amount of sub 1GHz spectrum. Ofcom is missing a huge opportunity for the UK to address the imbalance in sub 1GHz spectrum holdings, which has damaged consumer interests for the last 20 years, and is a situation which is now threatening to continue.”

The company argued that the importance of sub 1GHz spectrum has been recognised by other regulators across Europe and supported by economic analysis.

“All of the regulators bar Ofcom have made vigorous efforts to support healthy and sustainable competition by ensuring that the imbalance of sub 1GHz holdings is redressed,” said the spokesperson.

However, it should be stressed that things could yet change if Everything Everywhere decides to divest its 1800MHz spectrum before the auction, rather than during it.

According to Howett: “If this spectrum is auctioned before the joint award of 800MHz and 2.6GHz it could remove the need for any spectrum reservation. This is not insignificant given the growing interest in launching LTE at 1800MHz.”

3UK

3UK is likely to be quite happy with the new proposals because either it or potentially a new entrant to the market, is guaranteed spectrum in the sub 1GHz band. However, if 3UK, or a new entrant acquires some of the 1800MHz from Everything Everywhere before the spectrum auction, Ofcom would not necessarily guarantee them spectrum in the 800MHz band.

“It’s up to 3UK to decide whether it values spectrum in the 1800MHz band more than the 800MHz band and decide whether it participates in the bidding of Everything Everywhere’s 1800MHz band before the auction,” said Howett.

“It needs to spend time doing cost benefit analysis to find out what works for its business. However, if a new entrant comes along and secures some 1800MHz spectrum, which is not very likely but still a risk nonetheless, 3UK can mitigate the risk by bidding for 1800MHz or by bidding aggressively for 800MHz. Ofcom can’t be any more fair to 3UK than it is being.”

O2 and Vodafone

Vodafone and O2 are likely to be the happiest to hear of Ofcom’s revised proposals. Everything Everywhere has been disadvantaged by the revisions, and there has been no decision by Ofcom to take back any 900MHz spectrum from the two companies.

A Vodafone spokesperson told Telecoms.com that the revisions bring the UK closer to a “fair and open auction that will benefit the wider economy, increase competition and ultimately lead to the creation of innovative new services for consumers”.

However, the firm said that it still does not completely understand the regulator’s rationale for protecting a fourth operator.

The spokesperson also outlined its plans for rolling out LTE, and suggested that the company will be ready to roll out the technology when bidding is over.

“In the UK, Vodafone has already moved well beyond the testing phase for 4G. We have run three trials of the technology in the UK over the last three years and the international team of engineers who launched Vodafone’s 4G network in Germany over a year ago are already in this country, working closely with our own technical specialists.”

So, Ofcom has been in an unenviable position to try to remain fair to each of the operators but also promote competition and conclude the auction as speedily as possible. However, according to Howett, the regulator has not done a bad job.

“The decisions Ofcom takes now are likely to affect the level of competition in the sector for at least a decade. Striking a balance was never going to be easy. The set of proposals now on the table appear to leave everyone with something to be optimistic about, but at the same time requires compromises to be made. Perhaps Ofcom have got it right?”