Deutsche Telekom Cancels FMC Service

Deutsche Telekom AG (NYSE: DT) confirmed today that it canceled its fixed/mobile convergence (FMC) service, called T-One, missing an FMC opportunity on its home turf.

The German operator officially says the reason for cancelling the SIP-WiFi/GSM service was because it wants to focus on broadband and mobile Internet services. The T-One FMC service was evaluated during a recent product review and it didn't fit with CEO Rene Obermann's new strategy. (See DT Plans Strategy Revamp and DT Outlines Strategy.)

The service failed to take off because it was simply too expensive, poorly marketed, and lacked compelling features. [Ed. note: Other than that, it was fine.] There was only one handset available, which was supplied by Chinese vendor Foxconn Electronics Inc. T-One had fewer than than 10,000 subscribers since its launch in August last year.

"It's not at all surprising that T-Com is taking this product out of its portfolio," says Patrick Donegan, Heavy Reading senior analyst, and author of the report, "Wireless VOIP & the Future of Carrier Voice Services." "The whole value proposition of T-One has been flawed from the start. As for the Foxconn handset itself, it falls woefully short of what German consumers are looking for in terms of design and features."

Also, T-One was up against the popular and cheaper FMS home zone services, which are something of a phenomenon in Germany. "It's a German Wunderkind of service," says Emma Morh-McClune, principal analyst at Current Analysis .

Germany is the incubator for home zone services, says Mohr-McClune. A home zone service is a simple tarriff plan aimed at fixed/mobile substitution. Users specify a home zone with their mobile operator and receive a SIM card that is programmed to recognize when they are in their home zone. When in the home zone, which is defined by the coverage area of the base station nearest their home, users are charged at fixed-line rates or less. The service is compelling in Germany because users can keep their fixed-line number when calling on their mobile phone from their home zone.

Vodafone Germany revealed that it had more than two million subscribers to its "Zuhause" home zone service at the end of January, which is one-tenth of its subscriber base in Germany. "For a single access line, that's pretty phenomenal," says Mohr-McClune.

The T-One service was in direct conflict with T-Mobile's @Home home zone service, which has been very successful.

"[Home zone] services are very good at suscriber acquisition, and all the operators have a substantial number of home zone subscribers," says Morh-McClune.

Deutsche Telekom's FMC setback does not mean other operators' services are doomed to a similar fate. France Telecom SA (NYSE: FTE) reportedly has 100,000 units shipped for its UMA-based Unik service. It had 64,000 units at the end of last year, and reportedly another 36,000 in the two months since.

— Michelle Donegan, European Editor, Light Reading