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Europe Needs Mobile Mavericks

Michelle Donegan
Wireless Bits
Michelle Donegan

10:00 AM -- Consumers pay far more to use data on their smartphones in European countries that don't have an independent competitive mobile network operator, according to new research from Helsinki, Finland-based consultancy Rewheel. While it's no secret that lack of competition in any particular market results in higher prices for users, this study shows that significant price declines are driven by the operators that Rewheel refers to as "independent challengers." As the Financial Times noted in this article, those challengers are known as "mavericks" by industry regulators. These maverick operators are not part of any incumbent national operator or a subsidiary of one of Europe's five largest mobile operator groups (dubbed, the E5 group) -- that is, Deutsche Telekom AG, France Telecom - Orange, Telecom Italia SpA, Telefonica SA and Vodafone Group plc . Rewheel finds that even when an operator from the E5 group is in a challenger position as the third or fourth biggest network in a market, it does not drive price competition. The best examples of European challengers are 3 in the U.K., Free Mobile in France or Tele2 AB in the Netherlands, now that it has an LTE license. Rewheel shows just how much these operators drive down prices: the lowest available smartphone tariffs in markets without a challenger operator is 140 percent higher than in markets that have at least one maverick mobile operator. (For the study, Rewheel compared the lowest smartphone tariffs in each market for a minimum of 2GB of data and 200 off-net minutes per month.) Also, markets that have an independent challenger have on average 34 percent higher mobile data penetration. The Rewheel study shows how these competitors are needed to make smartphone usage more affordable and pervasive across the EU. The big operators clearly haven't done it on their own. There are such challengers in 14 of Europe's 27 markets, according to Rewheel's study, which didn’t specify the country names. So, where are the upstarts that will take on the rest of Europe's mobile data scene? Perhaps the painful economic situation in Europe is enough to keep would-be investors away for now. But that makes it more important than ever for Europe's regulators to set the conditions that will attract investment from new, independent operators. The upcoming 4G auctions in the region will be good opportunities for regulators to encourage new entrants, like Ofcom in the U.K. has done by designing its auction to ensure that there are at least four 4G mobile network operators. We're hoping regulators will get it right and the rollout of 4G networks will also launch a new breed of mobile operator challengers. — Michelle Donegan, European Editor, Light Reading Mobile

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User Rank: Light Beer
1/11/2013 | 6:23:22 PM
re: Europe Needs Mobile Mavericks
If instead of being fixated on protecting their existing voice and sms centric business models and revenue streams they would start focusing on squeezing down variable, data traffic related capex and opex - as for example operators in "mobile data progressive", truly competitive markets like in Finland do - they could-áaccommodate-áfar more traffic without hurting their margins. Of course, if the regulatory climate allows them to protect their margins without this extra "stress", why would they bother.

Gabriel Brown
Gabriel Brown,
User Rank: Light Sabre
1/11/2013 | 2:19:21 PM
re: Europe Needs Mobile Mavericks
On the other hand if there's insufficient profit, where's the incentive to build better networks? The industry needs a decent level of profit to innovate.

A lot of the cost reduction we've seen as consumers over the past few years (especially in the UK, for example) is the result of development started/done when the industry had cash to invest.

The danger of a race to bottom is-áthat we'll have cheap services, but not very good ones.
User Rank: Light Beer
1/11/2013 | 11:35:48 AM
re: Europe Needs Mobile Mavericks
Mostly bad.

Mobile network operators need to feel a burning pressure to keep innovating and increasing mobile network capacities and spectrum efficiency, ultimately their own competitive cost level advantage of "producing" - or rather delivering a GByte on their network.-áEven if they are confronted by the realities of flat or even declining market revenues, and maybe even that they themselves will not be able to grow any more their revenues.

If local regulators, competition commission, allows spectrum pooling and extensive active network infrastructure sharing, there will be not much incentive for the MNOs to push down cost per Gbyte. Especially not in light of the threat of voice and SMS cannibalisation. Why would they bother swapping their network gears for more modern, higher capacity, much cheaper platforms and negotiating better pricing deals with their infra vendors if at the end of the day their competitors are using the same cost level and everybody is more or less happy with their 50, 30, 20% market shares and existing margins?

Would the breathtaking speed of innovation, growth of processor power, memory, screen size have happened in smartphones, if the device market was a closed market with hard barriers of entry like in the case of service providers, if the few incumbents like Nokia, RIM, etc would have been "allowed" to start sharing the development of their hardware and software platforms? Definitely not.
Michelle Donegan
Michelle Donegan,
User Rank: Light Beer
1/11/2013 | 11:21:35 AM
re: Europe Needs Mobile Mavericks
Given the report's findings, you also have to wonder about how network sharing and spectrum pooling will affect consumers -- will these trends be good or bad for consumers?
Michelle Donegan
Michelle Donegan,
User Rank: Light Beer
1/10/2013 | 7:42:09 PM
re: Europe Needs Mobile Mavericks
Most countries weren't called out for their smartphone pricing, but the top four priciest markets were the Czech Republic, Greece, Hungary and Germany, based on Rewheel's data, which was collected in December 2012. -áAnyone surprised?-á
Michelle Donegan
Michelle Donegan,
User Rank: Light Beer
1/10/2013 | 7:37:34 PM
re: Europe Needs Mobile Mavericks
The 27 EU countries are diverse by any comparison. But Rewheel found that the tariffs for the smartphone plans it compared (that is, at least 2GByte data and 200 off-net minutes per month) ranged from 8 euros to 78 euros. That's a massive gap and it's bound to raise eyebrows in Brussels.
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