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MMO2 Shows Its Hotspot Hand

Pan-European mobile operator mmO2 plc announced its hotspot intentions at a press conference in London today and talked up its data service strategy big time (see mmO2 Announces WLAN Plans and mmO2 Mobile Data Grows).

It also wheeled out its CTO, wireless industry veteran Dave Williams, who is using the experience he garnered in the US of A as he plans his 3G network rollout in Yoorup. More on 3G later.

More annoyingly, the carrier's senior executives also managed to break the carrier world record for using the words "customer" and "satisfaction" (in sequence and separately) the most times during one presentation. Just how annoying that was you'll see in a moment.

So, to the hotspot strategy. The carrier is taking a softly softly approach to public WLAN, and is planning to offer its subscribers (18.2 million in the U.K., Germany, Ireland) service via 100 hotspots by the end of this year. That's an average of 182,000 users per spot, if they all wanted simultaneous access, but who's counting? [ed. note: you, apparently.] The vast majority of these hotspots will be owned and managed by partners.

So what's the thinking behind all this? Is mmO2 just keeping up with rivals Orange SA (London/Paris: OGE), T-Mobile International AG, and Vodafone Group plc (NYSE: VOD)? Or, we asked Kent Thexton, chief marketing and data officer, does the operator believe it can actually make some money from providing hotspot services? Guess what he said.

"It all comes down to customer satisfaction," replied Thexton. He adds, though, that as mmO2's key concern is making the service easy for customers to use, it will be putting its time and effort into developing a customer interface for laptops and PDAs that will make it as easy and simple to log on to an authorized hotspot as it is to access the carrier's GPRS network.

All very admirable, but we asked again: does mmO2 think it can make money from hotspot services? "Absolutely!" he finally commits.

So how will it make money? By keeping costs as low as possible. While mmO2 already has some of its own hotspots in Ireland (see mmO2 Gears Up For WLAN), the wireless operator wants to test the hotspot waters by working with partners, resorting to building its own access points in a few strategic locations. It plans to offer service by using a user authentication system from specialist vendor Excilan SA, which also acts as an aggregator of hotspots (see Excilan Touts Five Customers). This leaves mmO2 with little capital outlay and minimal ongoing operating costs, says Thexton, so increasing the chance of squeezing some margin out of what he admits is a limited market.

What about 3G, then? That service will be launched in 2004, says CEO Peter Erskine, who says he's not prepared to commit capital to assets that aren't going to used, so mmO2 will meet its license requirements in terms of network buildout for the moment, and then push ahead next year when there will be enough handsets that work, and when UMTS technology has gone through its teething pains, to make it worthwhile from a revenue standpoint.

"We know what the 3G customer satisfaction [[AAARGHH!!]] levels are like at the moment," he added, apparently having a pop at U.K. rival and European 3G pioneer Hutchison 3G UK Ltd.. Hutch, trading under its "3" brand, is having technology issues at present, though sales are picking up following a massive price cut (see Hutch Wakes Up).

But for Williams, 3G won't really kick off until high-speed downlink packet access (HSDPA) technology is deployed (see DoCoMo Cranks Up 3G). "That will be the real leap for 3G from the 2G world, as it will enable very high-speed data access" for downloading large files very quickly and attaining high quality from audio and video streaming services.

— Ray Le Maistre, International Editor, Boardwatch

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