This consumer offer is an extension of BT’s business package launched in 2008. However, by squarely positioning mobile broadband for consumers as an extension to its fixed service, it is yet another example of mobile broadband being seen as a complement rather than a substitute to fixed broadband in markets with high fixed broadband penetration.Furthermore, BT is a large fixed player moving into the mobile broadband domain. Until now, the UK market has seen mobile players launch fixed broadband services, but only Virgin Media (which already had a mobile arm) move in the opposite direction.
As a result, BT is able to leverage its strength in fixed broadband, which makes this stand out from the ‘me too’ mobile broadband offers that have flooded the UK market over the past 18 months. For example, the offer comes as part of a bundle including fixed and mobile broadband, as well as unlimited Wi-Fi hotspot access and other broadband ‘value-added services’, such as free security and online back-up.
Mobile players T-Mobile and O2 both include Wi-Fi in their UK mobile broadband packages, but T-Mobile has no fixed broadband and O2’s fixed broadband has limited market share.
So, BT really has an opportunity with this product to finally do something in the mobile domain that has some consumer appeal. Unfortunately, BT would not be drawn on the broader topic of its mobile strategy, so we are not sure to what extent this heralds a new dawn for it in mobile.
Multiple technologies highlight client software
BT has taken the same approach to connectivity management software as Vodafone’s recently launched Zero Click Connect. This is another sign that mobile broadband client software will take a much more holistic approach to connectivity in the future, playing into the hands of integrated players.
Although switching between network technologies is not automated, like in Vodafone’s dashboard, the client software recommends the best available connection across home Wi-Fi, Wi-Fi hotspot and mobile. This plays to the strengths of BT’s extensive Wi-Fi hotspot network, while minimising consumers’ excess mobile usage charges – particularly as the 1Gb mobile data allowance is less generous than many tariffs on the market.
Interestingly, like Vodafone, BT has also developed its software based on its strength serving business customers: both dashboards share the same pedigree as well as philosophy.
Providing value will make margins difficult
BT has a wholesale agreement with Vodafone, which is an extension of that signed last year for the business service. Unfortunately, the terms of the wholesale deal have not been revealed. Our main concerns for this offer hinge on the amount BT is paying to use Vodafone’s network.
Nonetheless its costs per megabyte will be higher than any of the UK’s Mons and, as a result, its margins will be slim. Yet BT’s offer is very much focused on offering value. The lowest option costs just £15.65 per month over eighteen months (with the first three months half price) for both fixed and mobile broadband and unlimited Wi-Fi.
We raised this concern with BT, but it was naturally adamant that the mobile broadband element is financially viable as part of the bundle. We still think that with a limited mobile broadband allowance, power users may well be dissuaded by excess usage charges. This will limit uptake by the most valuable mobile broadband customers.
Also, in a market as competitive as the UK, particularly in light of current economic conditions, BT is likely to face immense competitive pressure to increase its inclusive data allowance. If it does, this will harm both incremental top-up revenues and margins. The increased data usage will no doubt need to be paid for at wholesale rates, even though revenues decline as a result.
Steven Hartley, Senior Analyst, Mobile practice