Could Facebook overturn operator business models in Europe?

Paul Rasmussen
A survey of UK smartphone owners in May 2010 had Microsoft, Google, Skype and Yahoo as being the leading providers of email, Instant Messaging and photo services. Roll forward 12 months from when this study was undertaken and the picture is now significantly different: Facebook, claims CCS Insight, is now either the No. 1 or No. 2 provider of these services in the UK, with the pattern being similar across many other European countries.

Indeed, an indication of the dominance already being achieved by Facebook came last week from the UK telecoms regulator Ofcom. The government body found that Facebook easily remains the most popular website for smartphone owners, with users spending almost four times the amount of time socialising online compared with using Google or other websites.

Further evidence comes from Spain where Facebook has two times as many mobile users as Tuenti, and in Germany it has three times the number of mobile users compared with local sites. Only Hyves in the Netherlands remains ahead of Facebook as a local player.

If we accept that this upheaval in smartphone usage is not a statistical blip, then not only does this fast-moving trend threaten the established providers, but it should also terrorise mobile operators as to the damage Facebook could inflict on the cash-cows of SMS and MMS.

While operators, notably France Telecom Orange, are now taking a less aggressive approach to Internet content providers by attempting to partner with Google and the like, their response to users adopting Facebook services would seem flatfooted at best.

A noteworthy exception to this operator lethargy is 3UK. Facebook is using its highly visible login screen to promote the UK's smallest operator under its "Facebook for Every Phone" initiative that was launched last month. The scheme offers users free data access to Facebook for 90 days with the option to optimise data traffic after the period of free usage ends.

Beyond this, CCS Insight believes Facebook could also become a significant destination for watching video clips, with the company having the capability to surpass offerings from other major players.

Given that mobile video streaming (largely YouTube) already consumes huge amounts of bandwidth (estimated by some analysts at nearly 40 per cent of all mobile data traffic worldwide in the first half of 2011), the entry of Facebook could severely challenge the current business models of Europe's mobile operators. --Paul

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