FMC took center stage in 2005, yet the sum total of commercially available services in Europe today is just one: BT Fusion. The real action in 2005 happened backstage, as pure mobile operators spent the year building fixed-to-mobile substitution (FMS) services in anticipation of convergence. The result is a lower cost proposition similar to that posed by FMC, without the dual-mode handsets and hand-over issues delaying fixed operators from launching the real thing. If mobile operators are successful in convincing subscribers of the irrelevance of the fixed-line, the entire FMC proposition starts to look like an overcooked way to achieve voice cost-savings.
A home-zone service is an all-mobile service in which all traffic travels exclusively over the cellular network, with discounts for calls made within a designated home cell. No fixed-mobile handoff, no dual-mode handsets, no technological razzmatazz - and these services are selling well. O2 Germany launched its home-zone Genion service in 1999, and its 3.2 million Genion users now represent 72% of O2's entire subscriber base. Furthermore, O2 credits Genion with its market-leading ARPU stature, and the operator is now using it to target small businesses.
The evolution of the voice flat-rate model was probably the most significant tariff trend in 2005. The driver for this innovation was the need to camouflage the raw price of a voice minute to offset the discount MVNO community and head off prepaid price-war tactics. Early flat-rate offers took the form of options to existing subscriptions, or short-term promotions with "fair-usage policy" limitations. To be fair, the truly unlimited flat rate (unlimited calling to all networks, fixed or mobile, at all times) does not yet exist in Europe, but the latest evolutions to emerge are getting closer to this ideal. The latest and most evolved of these flat-rate models, BASE Unlimited in Belgium, attracted 40,000 24-month subscribers in its first six weeks.
2005 was the year that family tariffs started to gain traction in Europe. Once again, substitution forms the driver for the family tariff phenomenon: the family tariff assumes that a high proportion of a user's regular fixed-line communication is to a select group of people and aims to re-direct this traffic to cellular. Spain represents the most evolved market for family or group tariffs, and all three Spanish network operators now sport a highly diverse portfolio of services offering discounted calls to designated mobile numbers, targeting couples, families and peer groups.
Awarding businesses on-net savings (or even "free" inter-colleague calling) is the lynchpin of the mobile VPN proposition, as represented by key mobile VPN solutions such as Vodafone's Wireless Office or O2's Mobex. In Europe, Wireless Office is perhaps the most prevalent and widely deployed solution, with over one million customers across nine markets. Many mobile operators now market "integrated" fixed-mobile services, allowing end-users discounts on both mobile and fixed telephony by creation of a "virtual" tunnel to the PSTN. Such solutions have the advantage of simulating an FMC experience with a comparable cost-saving proposition, without the dual-mode handsets and hand-over implicit in the real thing.
Given all this success in the substitution space, it's tempting to suggest delayed FMC launches will face a deteriorated market opportunity. BT has now launched its consumer offering, but the promised end-year SME solution failed to appear. Still, it is certain that more UMA-based converged fixed-to-mobile services will appear in 2006. Firstly, we expect to see the launch of BT Fusion for Business, but France Telecom, TeliaSonera and Telecom Italia will not be too far behind.
Emma Mohr-McClune is a wireless analyst with Current Analysis