Editor's Corner

Hong Kong conglomerate Hutchison Whampoa made headlines late last week when it unveiled a mobile broadband service that treats a 3G handset like a PC. Starting Dec. 1st the company's U.K. 3G business, 3 U.K., will offer flat-rate wireless broadband pricing with services that will include many of the place-shifting nemeses of mobile operators: unlimited VoIP calling via Skype and services from Sling Media and Orb that allow users to watch home TV and video content on their handset as well as access digital media stored on their PC remotely. Customers will also be able to access the best of Internet messaging services from Yahoo!, Windows Live Messenger and Google. (Why 3 needed to make deals with folks like Skype and Sling Media is beyond me since customers can ride the broadband connection using these services without permission in the first place. I guess it needed to change the customer mindset, since such services were forbidden before?)

In short, 3 is offering everything that scares the pants off most European and U.S. mobile operators: free services, no usage-related charges, IM services that undermine text messaging and a lack of significance for the carriers' own portals now that well-known portal brands like Yahoo and Microsoft are involved.

Ironically, 3's strategy is a complete 180-degree change from its previous 3G service strategy. 3 has historically been heavily committed to a telco-as-media strategy, offering a wide range of proprietary content through its portal and being slow to offer unrestricted Internet access. Web access, in fact, was a premium service for 3 subscribers in the UK despite the company's decision to bundle Skype with its top-line Windows Mobile 5.0 devices. Clearly, customers weren't enamored.

Will they be enamored enough with this latest offering to make a good business model out of it? Porting services users are already accustomed to on the Internet appears to be a sound strategy, but there won't be that incremental revenue operators are accustomed to getting from a variety of usage-related charges. Will the valuation of 3 have to change?

We'll also likely see a new emphasis on network quality. 3 is rolling out HSDPA in the U.K., likely by Dec. 1st, and the technology is capable of supporting these services, but heavy VoIP, IM and browsing will be a major test for the new network. Managing massive amounts of data traffic is a relatively new phenomenon for operators, especially when VoIP is involved. 3, however, has said fair-use restrictions will apply so the offering won't be 100 percent like a fixed-line broadband offering.

For sure, 3's new offering is a risky move, but as the smallest player in the U.K., what does it have to lose? Certainly operators around the world will be watching intently. There could be a lot of lessons learned about how to find that happy medium that gives customers choice without totally reducing carriers to a dumb pipe. -Lynnette