Editor's Corner

Dual-mode WiFi/mobile offerings, otherwise known as fixed-mobile convergence offerings, are in large part failing to make a huge impression on end users. Last week Deutsche Telecom shut down its dual-mode SIP-based WiFi/GSM offering, called T-One, in Germany after attracting fewer than 10,000 subscribers since last August.

Pyramid Research notes that UMA services in the Netherlands, Denmark, Italy, U.S., France and the U.K. and dual-mode WiFi/GSM services in France, Germany, Spain, Japan and Scandinavian countries have grown slowly. At the end of 2006, FMC global subscriptions accounted for fewer than 400,000. Pyramid says this represents less than 3 percent of triple-play service subscriptions in these markets.

Certainly this FMC strategy is a no-brainer on paper. In Europe, mobile voice usage is low, around 200 minutes per month. By offering a much cheaper in-home calling plan over WiFi, operators could easily see a 50 percent to 100 percent increase in the minutes used all the while providing service over a lower-cost IP network. In the U.S., where voice usage is considerably higher, FMC is attractive because minutes are diverted off the network onto the cheaper WiFi network. Plus FMC is an attractive way to push the triple play by requiring a subscription to other services to keep churn in check.

So what's the problem? Poor marketing, high tariffs and a lack of compelling handsets are largely to blame for the slow uptake so far. DT's service failed to differentiate from the plethora of home zone pricing plans--which charge flat mobile voice rates for customers who use the service in the homes--from mobile operators, including its own sister company T-Mobile.

In general, it seems there is a basic disconnect for the consumer. Just what is FMC? Mobile operators have spent years personalizing devices and proclaiming the virtues of untethered access. Now consumers are supposed to understand the benefits of a mobile service in a fixed local area network? It sounds like a boring residential service. Moreover, it may be cheaper to buy into FMC than paying for separate fixed and mobile services, but it isn't obvious to customers. Plus most customers are required to buy a broadband Internet subscription too.

France's Orange is probably the most successful FMC provider at the moment. It announced 100,000 customers within six months of launching the service, Unik. That number is still low, but Orange says 15 percent of its new customers are buying into the service.

What's Orange's secret? Analysts report that the operator made a significant effort to educate its customer base about the offering. Its marketing mantra touts a single handset, a single voice mail and single billing and support.

Still, it doesn't appear most operators are willing to put in the heavy marketing that Orange has at this point. As Chris Ambrosio, vice president of device research with Strategy Analytics, recently pointed out to me, most operators that have launched FMC services are treating them like fringe services.

Probably the biggest hurdle that will keep FMC adoption low for some time is the lack of handset selection. Most operators have one to three models of FMC-enabled handsets to offer consumers and will soon start adding more, but the industry has entered an era in which innovative mobile devices with attractive form factors are becoming a key reason why a customer opts for one operator over another. An integrated fixed and mobile phone and services certainly does not give the same wow factor as a mainstream 3G phone with the sleek form factor all the bells and whistles that is marketed heavily by operators and handset vendors alike.

As a result of these marketing problems and lack of handset choices, Pyramid predicts low customer adoption will continue for the next one to two years. That's a dangerous proposition given the fact that a host of competitive options--ones that don't require specialized handsets--are coming into play. These options include home zones, femtocells and 3G VoIP. Will the dual-mode strategy have a strong future? -Lynnette