NEW YORK-The American wireless marketplace needs a healthy dose of innovation jump-started by foreign intervention to drive user penetration, said Hans R. Snook, chief executive of Orange plc.
At the moment, Orange is otherwise engaged, so it cannot put momentum into this immodest proposal straight away. However, it does have its eyes on the United States prize, he said.
Orange, a personal communications network provider, entered the U.K. market six years ago as the country’s fourth mobile telecommunications carrier.
Today, it is involved in a fierce bidding war against its own parent, Vodafone AirTouch plc, for next-generation wireless licenses in the United Kingdom.
Germany’s Mannesmann AG acquired Orange last fall before Vodafone AirTouch won its hostile takeover battle for Mannesmann. As a condition of the merger, Vodafone-Mannesmann must divest itself of Orange.
“Ivan Seidenberg (chairman and chief executive officer of Bell Atlantic Corp.) said U.S. (wireless) penetration will be about 65 percent by 2008. Why? Because there aren’t enough outsiders like Orange here,” Snook said.
“The U.S. market has been ripe for an Orange for the last 12-18 months. The Mannesmann purchase interrupted us … (but) we will be de-merged again. We haven’t been able to get here yet, but we will work on this after our (stock) re-listing process is over.”
Ultimately, Orange believes wireless penetration can reach levels of 300 percent because people will own more than one mobile device and mobile devices will have many functions.
As penetration and usage increases with the advent of multimedia services, “the scarceness of available spectrum and limited intellectual and financial capital” will promote development of a new model of the “international wire-free utility company,” Snook said.
He asserted that the wireless network sector will borrow concepts from two industries. In computing, companies like Microsoft Corp. make the operating systems and turn over application writing to independent software developers. In energy supply, utilities like Enron concentrate on construction and maintenance of massive distribution systems, while unaffiliated companies deal with the end-user customers.
“Orange introduced the concept of the virtual network operator more than three years ago, but the mobile industry wasn’t ready for it and neither were we,” Snook said.
“NextWave (Telecom Inc.) has had some difficulties, which I hope they get out of, because they have always had the vision of being a wireless network utility,” he said in reference to the bankrupt C-block carrier, now in litigation with the Federal Communications Commission.
Virtual network operators buying wholesale from wireless network utilities would be “fundamentally different from today’s resellers, which have no control over services,” Snook said.
“VNO’s would have strong service level agreements with options to take equity positions in the utility to improve the network.”
In response to increased demands on networks, the criteria for evaluating wireless operators also needs to change, the Orange chief executive said.
“We will have to discard the old ways of counting customers and judge the efficiency of the network based on the kind of utilization management used by the hotel and airline industries,” he said.
Operating under criteria that judge cash flow not only per minute of use but also per unit of spectrum, would provide incentives for carriers to engage in transactions like selling low-use airtime to banks for exchange of data. “Without cannibalizing existing revenue streams,” carriers could thereby gain more revenues from their actual or virtual network infrastructure.
In his futuristic scenario of virtual network operators, “the winners will be the companies who embrace the Internet, packaging content with compatible delivery systems, whether fixed or mobile,” Snook said.
“Although there are legions of dot-com millionaires changing the way we do business, the king of the hill won’t be the content provider but the delivery boy.”
When it launched Wireless Application Protocol and Internet portal services in November, Orange was the first U.K. carrier to do so, Snook said. It now is working on a planned offering to customize information based on customer interests and lifestyles.
“High-speed, circuit-switched data and [General Packet Radio Service] will allow data at speeds comparable to [Integrated Services Digital Network].
“With the advent of the global positioning system, (customized information) all will become location-based,” he said.
To promote that transition, Orange last year established E-Factory, an incubator for telemetry developers.
A pioneer with the Wildfire service, which allows “voice to become the mouse and keypad of the future,” Orange also has established the Mobile Wireless Forum to develop “seamless integration between mobile telecom and the Internet,” Snook said.
Just as he believes mass customization of services will be required for carriers to remain competitive, Snook also said billing will have to follow suit.
“We developed our own customer care and billing operation that is very flexible, however we want to split it up, by time, by transaction, by bits and bytes,” he said.
“Our goal is that every customer can have a customized bill.”
