Analyst Angle (Special Edition): United Kingdom market model for mobile broadband challenges

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. This article is an excerpt from RCR Wireless News’ July Special Edition, “Riding the Wave: The Forces Impacting Carrier Strategy.” The 80-page special edition is available here.
The mobile broadband market is well on its way to maturity. By the end of this year, almost 9% of the entire population of Western Europe will be active mobile broadband users, and in some countries, like Austria, penetration will reach well over 20% by year end, according to Yankee Group’s December 2009 EMEA Mobile Market Forecast. Note – mobile broadband is defined here as laptop-based access, typically achieved via an external USB modem. Our definition excludes handset-based or smart-phone based services.
Unfortunately, service provider strategies aren’t maturing at the same speed. Many mobile broadband providers today are still competing solely on price. While price-centric approaches may help providers gain share when a market is in its infancy, such strategies become increasingly unsustainable as a market matures. Rather than participate in a full on price war – in which the only way out is to kill or be killed – mobile broadband service providers should instead seek out and embrace unique branding strategies.
Brands to the rescue
Branding is the antidote to price wars. Clear branding allows service providers to create well-defined positions in an increasingly crowded and confused mobile broadband marketplace, ensuring they reap a healthy slice of the overall market pie. Brands that work for the mobile broadband space include:
—Price leader: This is one of the more obvious options, but it’s pretty unattractive to all but a handful of highly focused service providers or mobile virtual network operators whose entire business model and market survival is based on never being beaten on price.
—Network leader: This is where much of the action is today, as almost every service provider claims leadership on some aspect of network quality, coverage or reliability. In the long run, however, can any one service provider truly expect to retain a position as the undisputed leader in network performance? Not likely.
—Premium provider: Think of this as the Stella Artois of mobile broadband, i.e., reassuringly expensive or even aspirational.
—Service leader: This is the service provider that offers an unbeatable range of value-added services, backed up by the best customer service available in the market.
—Seamless access leader: This provider offers a market-leading combination and integration of landline, hot spot and mobile broadband access.
—Mobile-only leader: This is the service provider that emphasizes mobile broadband over landline broadband and actively encourages substitution.
—Segment market leader: This provider offers the best mobile broadband solutions for a clearly identifiable end-user segment. For example, the company could focus on small businesses, students, families or elderly customers.
—The innovator: This provider adopts highly targeted feature-based differentiation. The service provider focuses on one element of mobile broadband service in particular where it will never be beaten, for example, international roaming.
United Kingdom is a good branding barometer
To illustrate the point, consider the United Kingdom market. It’s a fairly good barometer of what’s going on in mobile broadband competition and branding because not only are the main multinational service providers represented there, but it’s also a relatively mature market. Yankee Group forecasts mobile broadband penetration will exceed 12% of the United Kingdom population by the end of 2010, compared with an average of 9% for all of Europe.
What role is branding playing in the United Kingdom? Here’s a breakdown, drawn from key messages within the various providers’ websites and web-based advertising.
Orange = friendly face: In the mobile broadband section of its website, Orange highlights the core value the Orange brand already represents in the United Kingdom marketplace: customer-friendliness. Orange offers free trials of a range of mobile data services, and it’s sticking to this approach for mobile broadband. It promotes peace of mind by offering a two-week guaranteed refund for customers unhappy with their mobile broadband experience, and also offers rewards (or treats) in the form of free cinema tickets for new users. It also promotes its consumer-friendly brand image by highlighting easy setup as a core feature of its mobile service. Despite the fact that Orange is a serious player in home broadband in the United Kingdom, it retains separation between its home broadband and mobile broadband offers in terms of how the services are packaged and advertised. Going forward, we expect Orange to add more integrated home/mobile broadband offers to its portfolio, following British Telecom’s example (see below).
Vodafone = premium provider: In describing its mobile broadband offer, the company uses words like “reliable” and “award winning.” By drawing attention to the PC protection and backup that is available with its mobile broadband services, Vodafone focuses on premium value-added features that reflect its desire to attract mid- to high-end consumers who are typically less price-conscious. Based on this evidence, we believe Vodafone is more interested in becoming the Stella Artois of mobile broadband than any of its rivals – although it may not thank us for the comparison. Vodafone is advertising home and mobile broadband under the single umbrella term “broadband,” which is a good first step toward more integrated broadband offers. It is particularly encouraging from a company that has mobility in its DNA and is still a relative newcomer to the converged communications services party.
T-Mobile = price leader: Whether T-Mobile likes it or not, most United Kingdom consumers don’t go to it for frills. They expect T-Mobile to offer competitive pricing for a pretty standard suite of services, and T-Mobile sticks to this positioning for mobile broadband. Apart from highlighting the fact that it won a recent award for best provider, T-Mobile’s mobile broadband marketing focuses on attractive price points and the wide variety of pricing options, particularly for customers searching for the best value (i.e., prepaid users). For T-Mobile, everything else is secondary to price. For example, its advertising offers little or no mention of value-added features, refund guarantees or customer support. Since T-Mobile is not a landline player, it also doesn’t offer complementary home broadband services.
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