Best Practice From Abroad: What Hotspot @Home Can Teach Us Europeans

| July 5, 2007 | Wireless Services - Europe | Advisory Report (Europe)

| Analyst: Emma Mohr-McClune

T-Mobile USA’ interpretation of UMA service modeling is distinctly different from anything we’ve seen so far in Europe. With no broadband network of its own, T-Mobile USA has deployed its T-Mobile@home service over ‘any’ broadband connection, including legacy home WiFi routers in the field and hotspots abroad.

Ultra-simple option-based pricing, a clear Family Tariff alignment and a markedly aggressive competitive agenda combine for one of the strongest UMA service propositions to date, anywhere. Until now, UMA has been a strictly European affair, but BT, Orange, TeliaSonera Denmark and Telecom Italia now need look to the US market for UMA service best practice.

Current Analysis Perspective

T-Mobile USA' Hotspot @Home creates a new benchmark for UMA service innovation, and European operators need to take note of several aspects of this service for insights into how to refine and improve their own UMA-enabled service propositions.

In a nutshell, Hotspot @Home is a UMA-based dual-mode phone service which allows end-users unlimited calling from the home hotspot or any other T-Mobile or public WiFi point to US fixed and mobile numbers for a fixed monthly charge, modeled as an 'option' on top of an existing T-Mobile package. The promotional launch offer is US$10 monthly for individuals and US$20 for families (up to five lines), with a choice of two routers (D-Link and Linksys) for $49.99 (free after rebate).

The service offers a choice of two dual-mode handsets, the Nokia 6086 and Samsung t409 at US$49.99 a piece, together with a two-year contract. For us Europeans, however, the really interesting elements of Hotspot @Home lie in its entirely new interpretation of the existing UMA business model.

UMA: FMS, As Opposed to FMC

A key lesson we Europeans can draw from Hotspot @Home is the way in which UMA technology can be deployed by a mobile-only operator as part of an FMS (fixed-mobile substitution) strategy. In Europe, the first adopters of UMA service technology have been broadband or integrated fixed-and-mobile players with a vast broadband customer base to protect.

Perhaps this is why that the European interpretation of UMA service technology has been as an FMC-centric (Fixed-Mobile Convergence), broadband defensive initiative. European service providers have leveraged their respective UMA-enabled services to 'put hooks' into their existing DSL customer bases, and offset broadband churn. This broadband focus has led European service providers to emphasize the 'FMC' nature of the product, to underline the message that service ownership requires both a wireless and wireline element.

In their effort to 'launch FMC,' European service providers have tended to treat UMA services as exceptional cases, special service entities within their own rights, largely forgetting the wider market in which they play, and the standard GSM services with which they undoubtedly compete. Hotspot @Home teaches us how a different strategic agenda for the same wireless technology can help a service provider re-focus on competitive service modeling. It teaches us that UMA may also hold relevance for a mobile-only operator, and it shows us how. For, T-Mobile's Hotspot @Home is designed to run over 'any' broadband connection: it uses second-party broadband as the transport mechanism.

UMA Over Second-Party Broadband

The Hotspot @Home service model presumes three various scenarios. In the first, a potential customer already subscribes to a broadband service, but has no WiFi access at home. In this first scenario, a T-Mobile USA customer can purchase a T-Mobile own-branded WiFi hub (a D-Link or Linksys router) for US$ 49.99.

In the second scenario, the customer already has broadband connectivity and his or her own, installed WiFi router. In this case, T-Mobile USA will allow a Hotspot @Home user to pair a Hotspot @Home dual-mode phone to this legacy router.

In the third scenario, a customer already has both broadband connectivity and a legacy WiFi router, but is willing to consider the purchase of T-Mobile's own WiFi hub to complement existing access options. In this case, T-Mobile USA has prepared a series of sales arguments, including the 'automatic pair' functionality of its own-branded router, and the value-added benefit of having one AP for voice Hotspot @Home use, and another for WiFi laptop connectivity.

This level of choice goes far beyond anything European UMA service providers currently market. In Europe, UMA services are positioned as a shopping list of requisite services and hardware, and all this makes for a very proprietary approach, with a higher implied TCO for the end-user.

Of course, there's always the danger that these second-party broadband providers will object to the way their bandwidth is being hi-jacked to transport voice minutes across IP. Looked at this way, US broadband providers are being deployed as the 'pipe' to effect a FMS strategy bent on eradicating fixed voice minutes. But US broadband providers have been surprisingly accepting of T-Mobile's access presumptions. Broadband and cable is, after all, increasingly used to carry VoIP Skype and Vonage minutes, and a UMA dual-mode service is arguably just another form of VoIP.

Ultra-Simple Pricing

Hotspot @Home's pricing model is a piece of art, and European UMA service providers are advised to take note of its transparency and compelling simplicity. Firstly, Hotspot @Home is an 'option'. T-Mobile USA has positioned Hotspot @Home as a US$ 10 monthly 'add-on' to any existing T-Mobile cellular plan (US$ 39.99 or greater), as opposed to an all-in-one standalone service which attempts to bundle wide-area cellular with local-area WiFi voice (e.g. BT Fusion Plus).

Secondly, the 'unlimited calling' aspect of the Hotspot @Home relates to calls to 'any' US fixed or mobile number, including off-net mobile numbers. In Europe, both Orange France and TeliaSonera Denmark launched their respective UMA services as a monthly 'option' in the same way, but calls to off-net mobile numbers are not included in the bundled unlimited calls package, and this is now standard practice across all European UMA services.

European operators may well argue that they are not in a position to duplicate Hotspot @Home's net-agnostic practice. In the US, the 'calling party pays' principle and a different approach to call termination regulation has made the inclusion of off-net mobile numbers within unlimited bundle feasible. That's true, but from an end-user's perspective, irrelevant. In Europe, most consumers do not know the mobile prefixes allotted to the various local mobile players, and the increasing instance of mobile number portability (MNP) has meant that UMA service customers are poorly equipped to judge the network operator of any given national mobile number.

In weighing up the pros and cons of a UMA service purchase, the lack of off-net mobile number inclusion in the unlimited call package creates an added cost danger disincentive for buying into a FMC UMA-enabled product. Consequently, European UMA pricing models - even those which deploy the same 'option' model - fail to match up to Hotspot @Home 's ultra-simple pricing proposition.

Hotspot Access Abroad: UMA, The Roaming Killer

It is a bitter irony that the first UMA-enabled FMC service to properly address roaming should come from a US player. Roaming, of course, is not quite the issue it once was here in Europe, given the European Commission's recent ruling, but the opportunities implicit in marketing 'free voice abroad' is one which European UMA service providers have, until now, entirely ignored.

T-Mobile USA' Hotspot @Home service is the first UMA service to allow users to make use of their 'unlimited national calls' bundle from a hotspot abroad, effectively giving users 'free calls' back to the US, from abroad. That does not apply to international calls made from a hotspot abroad to a third market, but given the nature of the bundled add-on, this should come as no surprise to Hotspot @Home users.

To be sure, T-Mobile has chosen against marketing this benefit, but blogs and the media have now effectively leaked this capability, and we believe T-Mobile USA may start informing Hotspot @Home customer base of the savings to be made when calling back to the USA from a hotspot abroad in the near future. European service providers should note that this functionality has created a new debate in the US about the applicability of Hotspot @Home as an enterprise solution, to help offset high roaming costs among the Road Warrior community.

| Client Access - Wireless Services - Europe |

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