Orange Re-launches Broadband, Bundles Aggressively, Misses Speed Boat

| Oct 2, 2008 | Consumer Broadband Services - Europe | Competitive Intelligence Report

| Analyst: Ben Tudor

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

September 30, 2008 -- Orange has upgraded its UK broadband network and it will begin offering up to 8 Mbps DSL services bundled as a ‘free’ extra for Orange pay monthly and business mobile subscribers. The move is an attack on fixed broadband suppliers unable to offer mobile services, and it echoes O2’s recent decision in the UK to offer free fixed broadband alongside its paid-for mobile broadband packages, confirming 8 Mbps DSL as a ‘commodity’ product to be bundled as an incentive for ‘premium’ mobile services.

Analytical Summary

• Current Perspective: Positive on Orange UK’s launch of an overhauled broadband network and announcement of new plans, as they put the mobile operator’s fixed-line operations back on an even keel and increase the strength of its bundled product lines. Orange now has a formidable unbundled broadband product and attractive price structures. However, it will face competition from ADSL 2+ providers, shortly to include ISPs that buy services from BT Wholesale, as well as from the incumbent cable provider, Virgin Media, which launched a mobile broadband product to sit with its TV, mobile, fixed voice and high-speed broadband products earlier in the same week.

• Vendor Importance: High to Orange UK, as the firm committed to launching an IPTV service last year and failed to meet its own deadline. While the reasons for such a gaffe are unclear, a beefed-up network and the chance to install thousands more Livebox devices in customer homes is a good grounding for the provision of further services, including, but not limited to, TV. Orange, and other mobile operators in the UK, have something that many fixed-line competitors do not: the ability to offer mobile services as well as fixed ones. An effective and usable broadband offering is a strong element in Orange’s UK portfolio.

• Market Impact: High on the UK broadband market, as Orange is a serious threat to wired ISPs that are providing little more than basic voice services and bit pipes. Orange is a threatening competitor, and one that has proven it can innovate. Smaller wired ISPs should be seriously concerned for their prospects in the face of a mass-market competitor. Bundlers and tier-one ISPs, such as Carphone Warehouse and BT, respectively, will also have a job on their hands to make sure they do not lose customers to Orange, not least because many of their customers are also likely to have an existing relationship with the mobile operator.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Consumer Broadband Services - Europe | More information

Recommended Competitor Actions

• BT should emphasise the superiority of its network, customer services and technology. The firm needs to make the most of its ADSL 2+ rollout, which offers up to 24 Mbps. It should also count on the solid reputation of its customer services organization.

• BT and ISP partners need to make more marketing capital from the I-Plate, an interstitial plate device developed by BT that isolates the Bell Wire, removing much of the cause of interference from DSL lines. BT has already said it expects the device, which it sells for UKP 10, to be given away for free by other ISPs. This can be used to retain customers that might be tempted by Orange’s offering. While the I-Plate works regardless of DSL provider, it may be a strong incentive to remain with the devil one knows, rather than the devil one does not.

• One downside of the Orange offer is that customers can only get the full benefit by becoming Orange mobile contract customers; otherwise, they are limited to paying UKP 10, 20 and 25 for the equivalent services. Wired ISPs need to engage in fresh marketing to expose the hidden costs of Orange’s bundle to consumers.

• Tiscali needs to emphasise its ADSL 2+ product, as well as qualitative benefits of its own unbundled network. Tiscali should also consider marketing its IPTV service more aggressively.

• Vodafone and O2 need to step up their marketing of wired broadband services. Vodafone UK currently sees DSL as a customer retention device; Orange’s latest move shows it needs to take a more serious approach to creating broadband packages. It should examine the progress of Vodafone Italia Station (see Vodafone Italia’s Station Arrives, May 29, 2008) and Vodafone Espana’s launch of the same device last month.

Recommended End User / Customer Actions

• Consumers need to assess the value of not just the broadband and fixed voice packages offered by Orange, but also its mobile tariffs. By their nature, mobile tariffs can be opaque, and even the most savvy consumer can have trouble working out whether a tariff or bundle will deliver better value than they currently get from a competitor.

• Consumers need to be wary of bundling and assess the whole package in comparison to other bundles and individual offers. Consumers will be locked in to 18 month contracts when buying any of Orange’s DSL products, and should plan accordingly – it is highly likely that ADSL 2+ services will be far more widespread – and possibly cheaper – than Orange’s product within a short time period.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Consumer Broadband Services - Europe | More information

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