O2's mobile broadband service - what you should know...

Last week O2 UK announced a mobile broadband (i.e. USB modem, or dongle) offering. Two packages are available to existing mobile or home broadband subscribers.

But how does it compare to the others already available?

Steven Hartley, senior analyst at Ovum comments:

“Firstly, O2 is relatively expensive, although the tariffs from both Vodafone and T-Mobile are currently on offer. For the equivalent length of contract and usage limits, O2’s 18 month contract is £5 more than 3’s, Vodafone’s and T-Mobile’s (which runs for 24 months). The one month contract is the same price as Vodafone, but the one-off USB modem fee is £20 more expensive.”

“Secondly, it is only available to existing customers, either mobile or home broadband. None of the other MNOs make this stipulation, although 3 is now offering a 50% discount to existing customers. A focus on existing customers emphasises a churn reduction strategy, which contradicts O2’s SIM only customer acquisition drive. Growing mobile broadband uptake in the UK could be an excellent opportunity to attract new customers to data services.”

“A focus on fixed broadband customers is another signal of O2’s intention to drive customer growth in this area; hence its core messaging around the service conveys mobile broadband as complementary to fixed, particularly with WiFi access included. Only T-Mobile also includes WiFi, and shows how mobile broadband offerings are converging with those from fixed ISPs.”

“However, O2’s fixed broadband services are only available from unbundled exchanges and its customer numbers are small to date (currently around 100,000). Therefore, we do not expect large numbers of mobile broadband customers to come from this category.”

“An interesting aside to O2’s announcement is Orange’s position in the UK mobile broadband market. It is missing a major opportunity due to a strategic emphasis on fixed broadband, combined with almost no marketing and exorbitant pricing (£25 per month for business users and £29.99 for ‘non-business customers’) for its mobile broadband offering. O2’s announcement at least shows Orange that fixed and mobile broadband can live side by side.”

“Therefore, O2’s complementary mobile broadband offering is interesting from a market positioning perspective. But ultimately it is not competitive for consumers, even existing customers. Like O2’s fixed offering it is unlikely to set the market alight. As a result, revised pricing looks more likely. As we mentioned in relation to 3 (see EuroView Daily, April 10), this suggests that the longer term outlook for mobile broadband is similar to that of fixed broadband – falling prices and a need to focus on value-added services, or survive as a bitpipe.”