UK mobile operator 3 launches price 'war'

Jul 9, 2013

Over the past couple of weeks 3 has signaled that it's going to go for a 'no fuss, no complications, get your data here' strategy. The pile it high, sell it cheap approach to mobile data that the dominant players in all mobile markets dread.

First it announced that it would not try to sell LTE as a high-value item, but rather as what it is.. a speed ramp for mobile broadband.

Its unlimited data plan - with unthrottled, unlimited tethering and free VoIP - will simply be assigned a free upgrade to LTE as and when 3 rolls it out. That made many in the rest of the mobile industry wince.

That was followed up with what, to my mind is an even nastier stake in the ground with 3 launching its back-to-basics 'pay as you go' offer. 3 says customers will pay a straight-forward 3p per minute to make voice calls, down from 26p; text charges fall from 11p each to 2p; and data will fall to 1p per megabyte from 65p, according 3.

In fact this isn't that great on its own - there are already plans out there that offer better headline costs.

The big change is that 3 has also allowed the user to roll over credits into the next period. This is the way prepay used to be and it means users don't have to guess consumption in advance to work out whether they will get a good deal or not. It de-obfiscates (clarifies) the real cost of service and makes it easy to compare like with like, where before pre-pay had ended up more like a mini contract deal.

With both these changes 3 is starting to look like a straight-forward mobile data carrier - selling mobile data access on a per-byte basis.

The PAYG offer, for instance, immediately makes second or third devices (an old phone kept for back-up, tablets etc) candidates for cell service where before the fixed monthly cost of a subscription was prohibitive and tethering was tedious. Flat rate data pricing with 'keep the credits till you use them' PAYG offers mean tablets can be equipped for cell and just used as an when required.

Such a data challenger strategy, if marketed properly, is clearly hugely disruptive, not just to other mobile operators who may be undercut and forced to reduce their own prices, but deadly to companies selling mobile telcos all the extra systems and software designed to better harvest customer cash through techniques such as personalisation, pricing tiers and so on.

This strategic approach is the opposite of the 'back to basics' espoused by '3' and it's always these vendor companies (rather than telcos themselves) who react first and strongest to what they see as short-term strategies which destroy value for the entire market.

According to Anukool Lakhina, Founder and CEO of 'big data' analytics company, responding in PR mode to the 3 announcement, "In the long-run there is a risk that the industry could cannibalise its profits from 4G in the event of a price war. Instead, operators should take a more data driven approach to service creation, looking at how they can develop more profitable packages that are better tailored towards fulfilling individual customer requirements."

Drilling down through the marketing-speak: unlimited data clearly means you can't sell volume tiers. Suddenly the complication and obfuscation option is less available and all that customer data mining to work out how to sell what to who and when, is no longer required.

What if most of the market was forced to chase 3 and also offer clear, simple options?

That's what they're worried about.

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