Upwardly Mobile: The operators' new clothes

Does my ARPU look big in this?

In the fast-moving mobile market, 'follow the leader' isn't good enough anymore. Jo Best looks at how well two operators - O2 and 3 - are doing in coming up with new strategies.

Recently, it seems, the mobile operators are starting to wake up to the market changing around them. Both Hutchison-owned 3 and Telefonica-parented O2 have decided it's time for a makeover, in interestingly different ways.

Let's start with O2. As CEO Peter Erskine rather adroitly put it: "Everyone is having to poke a stick in the other guy's backyard." The company is shimmying towards a repositioning that has already seen it take on broadband provisioning by buying high-speed ISP Be. So far, so good - everyone in the mobile space seems to be edging this way.

It's also thinking about IPTV - again, so is everyone else - but it doesn't fancy launching in the UK due to the presence of Sky and other pay-TV gorillas.

But what is it really doing that's new? Not an awful lot, in short. Yes, it's looking at FMC but hasn't got any firm plans. Yes, it's experimenting with mobile TV, but again, there's no rollout path laid out.

One smart idea does stick out from the O2 stable, though - Genion, a service that's only available in Germany but could well be on its way to O2 customers soon. It's a different take on FMC, where users get discounted rates when they use their mobile at home.

Bringing Genion to the UK, coupled with a promised expansion of Be geographical reach and a possible IPTV move, would effectively put the company into competition with the likes of NTL and BT. Turning O2 into a 'triple' or 'quad' player - selling fixed line, mobile phone and broadband service plus possibly IPTV - is a solid move and doubtless would be a boon to shareholders. But it's difficult to see what more O2 plans to bring to the market that its competitors aren't doing already, or planning on doing soon.

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Granted, O2 has got an ADSL2+ network - which means data speeds of up to 24Mbps - but it's yet to come out with what new services it plans for all that juicy bandwidth. And services are the only element that will differentiate O2 and its rivals. With free broadband, telecoms companies have tried to compete based on price with varying success - Sky has signed up customers by the fistful while Orange has struggled with the same proposition.

Services may yet prove one way O2 can win out - its My Blue Book product, which allows consumers to store all their personal mobile content remotely, is notable. It's a useful idea and one I can really see catching on. If O2 is to make its 'stick poking' really worthwhile, though, it needs to come up with more of these services and a little less of the follow-the-leader thinking that's dogging telecoms convergence of late.

This brings me to 3. The mobile operator has made some interesting announcements such as offering all sorts of traditional internet-type services - including VoIP and IM - for a flat fee. It's startlingly new in the mobile world, yet age-old in broadband. After all, we're all used to slapping down our £15 a month and getting all the eBay and Yahoo! we want when we pay our ISP.

But will this mobile equivalent be a hit or a miss? I think price could well be the factor that sends it one way or the other. Price it low enough and I can see the appeal for teenagers who want to get web applications like instant messaging, but can't afford a laptop. The Skype factor could also be particularly appealing to such users - if the price is right and there are savings to be made on phone bills, what's not to love?

There are some obvious flaws here too. Some internet services are exactly that - they're designed for a large screen and the relatively tiny nature of mobile screens makes heavy work of them. EBay, I would suggest, is one of these types of apps. The notable dearth of handsets compatible with the new 3 service is also a problem - just two at present, although it's something the operator will obviously have to sort in time.

The question on everyone's mind, though, is: is 3 shooting itself firmly in the foot? It risks reducing itself to a mere transport pipe, something that has put the wind up the mobile and broadband industries for some time.

Will becoming 'a mere transport pipe' pay off for 3? It's certainly risky, but it may yet prove a winner. Either way, it's good to see operators really experimenting with next-generation networks. Long considered an upstart with the odds stacked against it, 3 now seems to have stopped using its stick to poke in the other guy's back yard. Now, it's poking its rivals in the eye.