It seems a little late to us for anybody to be launching a new broadband service in the congested unbundled DSL market in the UK, but Telefonica’s O2 sees no other way of building out a broadband presence there and has launched this week with an aggressive package and the intention to build to 1 million customers by 2010.
Cable and Wireless, Virgin Media, Tiscali, Orange and BSkyB all own large chunks of broadband customers in the UK with incumbent British Telecom still retaining the largest share, and Carphone Warehouse successfully launching its own services last year. Vodafone also offers broadband lines which are wholesaled from British Telecom, as are some of the others, but with unbundled lines growing more rapidly now. In total the market reaches 14.5 million of the 24 million homes in the UK.
This means that all the potential quad players are in a better position than Telefonica’s O2 in terms of broadband holdings except for T-Mobile, which has been selling off unprofitable broadband operations in Spain and France, and which had never got around to buying any in the UK. It is likely that Telefonica will eventually either acquire or set up broadband operations in all the European and South American countries where it has a significant mobile presence.
A partnership with Cable and Wireless, which has only broadband lines in the UK, might prove profitable for one or more of these players, and it is expected at some stage that Italian Tiscali might come up for sale in the UK as well, although right now it is acquisitive and growing.
O2 will offer three broadband price plans starting at £7.50 a month ($15) for up for 8Mbps, another at £10 a month ($20) for up to 16 Mbps using ADSL2+ and a premium service £15 a month ($30) for speeds of up to 20 Mbps. If a customer is not an O2 contract mobile customer they will have to pay £10 ($20) a month more on each of the packages, which is still a substantial discount to incumbent BT’s broadband rates.
Orange has offered a free broadband line to anyone spending $30 or more each month on a cellular phone contract, and Carphone Warehouse began life with a similar offer as long as fixed VoIP and cellular voice was acquired through it, and BSkyB has offered a full triple play on broadband, as well as free broadband for subscribers to the Sky DTH service. Virgin Media offers a full quad play at £10 ($20) for each of the four services ‘ TV, internet access, fixed and mobile voice.
O2 cites figures that less than a third of subscribers are ‘very satisfied’ with their existing broadband provider, and says it will make its service simple to set up and use, and offer total transparency in pricing and service speeds, and says it will offer 24 x 7 technical support, unlimited data usage, a free wireless router which is pre-configured, emails sent directly to an O2 phone if required, and address book synchronization between PC and mobile and the ability to send 100 free texts a month from the PC.
‘The UK broadband market is fuelled by price competition but customers are also frustrated over hidden costs, bad customer service and technical complexity,’ said Matthew Key, CEO, O2 UK. ‘O2 Broadband intends to shake up the market and be a breath of fresh air by offering a technologically advanced service which also meets customer demand for a simple set up, receiving what you pay for with no broken promises.’