Sean Park Portrait
Quote of The Day Title
I say profound things

Advanced economies.

Ethan Zuckerman
Image by whiteafrican via Flickr

So the internet destroyed distance.  It took a few years but the death of ‘long-distance’ fixed line telecoms pricing but, helped along by the entrepreneurs and engineers behind things like Skype, it was inevitable that the historical business model of telecom monopolies were destined for the dustbin.  Yeah, yeah, yeah…ten year old story…so what, boring.

Ok.  But why on earth does the parallel extortionate business model live on in the world of mobile telephony?  International roaming charges are a joke,  especially if you are using the same provider on both sides of a border, but even if you are not;  ie they don’t make any economic sense (there is very little incremental underlying costs, at least not any that aren’t artificial) and they are extremely annoying and unfriendly to what are generally these companies best customers.  I don’t know anyone who is happy with their mobile phone provider;  it goes from grudging indifference through to outright hatred.  And yet these companies continue to be successful.  How long can this last?

As a frequent traveller within Europe, and a cost-conscious entrepreneur, I find myself very frustrated and limited by this state of affairs and often find myself using texts and missed calls to arrange for later calls (via skype) rather than bleed money to take a roaming call.  So when I heard of a new mobile offering that would allow me to use one number, one account, fungible credits across 21 countries, I had to sit up and take notice (via NetworkWorld):

The service allows prepaid subscribers travelling between participating countries to recharge or top up their accounts using airtime vouchers from any participating country. Pre- and post-paid customers will be charged the local rate in the country from which they are calling, and travelers will receive free incoming calls.

Wow sign me up. Vodafone? Orange? T-mobile? O2? Yeah, right… Try MTN! And its just playing catch up with the competition (Zain’s One Network.) MTN’s tag line?

One Africa. One Rate. That’s the Spirit.

Gee, good thing I live in the EU…where I guess the equivalent would be along the lines of:

One Europe. Many Rates. Eat Shit.

But don’t mistake me, it’s not a problem that the bureaucrats in Brussels should be responsible for solving, and I’m not so naive to think that the incumbents will be able to adopt disruptive business models, but where are the entrepreneurs??? There has to be an opportunity here – the number of people who live “in Europe” (as opposed to just withing one European country) is large and growing and will continue to grow.

The challenges faced by entrepreneurs in Africa and elsewhere in the developing world are often formidable and extend beyond the usual (already tough) stumbling blocks that ‘western’ entrepreneurs struggle with. However, the ‘developing’ entrepreneurs sometimes have a small but important advantage – in the markets in which they hope to operate, there often isn’t a “way it is supposed to be done.” They have lots of ways of failing (and lots of people telling them they will) but usually it is not because they are seen to be taking an innovative (read: dangerous) approach to business. I was reminded of all this when I finally got a chance over the past couple days to listen to this great presentation/discussion by Ethan Zuckerman and Eric Osiakwan given last fall at the Berkman Center. (Unfortunately the Berkman website does not offer an embed code, so you can’t watch it here but worth clicking on the link above.) Thanks to my friend Juliana – who is also a newly minted TED Fellow (well done!) – for sending me the link (several months ago!)

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  1. At 5:12 pm on 03 Feb 09 cpswan said:

    This is a familiar problem. I ended up with an old GSM phone with Dymo stickers on the back for my Swiss, Spanish and US numbers. Each number was for a PAYG SIM bought from eBay or a local store (though the 'war on terror' is making this harder than it was). You can get a reasonably seamless user experience (for callers) by using a one number service like GrandCentral, Skype, or PBX call forwarding; and BT's21CN based Mojo service was great for initiating outbound calls (though it relied on having an IP connection using WiFi or a BlackBerry with an all you can eat roaming data tariff).

    The underlying issue with the EU (and US) operators is that they paid far too much for 3G licenses, and so far the killer app that uses all that bandwidth hasn't appeared. I'm probably not alone in having a video call capable 3G phone for 3 years or more and never once made a video call. Most operators are constrained on what they can charge within their license, which leaves gouging roaming users as the only way to make up a gaping revenue gap. The cost of SMS (and more so roaming SMS) is also obscene for the actual data volumes and reliability.

    The licenses are unfortunately a double edged sword, giving the mobile operators an oligopoly – so almost no air to breath for a disruptive startup. I sense that there's been a brave attempt over the last year or two to make something of the intersection between WiFi and telephony, but so far the ubiquity isn't there.

  2. At 5:37 pm on 03 Feb 09 parkparadigm said:

    “which leaves gouging roaming users as the only way to make up a gaping revenue gap.” Made me chuckle. You are so right but at the same time the “logic” behind this would get a failing grade at any Business School or in any Accounting 101 class: sunk costs are just that: sunk. I'm sure – like for the Blackberry – there would be a tremendous first mover advantage if any of the big European mobile providers said what the hell and offered a European (or better yet Global) subscription package with multiple numbers on the same billing account.

    I also suspect one of the reasons that roaming customers have been abused – despite ironically being these companies' best customers / highest ARPUs – is that, politically, they have been perceived as easy targets: a small 'jet set' elite…whereas this may have been true in the past (and so however cynical, making this a good strategy) I think if they persist over the next few years they will find that this strikes an increasing number of their best potential future customers (the digital generation who only have mobile phones and VOIP and who are actually mobile within Europe…)

    Your point on the licences is valid. Back of the envelope brainstorm: what if EU auctioned a handful of EU-wide 3G licence with the proviso that no roaming charges could be applied? Sure they would raise less money and probably devalue the existing 3G licences (you could get around this maybe by requiring bidders to have one or more national licences already??) but would spur innovation. They could even give individual governments a free pass (ie no anti-competition fines) to rebate some of the existing 3G licence cost to operators if they felt this necessary (hey in these days of bailing out everyone, who's to say not telcos…) (ahem, that was ironic.)

  3. At 6:33 pm on 03 Feb 09 cpswan said:

    I think there are aspects of this that are a repeat of the hotel telephone fiasco. Once again the excuse for gouging is the fixed (sunk) cost of providing infrastructure. I've been waiting for a chain to break ranks and offer tariffs that just undercut what you'd pay on a roaming mobile (remarkably most are even higher than that), at which point I'd happily switch to get a better connection quality/reliability. My wait continues.

    The licenses provide a real disincentive to pan European (or Global) packages, as each chunk of spectrum has been auctioned nationally. There are certainly opportunities where a provider with footprint in a number of places could offer a better deal, but here's where I think we encounter the reverse angle of the 'jet set' stereotype – just how large is the customer population that this makes sense to? Bigger than many think would be my guess – if a couple of holidays a year is enough to make it worthwhile buying a local PAYG SIM (and for most people I'd say the break even point is less than a week). To this end the roaming charges could be characterised as a laziness tax, and one that millions of business travelers and holiday makers are (happily?) paying each year. Further state intervention could perhaps help, but my sense is that these problems get solved by less regulation rather than more (which tends to have unintended consequences that increase in proportion to complexity).

    There's also a side point here that applies to the business traveler for hotel and mobile roaming charges – if they can expense it then it's not perceived to be their problem. That such expenses are tax deductable also helps them slip under the radar.

    The BlackBerry precedent is troubling. On the one hand it's exactly what customers want – pay a bit more for a global all you can eat package; but I've heard it said that the telcos would never do a similar deal again. Just look at the roaming data $s that flood in for the average traveling iPhone user.

    The one number versus many is also an interesting conundrum. I'm a big fan of the one number approach, and these days that's all I have on my business cards. It can however be off putting according to culture and cost conditions. My friends in +1 may baulk at dialing a +44 number if they don't have a package that makes it (almost) free. I'm also told that in places like Italy it's common practice to list many numbers so that the caller can decide (guess?) which will be most appropriate to reach you on for a given context. Of course these issues dissolve quite quickly in a strong virtualisation and cloud service solvent. Multiple input end points (numbers), multiple output end points (handsets,lines,voicemail boxes etc.), user defined policy to determine the mappings. One day. Soon?

    Damn – looks like that blog post about telephony virtualisation that I've been brewing for a while just came out as a comment.

  4. At 7:49 pm on 03 Feb 09 parkparadigm said:

    I've got a +1 and a +44 “fixed line” number and a +44 mobile number (plus my skype ID) on my “business card” – it's amazing how many people still ask (usually obliquely) how often I'm in the US. For 99% of people my age-ish or above, a phone number is deeply rooted in their mind to a physical location. Indeed for this reason I don't 'post' other European numbers as that would either be confusing or have people assuming I've got offices all over the place which I don't. Whereas (most of) the Digital Generation I interact with seems to understand that the multiple number are for them – allowing them to reach me (more) locally wherever I may be.

    I don't wish I had one number per se, but the multiple numbers would be 'purpose-driven' not location driven…ie 2 or 3 different flavors of work, idem for personal use… You could argue that this is dealt with by caller ID but still far too often this doesn't work (caller blocked) and so would be easier to split by number being called. And I don't mind having two distinct mobile devices (which I do now) – keeps accounting easier. But then again if someone could sell me a universal billing platform that allowed me to see billing by number and thus by purpose that would be ideal…one bill, one payment. But would need device to be able to indicate which number to use for outbound calls (like an email client with multiple IMAP accounts.) This just seems so bloody obvious…why can't/won't the telcos do it? I mean even at the same extortionate price points – I mean if you are going to rob me blind at least do it in a user friendly way, I would feel less bad about it, sad as that may seem. (Talk about low expectations!)

  5. At 9:42 am on 04 Feb 09 cpswan said:

    There are some very real cultural issues around telephone numbers. The most vivid example for me was when I was traveling in the US and had my UK desk phone diverted to a local mobile. As I was expecting some visitors I took a PostIt note with the short dialing code for my desk phone to reception so they'd know how to reach me. When I was told 'I don't know how to dial that number' I just had to walk away. Some issues just can't be solved with technology, no matter how well it works.

    GSM has had a feature for some time that allows multiple numbers to be put on the same SIM card (in order to keep the accounting easy). Unfortunately I'm only aware of one operator in the UK that uses this functionality, and even then it's just for their own employees.

    The work that's being done with SoftSIM should be the salvation for these problems – just load your preferred device up with as many SIMs as you need for the places that you're going. Sadly I don't see it working out that way. My cynical expectation is that the operators will use the provisioning process for SoftSIM as a type of DRM for mobile handsets e.g. once one operator has provisioned a SoftSIM they'll dynamite the bridge that would allow anyone else to do that, and like the present SIM locking regime the user will have to pay to get back functionality that was there in the beginning.

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