Europe backtracks on market consolidation opposition

The General Court of the European Court of Justice has annulled a decision made in 2016 to block the merger between O2 and Three in the UK, potentially opening the door for consolidation.

In 2016, Europe decided it was better for sustainable competition that the four operators in the UK remain independent, blocking the mega-merger between O2 and Three. This decision has set market precedent over the subsequent period, with the generally accepted rule that bureaucrats would not allow less than four independent mobile network operators in a single market. This ruling turns that presumption on its head.

“In our appeal, we argued that the Commission’s approach to reviewing the proposed merger, and European telecoms mergers more broadly, was guided by a misconceived default view that European telecoms markets are better served by having a minimum of four Mobile Network Operators in each EU Member State,” CK Hutchison, Three UK’s parent company, said in a statement.

“This approach ignores market realities, the clear evidence of successful market consolidation in Europe and across the world as well as the very significant efficiencies in terms of increased investment, network improvements and consumer benefits that can be achieved from mobile mergers.”

As soon as the decision from Europe was made to block the merger between Three and O2 was made, the agreement between the two parties was terminated. It will now always be a case of what could have been, as this decision will not reignite talks between the two parties.

“Telefónica notes the EU Court’s decision, but the company has moved on,” a Telefónica spokesperson said. “Telefónica recently announced a transaction that combines Virgin Media, the UK’s fastest broadband network, and O2, the country’s most reliable and admired mobile operator, into a 50:50 joint venture that will create a powerful fixed-mobile challenger in one of its core markets.”

As there will be no material impact on the proposed merger between Virgin Media and O2, which was announced in recent weeks, questions will now turn to more general market consolidation in Europe


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Europe has always been against market consolidation if the result leads to less than four independent service providers in the mobile segment. If concessions are offered, like in the Netherlands for example, mergers would be allowed but this would result in a diluted version of what the merging parties would have wanted to achieve.

The ruling from the General Court changes everything.

In 2016, the European Commission considered the reduction from four to three service providers would have resulted in increased prices, decreased quality of service, hindered investment in infrastructure and would have had a detrimental impact on the MVNO segment also.

The ruling which has been made public today disputes the claim there would be negative impacts on competition. Negative experiences for the consumer has not been seen in other markets around the world where there has been consolidation, while there were several flaws during the assessment process. The original assessment also failed to demonstrate effectively that network infrastructure would be impacted also.

With the General Court annulling the decision to block the merger, it is effectively saying Europe would consider market consolidation should there be a good business case. This is a very interesting ruling and statement to make, as it is effectively a green flag to the industry. Could this spur the market’s imagination for consolidation?

O2 and Virgin Media are merging to form BT-busting connectivity giant

Telefónica and Liberty Global have confirmed plans to merge UK operations, O2 and Virgin Media, to challenge the connectivity market leader BT.

Since the end of the Supply Chain Review, the UK telecoms market has been relatively mundane, operating as one would largely expect, however this merger throws a cat amongst the pigeons. All of a sudden, the UK has become on the most interesting markets to watch, with the promise of a second convergence connectivity business to rival market leader BT.

“Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical,” said Telefónica CEO Jose Maria Alvarez-Pallete. “We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value.”

“We couldn’t be more excited about this combination,” said Mike Fries, CEO of Liberty Global. “Virgin Media has redefined broadband and entertainment in the UK with lightning fast speeds and the most innovative video platform. And O2 is widely recognized as the most reliable and admired mobile operator in the UK, always putting the customer first. With Virgin Media and O2 together, the future of convergence is here today.”

Talks emerged earlier this week, though they certainly got to the official confirmation stage quicker than many were expecting.

As part of the agreement, a 50-50 joint venture will be created, with the promise to spend more than $10 billion on network development over the next five years. Synergies are expected to be as much as £6.2 billion, with 46 million subscribers, 15 million homes passed for broadband, 99% population coverage for mobile, 18,700 employees and £11 billion in revenue.

Full details on the deal can be found on a new website, proudly proclaiming the creation of a national digital champion.

This all sounds very promising, but when the merger is complete in mid-2021, which brand will survive?


What should a merged O2/Virgin Media company be called?

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“In the long run, we believe it would be better for the JV to retain the O2 brand at the expense of Virgin Media,” said Kester Mann of CCS Insight. “Both have a strong presence, but O2’s respected customer service, highly loyal customers and sponsorship of the O2 arena mean it is impossible to drop. A multi-brand approach serves only to duplicate costs and risks confusing customers.”

For convergence to work, there can only be one brand which survives. BT’s £12.5 billion of EE has arguably not paid off to date as the two brands still exist, effectively creating two separate business units inside the same group. There might be convergence benefits from an operational perspective, but to realise the gains from a customer and commercial angle, the businesses have to be fully consolidated and coherent.

BT has never really been able to take advantage of its assets. It has the largest mobile network, the largest broadband network, the largest public wifi footprint and the largest bank accounts to throw cash at content. Its inability to evolve into a convergence-defined business has opened the door for O2 and Virgin Media. But the question is whether the duo can learn from these mistakes.

Ultimately this is a major threat to the BT business, not because this is a combination which can potentially match the scale and depth of BT services, but these are also two currently healthy businesses which are coming together.

Financial Results for O2 and Virgin Media to March 31 (UK sterling (£), millions)
O2 Virgin Media
Total Year-on-year Total Year-on-year
Revenue 1,739 2.9% 1,266 -0.6%
Profit 516 2.4% 84 >1000%

Sources: Liberty Global Investor Relations and Telefonica Investor Relations

Usually, when mergers and acquisitions are discussed, one of the parties is a significantly stronger position than the other. It can still be good news, but there is plenty of work to do during the integration stages to ensure the new company is fighting fit. This is not the case with O2 and Virgin Media.

Virgin Media might have experienced a bit of a downturn over this three-month financial period, but this could likely be attributed to dampened customer acquisition amid the COVID-19 outbreak, while O2 has demonstrated year-on-year increases once again.

While these are healthy businesses right now, some might have suggested limited success in the convergence game would have caught up eventually. This is a very encouraging move forward, getting ahead of negative impacts, though a renewed assault on TV/content is needed. Neither, despite what Virgin Media claims, have done very well in this segment.

Current subscriber numbers for O2 and Virgin Media
Mobile Broadband Content
O2 35,266,217 29,085 *
Virgin Media 3,179,500 5,271,000 3,687,400

Source: Omdia World Information Series

*Too early to tell how successful the partnership with Disney+ to add a content element to O2 bundling has been

One area which should be allocated to the risk column, though it is a very minor risk, is the prospect of regulatory intervention.

“Unlike when O2 attempted to join forces with Three in 2015 but was blocked by the European Commission, I don’t expect there to be any major hurdles to this deal going through,” said Dan Howdle, consumer telecoms analyst at Cable.co.uk. “After all, with BT’s purchase of EE given the all-clear in 2016, it’s difficult to see how a case could be made to block it.”

These are both telecoms companies, but service overlap is minimal. Core competencies lie in different segments, and while there have been attempts to launch into parallels, success has been woeful. These are complementary companies with little material service overlap.

When considering whether competition authorities will be interested, you have to ask whether the merger would make single business units stronger or is the company stronger by association with parallel services. O2’s mobile business will not be enhanced materially by Virgin Media’s MVNO proposition, and Virgin Media will not benefit from O2 at all in the fixed connectivity game. There does not seem to be any case for objection on the grounds of competition.

Aside from the direct impact for both Virgin Media and O2, the rest of the market could be spurred into action.

“Vodafone UK appears the biggest loser as the deal lays bare its weak position in the market for converged services,” said CCS Insight’s Mann. “It also looks certain to scupper its virtual network partnership struck with Virgin Media in 2019. We think this deal will trigger a ripple effect on the UK market: Vodafone, Three, Sky and TalkTalk will all be assessing their positions and further deal-making can’t be ruled out.”

This is a challenge to the industry and will create a rival to BT in mobile, broadband, convergence and enterprise. However, it is also worth remembering the ‘also rans’.

Unless the ambitions of rivals are inspired by this threat, the prospect of a tiered connectivity industry could emerge, with those offering bundled services on top and the pureplay service providers on the bottom.

The UK has quickly become one of the worlds’ most interesting telecoms markets, thanks to the permutations which could be inspired by this merger.

Tier One Tier Two Tier Three
  • BT (mobile, broadband, content)
  • O2/Virgin Media (mobile, broadband)
  • Sky (content and broadband)
  • Vodafone (mobile and broadband)
  • TalkTalk (broadband)
  • Three (mobile)
  • MVNOs
  • Alt-nets

Taste of remote working whets employee appetites for more – O2

Research from O2’s enterprise business unit suggests the UK’s eyes have been opened to the benefits of working from home and employees want the temporary measures to remain, post-coronavirus.

With the coronavirus pandemic coercing companies through a digital transformation programme to enable remote working and the continuation of business operations, one question which has been asked is how many of these evolutions will be long-term. According to the research, 45% of Brits predict a permanent change to their employers’ approach to flexible working when lockdown lifts.

“With more of us working flexibly than ever before, for most businesses, digital infrastructure has become more important than physical infrastructure,” said Katy Liddell, Director Business Sales & Service at O2. “In the face of this, businesses must continue to evolve to meet the changing needs of their workforce to ensure they continue to attract and retain talent.”

Mobility has been a promised benefit of the digital economy, and while there are some companies embracing the concept, more traditional organisations have resisted. With COVID-19 forcing society into lockdown, these firms are being driven through a transformation programme at rapid speed, but there are notable benefits.

63% of the respondents to the survey would be prepared to live further away from the office should commuting commitments be reduced. The majority would be prepared to live up to an hour away, doubling the amount which currently do so. This is of course a significant benefit to organisations as well as employees, as talent retention might be increased, and it broadens the scope of recruitment to a wider region.

It also means less money would have to be allocated to physical infrastructure, as an office would not need to be as big if only a portion of the workforce will be in at any one time. These savings can be allocated to reinforcing digital infrastructure, but also investing in new projects.

Should flexible working be adopted by urban firms, 41% of city-dwellers would be tempted to move to more rural locations with seaside towns more than doubling their appeal, 16% of respondents.

But what is the potential for COVID-19 working conditions being adopted in the long run?

“It will be difficult to go back to normal ways of working after lockdown, as we’ve now proven that most of us can work from home – despite many companies previously telling employees that it wouldn’t be possible,” said Dr Heejung Chung, Reader in Sociology and Social Policy Director at the University of Kent.

“The UK has a huge challenge with the geographic distribution of wealth, and this exaggerates the problem of overpopulation in cities. If people could work from wherever they want to, without any fear of career penalty, this would create a huge opportunity for everyone.

“Even though the findings highlight that people will be willing to live up to one hour away from work in the future – that’s still constrained by what people feel they currently need to do. If we completely opened this up with consistent flexible working, and we had the right digital infrastructure in place, that time could be significantly increased.”

We suspect that while there will be some return to pre-COVID-19 activities, but for the majority the work from home trend will persist. This does not mean the end of the traditional office, but death to the idea that you have to be sat next to your boss every day. The myth that some industries cannot operate from home at all has now been officially debunked. Interestingly enough, some employees would want a hybrid situation to maintain sanity.

26% miss informal socialising with colleagues, while 30% have admitted working from home can be lonely. The wider social lockdown during the coronavirus pandemic does not help the situation, as a traditional social life does not currently exist. It is also worth noting that digital cannot replace some of the benefits of working face-to-face. We are social beings, albeit some are very miserable, so it would be very immature to suggest the extinction of traditional office spaces.

That said, for numerous digital industries, from cloud computing infrastructure to office virtualisation products and telecoms services, this is a very positive trend.

O2 set to scupper next UK 5G auction

UK operator O2 is apparently unhappy with the way Ofcom plans to conduct the next 5G spectrum auction and could launch a legal challenge.

There doesn’t seem to have been any public announcement, but the FT has been chatting to shadowy figures who reckon O2 sent a letter to Ofcom during the consultation period for the auction, which recently ended. The letter effectively warns of the potential of a legal challenge, which would delay the auction for as long as it took for the courts to make a call on it.

The issue seems to be the matter of contiguous spectrum. Ofcom wants to flog lots of little bits of spectrum but O2 would rather just bid for one big bit, on the perfectly reasonable grounds that it would be a lot more useful for providing the kind of fat bandwidth 5G needs to deliver on is speedy promises.

Ofcom gave the FT a fairly passive-aggressive quote: “People and businesses need fast, reliable mobile services more than ever, so we want to auction these airwaves as soon as possible. We’re really disappointed that one operator has threatened to launch a legal dispute that could slow things down for mobile users and the economy.”

In other words O2 is selfish, bordering on treasonous for daring to raise an objection. There’s a simple solution, Ofcom: don’t chop the spectrum up. Then again one of the other operators would presumably moan if that happened, so maybe you can’t win. But it’s Ofcom’s job to sort this sort of thing out, so maybe it should adopt a more conciliatory tone and try to meet O2 in the middle.

O2 set to scupper next UK 5G auction

UK operator O2 is apparently unhappy with the way Ofcom plans to conduct the next 5G spectrum auction and could launch a legal challenge.

There doesn’t seem to have been any public announcement, but the FT has been chatting to shadowy figures who reckon O2 sent a letter to Ofcom during the consultation period for the auction, which recently ended. The letter effectively warns of the potential of a legal challenge, which would delay the auction for as long as it took for the courts to make a call on it.

The issue seems to be the matter of contiguous spectrum. Ofcom wants to flog lots of little bits of spectrum but O2 would rather just bid for one big bit, on the perfectly reasonable grounds that it would be a lot more useful for providing the kind of fat bandwidth 5G needs to deliver on is speedy promises.

Ofcom gave the FT a fairly passive-aggressive quote: “People and businesses need fast, reliable mobile services more than ever, so we want to auction these airwaves as soon as possible. We’re really disappointed that one operator has threatened to launch a legal dispute that could slow things down for mobile users and the economy.”

In other words O2 is selfish, bordering on treasonous for daring to raise an objection. There’s a simple solution, Ofcom: don’t chop the spectrum up. Then again one of the other operators would presumably moan if that happened, so maybe you can’t win. But it’s Ofcom’s job to sort this sort of thing out, so maybe it should adopt a more conciliatory tone and try to meet O2 in the middle.

O2 completes full convergence U-turn amid Virgin Media merger talks

Two years ago, O2 CEO Mark Evans said he was not convinced by the idea of convergence, but as merger talks between O2 and Virgin Media swell, the telco has entered into moonwalking mode.

The negotiations between O2 parent company Telefónica and Virgin Media owner Liberty Global, which have been confirmed by Telefónica’s group corporate communications team, would being together two of the UK’s connectivity heavyweights, significantly shifting competition dynamics in the telecoms market.

“A deal between O2 and Virgin Media has much logic,” said Kester Mann of CCS Insight. “Notably, it would offer each side crucial assets it severely lacks: a mobile network for Virgin and a fixed-line arm for O2. Should it come to fruition, it would transform the UK telecoms industry and a create a giant converged provider to rival BT.”

As Mann highlights above, the merger of the two parties would certainly create a converged telco capable of challenging the market dominance of BT. For one reason or another, the convergence trend was passing these telcos by, but uniting powers is a very interesting move.

At Virgin Media, this is a team which attempted to make waves with bundled service offering, but never really cracked the equation. The TV element was always a bit weak, while not owning its own mobile network was always going to put it a step behind the main players.

Current subscriber numbers for O2 and Virgin Media
Mobile Broadband Content
O2 35,266,217 29,085 *
Virgin Media 3,179,500 5,271,000 3,687,400

Source: Omdia World Information Series

*Too early to tell how successful the partnership with Disney+ to add a content element to O2 bundling has been

At O2, the executive team always made a point that the telco was a mobile connectivity business and it would not get distracted by side-missions into content or broadband. This stubborn position has of course been watered down over the last year or two, and now it appears Telefónica is embracing the convergence trend without prejudice.

To date these are companies who have been successful focusing on core competencies, but the world is of course changing, with the risks to pureplay telcos very noticeable.

“Neither company is immune to the driving need for a converged network and services,” said Paolo Pescatore of PPF Foresight.

“This is the next battle ground in the UK. Virgin Media has been one of the pioneers in this area but has been let down without a mobile network, late to market in 4G and a struggling TV business. Whereas O2’s sole focus on mobile and championing consumers will run out of steam at some point.”

What is of course worth noting is that this is a deal which is far from complete. Firstly, the duo would have to agree on a price, secondly, existing partnerships would have to be unwound, one of the brands would have to be folded into the other and finally, regulatory approval would have to be sought.

Both of these UK telcos are successful components of international corporations. Group level executives would want to ensure there the business benefits suitably financially, while also maintain a high enough stake in the merged business moving forward. This could prove to be a prickly point during the negotiations.

In terms of the existing partnerships, Virgin Media signed a very prominent MVNO agreement with Vodafone in recent months, while O2 offers MVNO services to Sky. These deals would likely have to be examined during the negotiation periods to ensure a merged party does not offer to much assistance to rivals.

Although O2 and Virgin Media are successful brands in their own right, one would have to give way to the other. BT and EE co-exist in the same group function, but the full benefits of convergence cannot be realised with two distinct brands. The teams would have to figure out which brand survives, and which one dies.

Finally, regulation. This has been an irritation for UK telcos in recent years as European authorities seem very dismissive of consolidation demands from the industry. As service overlap between O2 and Virgin Media is minimal, we suspect this will not be too much of an issue, though the likes of BT, Vodafone, Sky and Three will likely kick up a stink as the merged entity is a threatening prospect.

Should all the pieces fall into place, this is a move which could benefit both parties considerably. O2 would gain more access to fibre assets, Virgin Media to mobile infrastructure and both would be able to offer a broader portfolio of services.

Convergence is a business model which offers considerable gains in terms of customer loyalty, operational efficiencies, net promoter score, average revenue per user and momentum in diversification ventures. However, the barriers to entry are high, time consuming and very expensive. This is far from a finished deal, but it would create a much more competitive force and a potential catalyst for disruption in the UK market.

Disney set to capitalise on self-isolation with streaming launch

With millions of parents and children scratching the walls searching for something to do, the launch of Disney+ today (March 24) couldn’t have been timed better.

Having launched in the US to much fanfare, subscriptions shot through the roof. During the earnings call in February, Walt Disney CEO Bob Iger boasted of 26 million sign-ups in the first six weeks to December 31, a rip-roaring debut for the Disney+ streaming assault, and it could be looking at another very successful campaign in Europe.

“In essence, this is a great time to be launching a new sought-after service in Europe,” said industry analyst Paolo Pescatore of PP Foresight. “I am expecting to see subscriptions to the annual service surge in the run up to launch.”

According to Pescatore, the challenge which Walt Disney will face is sustaining growth as the scene has been set for a very successful launch in the European markets. This relies on more than timing, as Disney+ will have to prove it can match up to rivals on user experience, content and performance.

Today, Disney+ will launch in several markets across Europe including the UK, France, Germany, Spain, Ireland and Switzerland, while services are planned in Belgium, Denmark, Finland, Norway and Sweden during mid-2020. That said, Walt Disney already brought the March 24 launch forward by a week and it would be tempted to do so in other markets.

COVID-19 does of course present significant problems to numerous businesses and individuals, but there are opportunities.

Microsoft, Visa, Mastercard, Ocado and Amazon are all companies who are benefiting from the circumstances, and Walt Disney could also. The majority of children will be at home for the foreseeable future, as will parents who will hopefully be attempting to do some work. It might be tempting to spend £5.99 a month to provide some more distractions. Not exactly parenting 101, but needs must occasionally.

It has the brand recognition, the contextual advantage and the right pricing point. This could be the challenge to Netflix which many have promised but failed to deliver on. And perhaps most importantly, it has the partnerships in place.

Pescatore pointed to the strategy of offering exclusive partnerships in individual markets with various telcos as a very effective way of establishing a subscriber base. The promotions being offered are of course an excellent way to gather momentum, though it is also the existing billing relationship which is incredibly valuable. Netflix faced sign-up challenges in the early years of international expansion, but Disney has learned these lessons, signing up local partners from the off.

In France, Disney has inked an agreement with Canal+, Deutsche Telekom will be the exclusive distributor in Germany, while Telefonica has bagged the rights in Spain. The UK is an interesting one, with Sky becoming the official partner from a fixed perspective and O2 for mobile.

“The big question is whether O2 can capitalise on the exclusivity of selling to its customers; the jury is still out,” said Pescatore.

O2 will have to go toe-to-toe with Sky to take full advantage of the partnership with Disney, which presents two problems. Disney has allowed Sky to embed its services in its existing platform, alongside its own content and Netflix, which is an attractive proposition. And secondly, O2 has cultivated its image as a ‘pure-play’ telco, only focusing on mobile; this messaging will have to change.

This is a good start in the turnaround for O2. The Disney partnership will add credibility to the telcos image as a service provider, as opposed to a commoditised, mobile-only telco. This business model is doomed to failure, though adding Disney in is an incremental step in the turnaround.

O2 has the foundations of a multi-service telco thanks to its heritage with Priority Moments though this scheme is a shell of its former self as the telcos placed the wrong bets on the convergence trends. However, it has the customer base, an existing loyalty platform and a new partnership with Disney+ to drive forward to bigger and better things.

How UK operators are helping customers during the COVID-19 outbreak

With telecommunications now acting as the foundation for almost every element of society, how telcos react to the on-going coronavirus outbreak will be critically important.

Although the UK Government has stopped short of measures implemented on the continent, at least at the time of writing, this week has seen a much sharper response to the global pandemic. With movements becoming increasingly limited, the telecommunications networks will become more critical, but what are each of the telcos doing in reaction.

Each of the telcos have made slightly different concessions to customers, though we suspect the plans will looks remarkable similar in a couple of weeks. Each will likely learn from competitors as none will want to look like they are doing less for customers than rivals.

Vodafone

At Group level, CEO Nick Read announced a number of measures to be applied across the European footprint.

Capacity is being increased to deal with the new spikes in internet traffic, Vodafone has said it has seen a 50% increase already, while consumers accessing government-supported healthcare websites and educational resources will be able to do so without worry about data consumption.

In terms of working with the Government, Vodafone has said it will offer anonymised data, where legally permitted, to aid in tracking people’s movements and the spread of COVID-19. Government departments have also been offered the opportunity to deliver targeted text messaging where technically possible.

To assist its own supply chain, Vodafone has said European suppliers will be paid in 15 days, instead of the customary 30 to 60 days.

From a scientific perspective, Vodafone’s DreamLab, a specialist app that uses smartphones’ data processing capacity to help cancer research projects while users are asleep, will receive a £200,000 cash injection from Group to repurpose the app to support research into antiviral properties.

Elsewhere within the Group, Vodafone Italy Foundation has donated €500,000 to support the Buzzi Foundation and the Italian Red Cross, Vodafone Czech Foundation’s emergency app Zachranka is pushing out public health alerts to its 1.3 million users and the remaining business units are all creating initiatives to help young people gain access to their digital learning platforms.

Virgin Media

From March 23rd, Virgin Media’s postpaid customers will be offered unlimited minutes to landlines and other mobile numbers, as well as a 10 GB data boost for the month at no extra cost. For broadband, any data caps on legacy products will be lifted.

In terms of technicians and home visits, Virgin Media has now set-up procedures to protect its own employees. Three days before a scheduled visit to a customer’s home, a text will be sent to ask if anyone living at their property has been asked to self-isolate or has flu-like symptoms. If the answer is yes, the appointment will be re-arranged for two weeks later. 30 minutes prior to the appointment, the technician will phone the customer to ask the same questions.

Although this will come as little comfort to those customers who are in need of a technician, the precautions are completely understandable. In these cases, new customers will be sent a self-install QuickStart pack which will hopefully mean a technician is not needed. Vodafone has not responded to questions to what the plan is should a technician be the only option.

O2/Telefonica UK

Like many other telcos, O2 has said all NHS UK websites will be ‘zero rated’, meaning any data used on these sites won’t count towards a customer’s monthly allowance, while it will make efforts to help those who are not able to pay their monthly bill. Customers who are concerned about the impact coronavirus will have on their monthly income are urged to call 202 to discuss the situation.

Little has been said on what work will be done to ensure the network remains resilient during the period of heightened pressure. This seems odd, as the O2 network shut down in certain areas this week, not related to increased internet traffic or congestion. Some customers might want more reassurances considering the dependence on communications infrastructure over the immediate future.

Elsewhere in the Telefonica Group, the Spanish business unit has said it will add 30 GB of mobile data to all Fusion and Movistar convergence customers for the next two months.

BT/EE/Openreach

In response the potential of increased strain on the network, BT is seemingly not that worried; the following is an extract from the website addressing the immediate challenges:

We have more than enough capacity in our UK broadband network to handle mass-scale homeworking in response to COVID-19. Our network is built to accommodate evening peak network capacity, which is driven by data-heavy things like video streaming and game downloads, for example.

By comparison, data requirements for work-related applications like video calls and daytime email traffic represent a fraction of this. Even if the same heavy data traffic that we see each evening were to run throughout the daytime, there is still enough capacity for work applications to run simultaneously.

This is a confident position to take, though the team has also said it will prioritise emergency calls and systems supporting emergency services such as the NHS, Airwave and the Emergency Services Network (ESN), critical national infrastructure and vulnerable customers, should the network come under intolerable pressure.

The BT Group has not unveiled any new measures for consumer customers yet, though it has put in additional procedures for enterprise customers due to the increased demand for home working.

The enterprise business unit has said it will work with customers to provide short-term upgrades for network capacity, increased virtual private network (VPN) connectivity, additional conferencing and collaboration tools, as well as call routing/forwarding solutions to divert calls to home phones or mobiles.

Three UK

Although Three UK does not seem to have introduced any additional policies in respect to the coronavirus outbreak, it does already have several initiatives which could prove to be quite useful. For example, free home delivery for customers and Three Store Now, which is a live stream to connect customers to in-store assistants for demos or to discuss potential purchases.

Sky

In response to almost all major sporting events being cancelled, Sky has said it will allow customers to ‘pause’ Sky Sports subscriptions without any additional charges. With the Premier League being suspended until early April, England’s cricket tour of Sri Lanka cancelled and PRO14 Rugby postponed for the foreseeable future, there will certainly be a shortage of programming for this element of the premium TV offering.

On the broadband front, although Sky has reiterated it believes its service will be consistent, it does not need to make any announcements regarding data caps, like operators in the US, as these limitations are very rare in the UK market.

BT and O2 fall foul of UK advertising rules

Both BT and O2 have been given a slap on the wrist for airing misleading advertisements in the UK aired across the course of 2019.

While the misleading claims from telcos are starting to be weaned out through new regulations, old habits occasionally creep through. Once again, creative marketers are determined to undermine the trust the consumer places in the telcos by making misleading, unsubstantiated or just inaccurate statements.

All of the telcos are guilty of this nefarious marketing practice, though looking at the number of complaints directed towards the Advertising Standards Authority (ASA), BT, Virgin Media and Vodafone are particularly underhanded.

Starting with BT, the complaints were made by Virgin Media, Vodafone and fourteen members of the public, suggesting the team made misleading claims for the performance and technical capabilities of its wifi products.

Firstly, the accuracy of two statements were called into question; ‘only we guarantee wifi in every room’ and ‘we guarantee a strong signal in every room’, through the deployment of additional wifi discs which could be placed around the home. BT has said it has data from trials with 1078 customers which prove in 96% of cases full coverage could be achieved throughout the home with one additional disc, while the remainder were satisfied with two additional discs. Only one customer was entitled to a £20 discount as coverage could not be given throughout the home with the additional discs.

The ASA conceded that customers were likely to understand that exceptional circumstances could be applied, however the statements were too bold and promised too much, while the science to back up the claims could not be effectively reproduced on scale. The data was also not specific when it came to devices or time of day.

“…we were concerned that there appeared to be no reliable, reproducible methodology whereby each room or the further points from the router were tested, with no data reporting which rooms of the house had been tested,” the ASA statement reads.

The evidence did not show what speeds were being achieved on the devices, so we were unable to verify that the signal was strong enough to provide the minimum speed needed to carry out typical online activities.”

The second complaint was that BT advertising suggested these devices would not need to be plugged in. BT said it was common knowledge that electrical products would have to be plugged in, but in a world of wireless devices, this is simply not true. BT is either trying to pull a fast one or demonstrating incompetence with this response.

In terms of the O2 complaints, these were from Virgin Media and Three, questioning whether the ‘Custom Plans’ communication was accurate and appropriately comparing the O2 to tariffs to those of rivals.

In short, both complained that the adverts were not making it clear what tariffs were being compared, while Three suggested results of an overpayment calculator on O2’s did not reflect the actual costs charged by competitors and Virgin Media pointed out that it and Sky also offered custom plans. This appears to be a simpler case to consider for the ASA, as all telcos have made efforts to ensure customers are not continually charged for devices once the products have been paid for.

‘Custom Plans’ have been a significant element of the O2 advertising assault over the last 12-18 months, and looking at the financial statements, it appears to be a very successful campaign to entice customers away from rivals.

Naturally, O2 tried to defend its position, claiming it was doing everything possible to compare comparative deals and that the consumer could make their own reasonable assumptions, though the ASA clearly disagreed.

According to the ruling, the explanation below the overpayment calculator were not detailed enough, O2 did not do enough to indicate rivals also have unbundled deals and it could not make such direct assertions as it does not know the prices rivals charged for devices. The advertisement was deemed misleading as much of the claims were based on assumptions and inaccurate statements.

Misleading advertising is not something which is going to go away anytime soon, and unfortunately the telcos don’t seem to want to sort their own problems out. The dreaded ‘up to’ metric has been removed from the landscape, but this was only down to regulatory intervention from Ofcom not the telcos wanted to be more honest with their customers.

Unfortunately the ASA has not been empowered to do anything which would genuinely curb the creative advertisers who seem hellbent on misleading the consumer. Telcos seem to pray on the misinformed, quoting numbers which mean little to many and self-validation techniques which few have the time and/or competence to make use of.

The ASA does not have the power to direct financial penalties to those who fall short of expectations, nor does it have the manpower to react in a time appropriate manner. In these examples, the BT advert aired in July 2019, while O2’s hit the screens in January 2019. These adverts are no longer being used as the telco has already realised the rewards. All the ASA can do is issue a generic statement, dictating the adverts can no-longer be used in their current form; this is redundant action.

With little enforcement, the responsibility to be fair and reasonable falls on the advertisers. Unfortunately, these companies have shown little respect to the consumer to communicate with them honestly and accurately. Telcos are as bad, if not worse, than most and there seems to be little ambition to change for the better.

UK’s £1 billion Shared Rural Network is going ahead

The Shared Rural Network is an innovative idea from the UK Government, and now it is ready to roar forward, promising 95% geographical coverage by 2025.

The agreement will be signed by the CEOs of the four UK MNOs today, cementing down a £532 million investment from the telcos which will be bolstered by an additional £500 million from the UK Government. As well as eliminated total ‘not spots’ in the connectivity landscape, the Government has also said the deal will improve connectivity for 280,000 households and 16,000km of roads across the country.

“For too many people in the countryside a bad phone signal is a daily frustration,” said Digital Secretary Oliver Dowden. “So today we’re delivering on the Prime Minister’s 100-day promise to get a £1 billion landmark deal signed with industry to end poor and patchy mobile rural coverage.”

While this is not the first example of a Government pushing through shared infrastructure to improve connectivity coverage, it is a heavy financial commitment. The £1 billion will be used to construct and maintain the network over the foreseeable future and is a win for the bureaucrats. There aren’t many governments around the world who have been this successful in convincing fierce rivals to play nice alongside each other.

That said, there were rumours about a splinter group over the last few weeks. Although the telcos have seemingly been very open-minded about the collaboration, rumours emerged to suggest BT was being an awkward partner.

As the telco with the widest coverage across the UK, BT/EE has the most to lose should telco neutral infrastructure become more widespread. As part of the Shared Rural Network negotiations, the telcos were supposed to be opening-up their own infrastructure to rivals though some sort of compensation would be part of the agreement. BT has been negotiated hard, to such a degree a splinter group between the other three MNOs was suggested, to create a shared network without BT.

With the signatures soon to be on this agreement, it seems the bickering has been negotiated out, though it demonstrates how delicate a procedure this initiative was and is.

Nevertheless, this should be taken as the gold standard for collaboration, not only for intra-industry benefits but also public-private relationships. It is an excellent example of a government understanding the pain-points of an industry and responding with a logical solution which not only benefits the industry but consumers and businesses.

The success of this venture could also have interesting ripple effects in other regions around the world.

Africa is a continent which has always struggled in the digital economy, aside from a few small areas. Low ARPU and increasingly expensive demands for network deployment paint a difficult picture when it comes to commercial feasibility, though telco-neutral networks could be an option. We suspect there will be moneymen across the world watching the UK experiment closely with an eye on replication for profits in developing nations.

Of course, it is not only the developing nations who could benefit from such initiatives. The US, for example, is a vast nation with some very sparsely population regions. The digital divide can be as dramatic here as other less economically fruitful nations, and this could be an interesting solution.

Aside from the financial and societal benefits, this initiative could also create opportunities for more embryonic technologies in the telco world.

“Network sharing is a relatively new concept to operators, and they need the tools to enable them to successfully create infrastructure that doesn’t compromise on performance,” said Steve Papa, CEO at Parallel Wireless.

“OpenRAN (radio access network) is a new approach to building networks, being trialled today by major operator groups, which can make technology from different suppliers work together, and reduces overall complexity and costs. Operators and the government will need to strongly consider new approaches such as OpenRAN, if they want to accelerate their vision of building affordable shared networks, to close the digital divide.”

Although there is excitement about the prospect of OpenRAN as a disruptive force in the industry, few telcos want to drive forward aggressively with the technology being at such an early stage of development. With the Shared Rural Network, some of the risk might be mitigated, however.

The Shared Rural Network is designed to tackle connectivity in some of the more sparsely populated areas. The telcos should view this as an opportunity; is there a better time to trial a technology which could go wrong when there are likely to be very few customers around?

Industry Comments:

Mark Evans, CEO of O2

I’m proud of the work we’ve done to secure the Shared Rural Network agreement, ensuring customers living in rural areas will be able to get the fast and reliable coverage they need and deserve. The collaboration between the industry, government and Ofcom should be seen as a leading example of how to deliver infrastructure investment and we look forward to now rolling the Shared Rural Network out as quickly as possible

Philip Jansen, CEO of BT

High-speed mobile connectivity is a central part of modern life whether you live and work in a city centre or in the countryside. Building out fast and reliable access to 4G across the country is a national mission and we’re playing a leading role, collaborating with government and the other mobile network operators in the UK, to make this happen. The Shared Rural Network is something we can all be proud of

Dave Dyson, CEO of Three

The Shared Rural Network is a game-changer for the country with coverage from each of the four operators expanding to at least 90% of the UK’s geography

Nick Jeffery, CEO of Vodafone UK

A rural postcode should not be a barrier to receiving a decent mobile signal. Together, we have created a programme that is unmatched anywhere in the world. It will mean an end to mobile ‘not spots’ for people in the more remote areas whether they are at home, at work or on the move. We will now get on with the job of delivering it