Wednesday, February 06, 2008

Fusion fizzles

[UPDATE] As they say, the rumors of Fusion's demise were exaggerated, prompting a story titled "BT Forced to Defend Fusion" from Total Telcoms. I do believe that BT has some challenges related to Fusion, but I'm glad BT continues to work through them.

Two years ago I wrote a post called “Why Fusion hasn’t fused”.

Here we are, two years on, and it looks like BT is coming to a similar conclusion. As reported in the Daily Mail, BT will stop marketing Fusion to consumers.

Many will want to jump to the conclusion that this signals the demise of dual-mode handset (DMH) services in general. Absolutely not, DMH is on fire and continues to expand. I happen to think that this action simply confirms what we’ve all known, that DMH services which focus on the fixed network are doomed from the start.

Let me explain.

Fundamentally DMH is about fixed-to-mobile substitution (FMS). But as a fixed operator, what you really want is MFS, or to pull minutes *off* the mobile network and on to the fixed network. It's fighting the tide.

In the case of BT, any voice minute that moved onto the mobile network cost them more because it was carried through their Vodafone MVNO rather than their own discounted fixed line network.

The value proposition and the service objectives of DMH are completely mis-aligned for fixed operators. Another reason why VCC, primarily for fixed operators, will never get off the ground.

After that, there are several reasons why fixed operators in general will always have a very tough time with DMH:

- No retail presence. Who buys a phone today without first picking it up and touching it (I guess about 45,000 people in the UK!). Last year I think BT did develop a retail push with a UK outfit, but if you're not 'retail savvy' already, the mobile market is extremely competitive place to learn.

- Because they have 0% mobile market share, none of the handset manufacturers would do any custom/special work for them. Again a problem for all fixed operators (I'm thinking cable companies now, not so much a problem for an integrated operator like AT&T). Therefore, they never got leading edge handsets. Orange can push Nokia or Samsung to develop DMH product, but BT, no way.

- BT is not considered a 'mobile' company. But DMH is a mobile phone service. So they had a giant market perception problem to work through, trying to convince consumers that given the choice of getting mobile service from Vodafone, T-Mobile, Orange, O2 and BT, that good 'ole BT was the right choice. This is going against the grain of years of existing market perception, it's a billion $$ public relations campaign, not a couple of bill inserts and some print advertising.

I think these are all the same reasons why DT's T-One flopped. I think this is why we don't hear a word about Embarq's service in the US.

Notice none of the problems are attributed to technology. I think we all know UMA works.

I think any DMH service which caters to the fixed side of the house is doomed from the start. This is about FMS.

Unfortunate, but not surprising.

No comments: