Mobile Operators Look to Translate FMS Success in Germany to the Rest of Europe
In 2005, Vodafone launched its Zuhause fixed-mobile substitution (FMS) service in Germany, followed in early 2006 by TMobile’s @home. These FMS products are aimed at migrating home voice usage to mobile. The services are based solely on wide-area network technologies coupled with location-based pricing (i.e., the phone is a standard GSM or W-CDMA device but only allows for calls to be made within a specified home zone). As such, they are solely aimed at replacing the home phone. Historically, fellow operator O2 had been successful with its FMS offer Genion, which launched in July 1999. That service similarly offers discounted calling rates within a home zone defined by WAN coverage, although Genion is bundled with a standard mobile subscription to give differential charging based on location (i.e., cheap calls within the specified home zone and a standard mobile tariff outside).
The trend in Germany runs counter to the prevailing mentality among operators in other markets in Europe (and, indeed, in Germany as well), where a more crude version of FMS is emphasized, that is, large bundles of voice minutes, or on fixedmobile convergence (FMC). The former is effective in migrating fixed-line traffic to mobile because incremental usage on top of the monthly fee is typically free. However, doing so makes two major compromises. Firstly, it removes the link between usage and spend, meaning that MNOs gain little revenue benefit from driving increased usage. Secondly, it devalues mobility because it assumes calls within the home and outside will be charged at the same amount. If anything is mobile’s ”killer app,” it’s mobility. Therefore, MNOs should ensure they avoid compromising the premium they charge for that benefit.
While bundling options are too crude, FMC has the opposite problem: it is too clever for its own good. MNOs are prioritizing FMC because the technology is so clever, not because it delivers tangible benefits to subscribers. MNOs can deliver the price benefits of FMC using clever pricing. In that context, FMC brings slightly better in-building coverage—not exactly a dealbreaker for most subscribers. At the same time, the handset range isn’t great, which typically would put off a lot of potential customers. Nevertheless, following BT Mobile’s lead other major telcos in Europe including FT/Orange and Telecom Italia are prioritizing FMC.
In a European market becoming over-obsessed with fixed-mobile convergence (FMC) these mobile-only FMS services are attracting subscribers and improving KPIs, demonstrating a tangible tactic for increasing revenue in a saturated market.
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