What do we do about O2?

Over the last few days the FT has focused on the potential for regulators to stop the disposal of O2 in the UK by Telefonica. They are now saying that the UK must not drop to just three networks but the market requires four.

This is such a simple belief in competition that you have to ask how much time have they invested understanding why two of the four incumbents courted BT when they signalled a wish to return to the mobile sector?  When former state owned players cannot make the numbers work to operate in one of the largest economies in the world then the market has failed!

The current level of competition means that at a consumer level the numbers are marginal.  The Infrastructure requirements to roll out 4G makes the market subprime. Rather than opt out of regulation Ofcom should seek to acknowledge that the solutions required needs them to take decisive action to improve the cost base whilst raising the quality of the networks.

If the Infrastructure can be improved and better wholesale terms can be achieved then at a retail level we might se more competition.  Over the past 15 years we have seen a decline in the number of retailers offering consumers mobiles as Independent players have gone to the wall and Networks have closed a number of there stores.  The exit of Tesco from the MVNO space can be seen as a warning flag that the consumer might have won on price but has lost on quality.

I would allow Three to buy O2 on the basis that Telefonica is current in a debt reduction cycle rather than investment mode, thus all the while it holds the UK asset it under invests meaning that it falls behind it competitors.  Without Three buying O2 the business would face a slow death.  Once we have consolidated the market to three players we require Ofcom to invest in staff with a deep knowledge of Mobile who are prepared to take action before breakfast, before lunch and after dinner to borrow a phrase from Michael Heseltine. At the dawn of Mobile thirty years ago we had a duopoly that was regulated in such a way that consumers had choice and a number of people became MultiMillionaires serving the consumer.

Rememberance of things past

So following my lunch this week I set about trying to find the 2001 Keynote by Douglas Adams. I start off by using Google to seek out the GSMNewsReel video I remember watching on my return from Cannes six years ago - and get no joy. However I do get the opportunity to read a number of posts that talk about what the Mobile world will look like once we go 3G; also I get to see that Douglas Adams not only invented Babblefish but he could also have claimed to be a key driver in the development of User Generated Content and Wiki's thanks to H2G2.

The I use Ask and it does better than Google in that it locates a transcript of Douglas Adams address and a review from the GSMNewsReel of all those that spoke in 2001. Still no joy finding the video, have asked if a contact at the GSMA can find the footage in their archieve and send me a copy, if get lucky I will post it up so that you can all see what he is said at the time.

Looking back at the past I got a number of snipets which with hindsight can be seen with a different light. Branson spoke before Adams at Cannes and he "put forward a convincing argument in favour of MVNOs, explaining that they can enhance revenue streams, they're cheap to establish and that they offer solid risk diversification. In the never-ending search for the winning data strategy, an extra operator on your satisfactory discovery, he said. He called forth examples from the motor industry and the music industry where the virtual model has proven success. His words of advice in this area were clear. Shareholder buy-in from the host, decent distribution, a general rather than niche approach to the market and access to the meaningful content are all pivotal elements of success, he said."

I wonder if Virgin Media are following the same Strategy today as part of the Quad Play we see today, heck I wonder if they have a strategy that allows them to compete with Tesco Mobile. As an MVNO we see in Tesco an excellent example of Consumer choice, some 1.8M subscribers have opted to get their mobile with their milk. Not for them some fast moving world of Mobile Data, just basic voice and text thanks along side a value handset - all of which ties in with what Douglas Adams told those in Cannes back in 2001.