3 goes flat-fee with web 2.0 makeover

NEWS

Mobile operator 3 has announced a major shift in its business model - repositioning itself as a media and web access company, a strategy that has been more common with broadband sellers.

In a scheme called X-Series, 3 has signed up the likes of eBay, Windows Live and Yahoo! as partners and will begin selling their services, such as instant messaging or browsing, on a flat-fee basis, regardless of how many clicks, messages or videos they take up.

Traditionally, mobile operators have shied away from such a model, fearing they will be reduced to transport pipes rather than service companies. Frank Sixt, group finance director at 3 owner Hutchison Whampoa, said: "It's a natural progression in our broadband strategy... It's what our network is designed to do. It's the natural next step for our business.

"We are taking our chances and going naked into the world outside," he added. It's a U-turn for the company, which previously offered users browsing via a 'walled garden', which it finally ditched earlier this year.

Like all the UK operators, 3 has rolled out HSDPA, also known as 3.5G - a technology that affords users speeds of up to 1.8Mbps. It's now hoping to capitalise on such speeds to offer higher bandwidth applications.

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Among the partners 3 has signed up is Skype, which will offer free calls to PCs and mobiles in countries that 3 operates. Skype's co-founder Niklas Zennström said it will roll out premium services such as Skype In and Skype Out, as well as other functionality like Skype Chat, next year.

Zennström said that people have expressed concerns that mobile operators will disrupt their own market by adopting VoIP. "I'm pretty confident... they will get more customers," he said.

John Delaney, principal analyst at Ovum, said adopting the internet business model may prove perilous for 3, but could ultimately pay off.

"Embracing the internet model is risky. In the worst case, 3 could end up having its role reduced simply to providing internet access. But as the UK's smallest operator, and the one with the least legacy stake in the traditional business of mobile telecoms, 3's best hope of out-flanking the competition has always been to embrace disruption. That seems to be the path it has chosen to take here," he wrote in a research note. "One big question, which wasn't answered today: how much will all this cost?"

The X-Series will launch on two devices initially, the Nokia N73 and the Sony Ericsson W950i, and will be available from 1 December in the UK and next year in 3's other territories.