Connected Research

Union policy research in the 21st century

Posts Tagged ‘Vodafone

OK, on with the show

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Though before we do, some interesting reaction to the overnight events picked up via TIGMOO by Anna Rose at Unison Active, as well as by Tom over at labour and capital.

In what is otherwise, given its timing, likely to be one of my more immediately unread posts in the one year (next week!) that this blog has been functioning, I did find this week that there were some interesting things happening in the world of regulatory broadband policy, both in Australia and in Italy, and in the world of net neutrality, in the US, which reflect some aspects of why the blog exists.

In Australia, the centre-left government has published a A$25m (£15m) report commissioned by McKinsey and KPMG that says, essentially, even if Telstra, the former incumbent, doesn’t decide to throw in its lot with the government’s plans for an initially publicly-owned national broadband network company, NBN Co can still go ahead on its own as a viable commercial entity (see here [registration required; limited viewing time] and, when that runs out, here for the basic news story].

Such a conclusion is really no great surprise, and perhaps its most important function is the practical assistance it will provide the government in its continuing negotiations with Telstra on the folding of its assets into NBN Co (although whether that’s a suitable use of public money is a different matter) – both that and the re-starting of structural separation discussions in the Australian parliament, scheduled for next week. The government’s intention to create a ‘Telstra 2’, having not so long ago sold the last one off to a lot of individual (‘mum and dad’) shareholders, with a long-term intent to do the same thing with NBN Co, is the subject of a lively debate, as the comments in The Australian show.

Meanwhile, a proposal for a super-fast broadband network in Italy was made by Vodafone, Wind and Fastweb (the latter two being existing Italian network operators) in Milan today. La Repubblica originally broke the story on Tuesday (you’ll need to speak Italian or else have a good translator – or else, if you’re quick, see either here and/or here for an English language version). The consortium of three want to spend €2.5bn on building a 100Mbps fibre network in Italy over the next five years – but che sorpresa, they want to build it only in the 15 major towns and cities. At the launch, it was also made clear that, over 5-10 years, the network could be extended in an €8.5bn investment to all towns with more than 20,000 inhabitants (representing around half the Italian population). Former incumbent Telecom Italia, which was invited into the project and which has always welcomed the notion of joint partnerships (provided that it keeps its finger on its existing network), has its own €7bn investment plans over three years but deployment so far has been somewhat relaxed.

Cynicism aside, any investment in high-speed broadband is welcome – but it does need to be part of a nationally- planned advance in fibre installation, and one that extends high speed broadband provision on an equitable basis right throughout the country: to rich and to poor; to urban and to rural; to young and to old. Where the market is allowed to dictate investment in nationally-important infrastructure, the end result can only be inequity, exclusion and a widening of the social and digital divides as a result of the inevitable cherry picking that will occur. Leaving the poor old incumbent to pick up the pieces for the rest is hardly reflective of a level playing field, while the concept of social justice – as well as that of evenly-spread economic development – deserves better treatment.

An interesting parallel between Italy and Australia is also that Agcom, the Italian regulator, has been looking at the creation of a separate, new company responsible for the country’s next generation broadband infrastructure.

Finally, in the US the Federal Communications Commission has made progress with its response to last month’s legal ruling against its sanctioning of Comcast for traffic management policies. I blogged about this here. The danger of the ruling was that an inability of the FCC to take action in this way, because broadband internet access is classed under US regulation law not as a telecoms service but as an information service (and thus subject to a different, lighter regulatory regime), left it unable to guarantee net neutrality – i.e. the freedom of internet users not to be subject to the ‘management’ of their surfing by their ISP. This impasse in turn seemed to threaten the FCC’s ambitious National Broadband Plan.

What the FCC has done, according to the BBC – a bit of a lighter read than the FCC’s own statement – is to develop a ‘third way’ (just like 1997 all over again!) which classifies the ‘transmission component’ of broadband access as a telecommunications service while taking a principled non-intervention approach to much of the rest of broadband access. The Chair of the FCC was at pains to point to the ‘narrow and tailored… cautious’ approach, and the need to overcome the difficulties posed to the National Broadband Plan by the legal decision, but even this limited compromise appears to have left the two Republicans on the FCC behind. Here, the Chair’s view is likely to be supported by the two Democrats, indicating it will thus prevail, but ISPs themselves already appear (according to the BBC report) rather unhappy.

These three highly separate, but highly linked, stories highlight the problems of regulating broadband access both in an environment of seeking control of the technology so that it serves the interest of the people, and in free market situations in which competition is supposed to prevail but which doesn’t necessarily always support the interests of the consumer, both taking place in the context of a neo-liberal dominated world view. You might wonder – just as bond markets opening in the middle of election night, as results are starting to come in, and subsequently with its intermittent results, was thought to be newsworthy as part of the BBC’s online internet coverage – just how we’ve got into this mess.

A lack of strategic thinking is one reason – and it’s clear that only strategic thinking can get us out of it.


Prospect statement on Vodafone job cuts

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Prospect has reacted angrily to yesterday’s announcement of job cuts in Vodafone [registration required; limited viewing time; alternative source].

Steve Thomas, Prospect’s National Officer for Vodafone, has contacted the company to express serious concerns over the cuts themselves as well as the complete lack of consultation, Prospect having learned of the cuts via the media. We are also disturbed about reports that individuals are being asked to leave the business without notice.

You can read the full statement here.

Vodafone needs to learn that, whatever co-operation Prospect members are prepared to provide over resourcing decisions, the quid pro quo for that is decent treatment and respect for the contribution they have made during their lives in the company. Where that doesn’t occur, the price of that amongst those left behind is lower morale, lower productivity and lesser co-operation.

Written by Calvin

10/03/2010 at 11:30 am

Mobile market share – the state of competition

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This continues to be one of the most enduring posts on this blog, but it is now a little out of date. You can find the full original post below, but you might like to know that I have also updated the figures in a slightly different context than the T-Mobile/Orange JV, and re-located them in a couple of posts on a separate blog which you can find at:

or (slightly earlier) here:



And the original post commences here:

Yesterday’s press release by France Telecom and Deutsche Telekom about the approval for the merger of their UK subsidiaries highlighted an interesting snippet of information concerning the JV: that it would serve 29.5m customers.

On the presumption that this is the existing customer base of the merged JV, how does this relate to market share? We have been repeatedly told that the market share of Orange and T-Mobile in the UK is 37% – thus indicating a total mobile customer base in the UK of just less than 80 million. This is, more or less, in touch with Ofcom’s estimate that there are 126.1 active mobile connections per 100 population (Figure 4.1), given a UK population of 61m. That would indicate about 77.4m mobile subscriptions (and, indeed, a market share for T-Orange of about 38%).

The most recent Ofcom quarterly figures, published last month for Q3 2009, are, however, likely to provide a more accurate and reliable figure. These show a total subscriber base for the big 4 (i.e. excluding 3 UK) of 69.2m (Mobile telecoms market data, Table 4). We’d probably now need to add about 5.2m for 3 UK, on the basis of it at least matching its 2008 growth rate in 2009 (Figure 4.42). These figures exclude the customers of mobile virtual network operators (such as Tesco Mobile, which uses O2) for Vodafone, O2 and Orange (but presumably, therefore, they include those for Virgin Mobile in the T-Mobile stats). According to the most recent quarterly accounts for Virgin Media (Customer Segment>mobile), Virgin Mobile has around 3.232m customers. Taking these off the Ofcom numbers, to give a comparable figure for all the operators based on direct subscriptions rather than those encompassing virtual operators, gives the following indicative market shares, by number of subscribers:

Interestingly, the number of T-Mobile and Orange customers on this basis totals exactly the figure in the companies’ press release – 29.5m. Yet, the market share on this basis is not 37% – but 42%. Including Virgin Mobile subscribers in the T-Orange total, and adding a Tesco Mobile subscriber base of 2m (Retailing Services>Tesco telecoms), the market share of those on the T-Orange network climbs a little, to about 43%. This excludes virtual operators on the Orange and the Vodafone networks, but these are likely to have only a small market share (and, in Orange’s case, would further concentrate the numbers). Not really within an acceptable margin of error, that.

Now that the merger has been approved, these are figures that will need to be closely monitored in order to examine the effectiveness of the ‘remedies’ that address the competition aspects of the JV. Nevertheless, there would appear to be little urgency for this – the merger may proceed ‘by the spring’, but the auction of additional spectrum in the 1800MHz band which has been made a condition of approval for the JV need not take place until the end of 2011 while the spectrum itself does not have to be cleared for use by the winners in that process until 2013 in one case and 2015 in the other. In order to show a bit of good faith, given the fast track approval the JV has received, the parent companies might want to look at facilitating an earlier release than that.

Written by Calvin

02/03/2010 at 4:09 pm

T-Orange in the pink – but unresolved issues remain

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The European Commission has today approved the joint venture between T-Mobile and Orange in the UK. The outcome had been heavily trailed in press speculation last weekend, and the concessions appear to be in line with what the papers were then discussing, i.e:

– specific protection for 3 UK regarding its own network joint venture with T-Mobile

– T-Mobile and Orange to give up 25% of their jointly held spectrum in the 1800 MHz band

Today was the last day, according to the European Commission procedure, for the decision to be made and, as a result, the Office of Fair Trading has also today withdrawn its request that the merger be referred to it.

The questions that remain appear to me to be as follows:

1. The Commission decision talks of the arrangements with 3 UK being necessary ‘to ensure that there remain sufficient competitors in the market’. If four is now ‘enough’, why has competition policy been geared towards establishing and maintaining a fifth operator in the market – not least in the light of the influence this requirement for an additional market entrant had on the auction for 3G spectrum in 2000 (and on the subsequent fall-out)? And what should happen in the light of four operators now being a ‘sufficient’ number were Vodafone to decide it wants to merge with 3 UK, as the two smallest operators in the UK market, as happened in Australia last June? [Edit 5 March: One analyst has already commented that such a deal would, in the wake of the T-Orange JV, be ‘competitively appropriate‘.]

2. According to the press speculation, 3 UK signed a deal with T-Mobile and Orange giving it access to 3,000 more sites to support its own network expansion. Part of the OFT’s fears of the impact of the merger on 3 were that it could end up facing severe jeopardy if T-Mobile and Orange were to switch customers on to the Orange network, running down maintenance on the T-Mobile network, allowing it to atrophy and thus undermining the critical quality component (para.67). With the greatest of respect to 3’s negotiators (and of course to commercial confidence), how do we know that the additional 3,000 T-Mobile and Orange sites to which it has just secured access will continue to be ‘viable’ ones into the future (i.e. that the OFT’s fears won’t end up being realised)?

3. The European Commission correctly points out that it is contiguous spectrum across frequency bands which offers the key to early implementation of LTE (so-called 4G) services. With it, T-Orange is in a clearly advantageous – a market leading, in fact – position. The concession of the 15MHz of spectrum that T-Orange has offered must, therefore, be done in such a way as to ensure that, afterwards, there is no such contiguous position (note here that the JV appears not to have had to go further than its initial offer, according to the press speculation). This could easily be achieved were the 15MHz of spectrum conceded to be that of one of the operators alone rather than from them both. It is clearly imaginable that point (2) above is also very much tied in with this.

4. Both the EC and the OFT press release contain clearly jointly-worded statements on the concessions doing enough to satisfy on the impact of the JV on competition. Even a cursory glance at the OFT’s request indicates that this was not the only (though of course it was the primary) concern: issues of subsidiarity also featured, for example. Other question marks around the approach to regulatory decision-making highlighted previously on these pages are also important.

And, finally – something may have been lost in the translation, but the competition issues are not yet ‘resolved’, in the words of Competition Commissioner Almunia: please note that crucial decisions and actions have to be taken before that can be proclaimed.

Written by Calvin

01/03/2010 at 4:21 pm

Spectrum issues and the T-Orange JV

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The Financial Times reported this week that O2 and 3 have told the European Commission that it is the UK authorities that are best placed to review the T-Orange joint venture, while Vodafone has also publicly commented on its view that the UK authorities are keen to review the spectrum aspects of the merger, an issue to which O2 also points.

These pages have declared their view on these issues already – it should be investigated in the UK, as the joint venture affects only the UK market and there are thus strong subsidiarity-related reasons why the EU should choose not to get involved – but the most interesting part of the FT‘s story is the bit relating to spectrum allocations.

Last summer’s report by the Independent Spectrum Broker included a useful chart documenting existing spectrum allocations, which I have reproduced below:

Vodafone and O2, as the two earliest operators from the mid 1980s, have some frequencies at the 1800 MHz level but frequencies here are otherwise dominated by T-Mobile and Orange, which appeared on the scene in the early 1990s. Vodafone and O2 have the only spectrum awarded at the 900MHz level while frequencies at 2.1 Ghz are the ones allocated for 3G services, which is where 3 comes in – it has none of the lower frequencies allocated earlier.

The key to understanding spectrum issues is that lower frequencies (like 900 Mhz) lend themselves well to quick network roll out because they cover longer distances, and thus requires less infrastructure (base stations and masts), and because their signals penetrate buildings better than those at higher frequencies (like 1800 MHz), which require more infrastructure and which are better suited to providing capacity in denser populated, urban areas. The less good penetration of signals at higher frequencies is the reason why 3G services are, in principal, suitable for mobile services outdoors and are much less suited to fixed installations inside buildings.

Ensuring a more even allocation of frequencies was the aim of Kip Meek, the Independent Spectrum Broker, on the grounds that allowing operators to trade frequencies between them would allow them all to choose the combination of spectrum that best suited their needs and which, as a result, would improve services (and access speeds). By ending the legal challenges by operators over policy on 2.6GHz frequencies (best suited for so-called 4G services), it would allow Ofcom to catch up with European counterparts on allocation.

The dominance of the T-Orange JV at the 1800 MHz level, and thus its ability to dictate the terms of spectrum trading between the operators, is the reason why the argument has been raised that the JV should concede 1800 MHz spectrum. Without necessarily going too far down that road, it is easy to see why the JV would blow apart the work done by the Independent Spectrum Broker in reaching his conclusions on spectrum trading. It thus becomes easier to see why it is the UK authorities that need to investigate this proposed JV: these are issues that properly concern the UK, not the EU.

Written by Calvin

08/01/2010 at 12:44 pm

Vodafone seeks to close DB scheme to future service

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Vodafone announced yesterday that it is looking at closing its final salary pension scheme to future accruals from April 2010.

Connect is disappointed that Vodafone has made this decision, which will inevitably lead to members having to contribute more for and receive less in their pension. Nevertheless, the company has signalled its early intention to receive representations from the union on behalf of our members and we will be making strong representations to it.

We do welcome the company’s commitment to improve the standard of the defined contribution scheme.  It is our aim that the company will make improvements to this scheme sufficient to match the benefits that those who currently pay into the final salary scheme would have expected to receive. We will be putting constructive, detailed alternative proposals to the company to this effect as we strive to get the best possible deal for members. We have a wealth of experience of negotiating successfully with employers to deliver solutions in this respect.

Where Connect is recognised, our experience shows that we can have a positive, beneficial influence on company decisions of this type. The message is also clear that there is no better time to be in the union so, if you’re not, join us!

Connect will be holding a meeting for old and new members in Vodafone this coming Thursday.

Written by Calvin

25/11/2009 at 3:03 pm

T-Orange in the pink?

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Orange is reported to have claimed [subscription required; limited viewing time] yesterday at the FT World Telecoms conference taking place in London that it and T-Mobile would not be required to make concessions to the regulator to get the go-ahead for their joint venture, dubbed T-Orange.

Well, it would, wouldn’t it? And continuing to claim that the venture would be ‘good for the market, good for the consumer, good for the entire industry’ doesn’t make it any the more true (though, depending on definitions, I can easily see a situation in which a reduction in competition might be held by those responsible to be ‘good for the industry’).

The context of the claim is the issue of making any concessions on spectrum – and here the company may have a point: T-Mobile and Orange have spectrum at the 1800MHz frequency, whereas the more prized 900MHz frequency, because it lends itelf better to penetration inside urban buildings, is – currrently – the preserve of Vodafone and O2. This might indeed require T-Mobile and Orange to invest more for the future (a crucial argument in the Vodafone and 3 merger in Australia, interestingly enough, which I blogged about here), although the proposals of the Independent Spectrum Broker (see also the Digital Britain final report, at p. 72) to ‘rebalance’ operators’ holdings will change this. So, over time, investment by T-Mobile and Orange will be lower than it is currently stating.

But, of course, spectrum concessions are not the only regulatory tool at the disposal of the regulator and I remain unconvinced that the creation by merger of what would be the industry’s dominant organisation, in terms of numbers of consumers, is in the interests of consumers. That it can be argued that it is so is an indictment of a regulatory policy which has been focused – not just in the UK, and not just in the telecoms industry – on the sole purpose of encouraging competition as a means of driving prices down. Short-term, low prices are clearly good for the consumer but, long-term, when they are apparently too low to meet the investment needs of the operators (or – outside telecoms – when they allow dominance of the entire industry, including of the links in the chain by Tesco, for example), they are bad. It is of course that situation which had led T-Mobile and Orange into this merry dance.

And it won’t stop there. The same report claims that Vodafone, which would become the smallest UK operator (excluding 3) were the merger to be allowed to proceed, said at the same event that it is ‘unphased’ by the proposal and that competition in the UK would remain ‘extremely robust’. Well, it would, wouldn’t it, given that this would then replicate the situation which allowed Vodafone and 3 to merge in Australia. No doubt Vodafone does indeed believe in ‘consolidation in some markets’ since it is perfectly possible to imagine that it will lead to a situation where the UK has just three mobile operators rather than the five that currently exist. And wither competition policy then?

But, more than that, we do need to consider how regulatory policy has led to a situation which appears to facilitate a reduction in the number of competitors in the market place. Aside of what the regulators may otherwise ask T-Mobile and Orange to do as a condition of the venture being allowed to proceed, we do need to have the debate as to how we have got into this mess.

Written by Calvin

20/11/2009 at 2:08 pm