Vodafone today announced it would launch a service in Germany providing 1000 minutes of call time for a flat-rate of EUR 20 per month. The catch? The calls must be made within the subscriber’s home zone – an area about 2 Km in diameter, centred on the address where their handset is registered. O2 Germany already operates a similar service – Genion – with some success.

According to this article on the announcement, Vodafone plans to extend the service to other markets as part of a pre-emptive move against wireless VoIP offerings and Fixed Mobile Convergence packages from other service providers.

The logic is simple: Vodafone wants to ensure users rely on their mobile handset for all their calls and are not tempted to switch back to the ‘home phone’ for longer conversations. With the great efficiency of W-CDMA networks, voice capacity is less expensive, and Vodafone believes it can afford to move towards a commoditisation of voice if it ensures subscriber loyalty, a quicker 3G migration path and eventual adoption of value-added services. Hutchison 3G has already been executing this strategy, offering the most competitive voice tariffs in an attempt to add users to its network and thereby increase data usage by virtue of network effects.

This raises an interesting question about location as a context for the user experience. Of course, location has already been widely identified as a key factor in determining the value of advanced services: experts in this area refer to a 3D dimensional graph of location, mission and time when determining how much a user is willing to pay for a particular service. For instance, the value of a map increases enormously if a user is lost (location), trying to get to a meeting (mission) and 15 minutes late for a scheduled appointment (time).

However, there is a different argument for voice. Pricing calls on the basis of location is not only irrelevant but also confusing for the user and unsustainable as a long-term strategy. It could work in one of two ways: as a user, you are either going to continue to making all the calls you’ve always made, plus additional calls when you’re at home to take advantage of the flat rate or, alternatively, you will reduce your normal calling activity when outside the ‘home zone’ because you are conscious that you are being charged more than you would be at home.

There’s no sure way of determining which will be the more pervasive trend. Much will depend on the psychology of the individual user.

In terms of the overall experience, however, customer expectations are increasingly slanted towards the idea that communications should be location-independent – email, IM, VoIP are all based on this concept. Rather than seeking to compete using the same rule book as the fixed carriers, wireless operator’s long term interests will be better served by focusing on a customer message which highlights their ubiquitous mobility and encourages subscribers to forget location altogether. Location is out-dated as a determining factor in P2P communications – users should be free to communicate wherever, whenever and however, without concerning themselves with location-based pricing.