“Are you going to get ahead of the curve or are you going to hunker down and protect what you’ve got?”
This was the rhettorical question asked by Kevin Russell, CEO of Three UK, during the launch of the company’s Skype phone. They may not have been in the room at the time, but the target audience was very clear: Three is continuing to challenge rival operators in all its local markets with a willingness to adopt new and radically different business models. Its competitors should take note – Three is becoming a powerful catalyst for change.
The company is capitalising on its position as a new entrant in each market and the willingness of Hutchison Whompoa, its parent organisation, to invest in a long-term game plan. Hutchison has racked up huge capital expenditures around the world to build one of the most modern and high capacity mobile networks available. With far fewer existing customers than most of its competitors, it has limited exposure to the risk of cannibalising its current revenue streams. This is enabling the company to treat the traditional revenue generators of the mobile industry – voice minutes and text messages – as almost zero value commodities.
Particularly in the UK, which is one of the world’s most competitive mobile markets, Three is showing no sign of slowing down the process of competitive attrition which has seen the price of basic communications tumble and the size of voice and text bundles balloon. The company is totally direct about this: at the launch event today I overhead a Three executive explaining to an analyst that mobile voice was over-priced and they see it as their job to help bring it down.
The Skype phone is part of this process. It is not a particularly ground breaking piece of technology, nor is it wholly new (Skype and Three have been working together to enable users of its X-Series products to connect to SKype for some time). However, by focusing on the entirety of the customer experience, Three and Skype have come up with quite a significant innovation for customers: free calling to any Skype user, anywhere in the world through an interface that’s as simple as making ‘normal’ calls. This is combined with a good looking handset, available free on contract or for £49.99 on pre-pay.
The service also adds some interesting additional functionality. Firstly, it is presence-enabled, so users can see the status of all their Skype contacts at a glance (i.e. are they available to talk, are they away from their desk or would they prefer to receive a text message). Also, it is set-up to support instant messaging, providing a free replacement for texting.
The bottom line for customers is that they can now have all the voice and messaging they could ever imagine using for £12 per month on contract or a combined total of £49.99 for the handset and a minimum £10 top-up each month on pre-pay. (In reality Three’s fair usage policy equates to about 4000 minutes of voice and 10,000 instant messages.) To achieve this users will not have to sacrifice any of the mobile functionality or ubiquity of coverage they are accustomed to – they’ll just have to ensure most of their contacts are also on Skype.
The way in which Three has implemented Skype is illustrative of their approach to product deployment. It uses a combination of the voice network and data communication to achieve the overall customer experience. The sign-on process, instant messaging and status updates are all sent as data. Voice calls, however, are routed over the existing voice network via a gateway server. Whenever you make a Skype call, you’re basically placing a standard voice call to a server box somewhere in Three’s network, which is then patching that through to the other Skype user.
There’s been no attempt to get evangelical about the idea of sending voice calls wholly over the IP network or an insistence that the most disruptive way to do this is over Wi-Fi rather than cellular. Three and Skype have simply looked at what customers want and found a way to achieve this.
It was clearly a complex project from an operational point of view, but this complexity is well hidden from the consumer. It involved an considerable expansion of the Three UI team, working with a contract handset manufacturer in China, partnering with Qualcomm for the software platform and developing an edgy marketing campaign that will focus on identifying key consumer influences rather than broadcast slots. The result is a polished consumer product that is very much ready for mainstream usage.
I was particularly impressed with the handset. Manufactured by the Chinese ODM Amoi, it is a 3G device, with a comfortable monobloc form factor and a weight of 86 grams. It is equipped with a 2 megapixel camera, web browser, Bluetooth, 256 Mb MicroSD card, 3D gaming and a 220 x 176 screen. Three Italia has been working with Amoi for some time to develop handsets branded in partnership with an Italian scooter manufacturer for that market. This particular product has a great UI and a logical interaction flow – it is easy to imagine consumers enjoying using it even without the unique selling point of the Skype functionality.
The applications platform is Qualcomm’s BREW and it includes BREW’s integrated application shop. This enables Three to sell additional applications to users from within the BREW environment and also push over-the-air updates to the Skype application. It is worth noting that this is a significant development for Qualcomm, which has struggled to gain any traction for BREW in Europe. Rumour has it QUalcomm dedicated significant resources and financial backing to make this happen.
The Skype service itself is accessed from a dedicated hardware button in the middle of the main joypad. This is a big part of the way in which Three and Skype have tried to simplify the experience. With their existing X-Series collaboration, users had to navigate to the application folder, find the Skype icon and launch it separately. With the new Skype phone, users can choose to be signed in automatically, so as soon as they turn on the handset, they are logged in to Skype and voice calls and instant message chats pop-up as they’re received.
The main interface is the standard Skype list of contacts, with presence icons to indicate their status. The mobile application can also be used to sign-up for a new account, add new friends, initiate chats and control your presence status.
Most importantly, it runs seamlessly in the background and there is virtually no latency when switching in and out of the application. I can’t stress how important this is. So many new innovations on mobile devices fail because they’re just flaky. They suffer from delays, memory shortages, crashes and long latency times. The new Skype phone has none of these characteristics and is a great example of integrated product design.
It is, however, a first step. Both Kevin Russell, CEO of Three UK, and Michael van Swaaij, acting CEO of Skype, acknowledge there are some shortcomings. There is no ability to call non-Skype users through Skype-out (where users buy Skype minutes to use on low cost voice calls outside the Skype user base) or Skype-in (where users have a dedicated Skype phone number that can be called from a standard phone line). There is also a question mark over how the service will be made available to existing Three customers.
Leaving these caveats aside though, Three and Skype have come together to make a courageous statement about listening to customer needs, challenging the status quo in the mobile business and recognising that delivering a great customer experience means getting it right across hardware, software, service, pricing and marketing strategy.
That’s as refreshing for the average mobile customer as it is alarming for the traditionalists who’d rather ‘hunker down’ and hope they can weather the storm.
We’d like to know what you think about the partnership between Skype and Three, particularly in these areas:
– What percentage of global voice minutes will be routed through Skype by 2010?
– Which market segment is this product most likely to appeal to – business customers, students, foreign workers or another group altogether?
– Will the absence of features such as Skype Out and video calling limit adoption by existing Skype users who are accustomed to having these facilities?
Please post your comments to the blog below…