Analysts question the Orange way
Published: 01 Jun 2006 11:30 BST
Orange's decision to offer bundled mobile, home line, broadband and IP-based TV could lead to marketing and customer service difficulties, according to industry experts.
"It's generally advised that combatants should fight a war on a single front," Jupiter Research analyst Ian Fogg told ZDNet UK following Orange's announcements on Wednesday. "But Orange is fighting on at least three fronts, maybe four. It's extremely challenging for a company like Orange to make sure they have a great product and customer service in all these areas. If they're not best of breed they're potentially at a disadvantage."
"If a customer has more than one product from a company, what happens if they become dissatisfied with one element of that bundle? If frustrated enough, they might leave all the elements."
Mark Newman, chief research officer at Informa Telecoms & Media, agreed. "It's a bit of an all-or-nothing approach. The stakes are so high you either end up having a £100 customer or nothing," Newman warned.
Fogg also suggested that the raft of products might prove tricky to sell, saying such bundles can be hard to market effectively "because they have so many strings to their bow".
"What you normally end up doing is marketing one element and then upselling the others," he said.
BT gave a blunt reaction to Orange's announcements, with chief operating officer John Petter pointing to his company's upcoming free Internet security packages, BT Fusion and broadband TV services as "value-for-money" alternatives to Orange's offerings.
"We expect these services to mean more to customers than a re-branded company that has some bundled special offers which require you to spend at least £30 a month on other services," Petter said in a statement on Wednesday.
But Chris Williams, broadband product manager at independent comparison and switching service uSwitch.com, said Orange's package illustrated the direction in which the telecoms industry is developing.
"[Carphone Warehouse's] TalkTalk 'free broadband' bundle, announced in April, signalled the introduction of a new generation of telecoms packages, and the resulting developments, including this latest offer from Orange, have cemented the direction we expect the telecoms market to take," he said in a statement on Wednesday.
However, the dual-mode handsets — supporting Wi-Fi and GSM — that are integral to Orange's fixed-mobile substitution (FMS) strategy could themselves prove an obstacle.
"I think the dual-mode approach is a bit of twinkle in the operators' eyes. It's going to be two to four years before they improve the battery consumption of these phones," Newman said, adding: "There's an awful lot of positioning and posturing taking place now."
In comparison, Vodafone's take on FMS, which relies on cell ID location rather than being picked up by the customer's home Wi-Fi network, had advantages and disadvantages, according to Fogg.
"The advantage to the Vodafone solution is it's not dependent on the type of handset you have, but the disadvantage is it's the area around your home. If it's a busy urban area it could affect their revenues more," he said.
Doubts were also raised over France Telecom's decision to rebrand its popular Equant business, which provides VPN services, under the Orange banner. Ovum's head of telecoms strategy, Mike Cansfield, suggested that corporate customers may be less keen on the change than smaller businesses.
"Equant is a very well-established and respected brand in this segment," he said on Wednesday. "Stability is highly prized in this segment, not only because communications is the lifeblood of corporates, but also they all remember the near industry meltdown of a few years ago. So changing brands is risky. Time will tell if the future is bright for Orange in this segment."
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