3 embraces the Internet and the connected home

John Delaney, Principal Analyst

On 16 November 2006, Hutchison Whampoa Limited announced the global launch of the X-Series from 3. According to Hutchison, the X-Series will extend several of the core applications and uses of the broadband Internet to the mobile handset, with a flat-rate pricing model.

Customers will be able to make unlimited calls from their mobile using Skype, watch their home television via their mobile using Sling, access their home PC remotely using Orb, and have access to Internet and messaging services from Yahoo!, Windows Live Messenger and Google.

The X-Series will be available in the UK from 1 December 2006 and in 3's other markets around the world in early 2007.

Mobile operators in Western Europe have mostly been trying to avoid having their data business follow the Internet business model. By that, we mean free services, no usage-related charges and no automatic visibility of the access-provider brand. 3 now seems to be embracing the Internet model - at least to the extent that today's technology can support it.

Everything about the Internet that worries the mobile operators is here. Flat-rate data tariffs remove the link between service usage and end-user revenues. VoIP undermines mobile voice revenues. Instant messaging offers text messaging at a fraction of the price of SMS. The big portal brands are far more powerfully associated with Internet services than the operators' brands. Open Internet access means you never have to see the operator's portal again, if you don't want to.

True, the idea of 'the Internet on your mobile' has been done before. T-Mobile's Web 'n' Walk is a mobile Internet service that encompasses some big brands (Google, eBay), and it also has a flat-rate data tariff (available only to customers with a voice contract). But by limiting everything to the browser, T-Mobile avoids having people use the worrying services like Skype and MSN Messenger. 3's package, however, does have some caveats in this regard: yes, you can make free Skype calls, but only to PCs or to phones that are also running Skype.

The X-Series also takes a stride forward in the use of the mobile phone as an extension of the connected home. Many summarise the future of media consumption in the phrase 'everything, anywhere'. While the X-Series doesn't deliver that ideal, its ability to access home TV services and content stored on PCs looks like going further in that direction than anything else we've seen to date from mobile operators in Europe.

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.

One big question, which wasn't answered today: how much will all this cost? No pricing information was given. That's what will ultimately determine whether X-Series becomes a mass-market service or remains confined to the category of 'expensive toys for rich boys'.

John Delaney is a principal analyst in Ovum's Consumer Group. The team analyses the consumer market for data and multimedia services on mobile networks and the Internet, including messaging, information and entertainment.