Seeking the business case for FMC

Today is a big day for Orange and arguably Europe regarding the future of fixed mobile convergence (FMC). Orange’s Unik service goes live in France enabling users to make calls on their mobile through their home’s broadband connection or Wi-Fi hotspot.

Orange plans to also launch a Unik-style service in the Netherlands, UK, Spain and Poland. With 60m subscribers in these markets, mobile handset makers should at last be convinced to bring more dual-mode WiFi-GSM handsets to market.

Orange is only the latest of several European operators to deploy such a service. Telecom Italia just made available its much-anticipated Unica UMA-based FMC service, though Total Telecom has already reported how the service came out with little fanfare. Meanwhile, in August, TeliaSonera's launched its Home Free Mobile IP service in Denmark while Deutsche Telekom started its SIP-based T-One service in Germany.

And all follow trailblaser BT with its Fusion service launched over a year ago. BT’s Fusion subscriber numbers, however, are discouraging. “The latest figures we have are 30,000 at the time of BT's Q1 results [issued in July],” said a BT spokesperson. One FMC industry observer believes BT’s service package has too many constraints. “Operators that understand how to bring the service to market should be well into the million-plus subscribers in the first year,” he says.

Yet FMC service launches will only gather pace in the coming year. ”One year ago the FMC Alliance had a dozen members and BT had launched Fusion. Now it has 26 members and eight have announced or started services,” says Ian Cox, an analyst soon to publish an ABI Research report on FMC. “In mid-2007 I expect all 26 members to have services running.”

Cox notes that UMA is the first standard-based way of enabling handsets to connect via broadband and it has a two- to three-year lead over a full IMS solution. But there are pre-IMS trials and services up and running based on SIP dual use handsets from the MobileIGNITE group.

But what concerns him most is the business case for the service: “There is a lot of expense here.” There is the CAPEX for the UMA controller that costs several million dollars apiece, “and you need at least two”. Then is the cost of the handset as well as the challenge to get a potential subscriber to give up their existing handset, likely to be relatively new.

Cox views the operators’ FMC service launches as a defensive strategy. If carriers don’t do anything they will lose revenue, he says, and with such a service they can offer prices that match VoIP charges of a Vonage and Skype. “The business case for FMC is difficult. There are lots of things to consider,” he says.

The industry observer is more upbeat about FMC services though his gaze is towards the US market. T-Mobile is very encouraged by their FMC trials and the consumer feedback, he says. “They are upping their forecasts.

Are operators harming themselves by offering complicated and inflexible converged service packages to users?

See also the poll in The Register, click here