Mobile and fixed network service providers are, by now, used to competition. And, by now, there are some standard competitive responses to new competition, in either the mobile or fixed services realm.
Typically, incumbent service providers are attacked on the pricing front, the reason being that the simplest of all value propositions for a customer is “same product, lower price.” So the easiest marketing position for a challenger to take is “same product, lower price.”
Typically, mobile service providers respond by creating new “value” brands that attempt to protect pricing for the mainstay brands, while allowing the new value brand to compete head to head with lower-cost competitors.
It has been far more common for fixed network service providers to “ignore” the threat, essentially concluding that losing some amount of market share is the preferable tactic to dropping retail prices across the board, or creating some new “value” segment for voice services, for example. In other words, telcos could have rapidly embraced lower-cost VoIP services, but chose not to.
Likewise, fixed network service providers chose to ignore launching their own branded digital subscriber line services until it was abundantly clear that a new product category had been created, and that telcos would lose the market to cable operators if they did not move.
Sometimes it works better than others, though. In France, Orange has found that its initial assumptions about what is required to compete with Illiad’s “Free” service have been inadequate. That seems to be the case right now.
Sosh, sold only online as a way of creating differentiation and controlling sales cost, has boosted account data buckets for its top offer to 3 GBytes, to match Free’s offer, and also creating new price plans that better align with Free’s offers.
The Orange packaging changes come as Sosh adapts to a pricing attack that has been more vigorous than anticipated. The other French mobile leaders, including Bouygues Telecom and SFR, also have had to adjust to Free’s attacks by crafting their own value brands or changing retail packaging.
In this case, the leaders are trying to contain the pricing damage by creating value brands that compete with Free on price, while generally protecting the existing prices of the original brands. The longer term issue is whether that strategy is sustainable over the longer term.
The danger is that, at some point, the pricing expectations change so much that the original brands have to lower prices as well. So far, Orange appears to have been quite surprised by the vigorous Free pricing.
Compared to the initial offers unveiled in September 2011 by Sosh, the latest price drops at Sosh are significant. Sosh initially offered 1 GByte buckets of usage for 39.90 euros. Sosh now offers is now three times more data for less than 37 percent of the original retail pricing.
So far, the pricing umbrella has dropped only for the major mobile carrier “value” brands. The bigger issue is how long it might be before general end user expectations about value and price change enough that even the original brands must respond to the price pressure.
Read More About: Carrier Evolution