In January, the French ISP Free launched France's fourth mobile phone network and an offering called Free Mobile -- hailed by many as a revolutionary wireless service, offering prices that other operators will not likely be able to beat.
Many companies already compete in the French mobile market. Three network operators -- Orange France , SFR , and Bouygues Telecom -- offer 2G and 3G services, and more than 30 mobile virtual network operators piggyback on the three physical networks.
But according to Xavier Niel, founder of Iliad, Free’s parent company, this was not enough to ensure fair prices for French consumers. People in France are fed up with “being ripped off with the highest prices in Europe, and things should change,” he says. “Today is the day of your freedom and the end of the yoke in which you have been locked up these last years.”
Since 2008, Free has been promising to halve the price of mobile communications -- a threat that traditional operators did not take seriously until now.
Its basic mobile phone service includes 60 minutes of outbound calls and 60 outbound text messages -- all free for the ISP's 4.8 million broadband customers. Everyone else pays €2 ($2.60) per month. Additional outbound minutes will cost €0.05 ($0.06), and additional text messages cost €0.01 ($0.01). Incoming calls and text messages are free, as they are on most mobile networks outside the US, Canada, and China.
Other offers includes an “unlimited” plan for €20 ($26) per month (€16 or $21 for broadband customers) that includes unlimited text messages and calls to fixed-line numbers in Europe and the US. 3G Internet use will be throttled above 3GB of data per month -- a fairly typical limitation that most customers should be content with.
Unlike most of the other French mobile operators, Free won’t charge its customers to end their contract at any time, as long as they pay for the phone.
The major French telecom operators have started planning strategies to compete with Free’s unlimited voice, SMS, and data plans. But analysts say none of those carriers will likely come close to matching the deep discounts Free is offering on France’s normally pricey mobile services -- and they may never be able to do so.
Free has many advantages over its competitors. As Om Malik detailed last month on GigaOM, each of Free’s more than 5 million Internet broadband subscribers has a set-top box that includes a broadband modem and a WiFi router that automatically connects the user to a WiFi cloud with more than 5 million users -- a cheaper alternative to 3G.
Those 5 million access points will make the difference for Free. Its biggest competitor, France Telecom, has only 30,000 access points.
Even though Free has not published an official figure, it has been reported that the company has been gaining 100,000 to 150,000 subscribers a day. One estimate says it has received 2.3 million subscription requests in less than a month.
According to a Jan. 30 article on Light Reading, “mobile operators have been contending with an exceptional increase in portability requests, following the launch of Free Mobile’s services.”
No doubt Free is winning the price war in France, but its viability will depend mostly on the reliability of its services. The next few months will determine whether it will live up to its name and set an example across Europe with its low-cost business model.
— Hospice Houngbo is a former Fulbright scholar/researcher and a former graduate student of IT at the Rochester Institute of Technology. He is currently a PhD student in computer science at the University of Western Ontario.
We can't just say it won't work in France because it didn't work in the US. Free has studied and learned from former failed attempts. There may be some issues related to Wifi connections and Free's engineers are certainly aware of that and will be working to overcome them.
But not completely accurate. Sprint, ATT, and Verizon have femtocells. The issue is that you are allowing a telco to use your internet connection. And I haven't even started to mention all the security concerns.
Is that Free is using their member's Internet connection. That is an overlooked cost. This approach was tried in the U.S. as a way to off-load traffic from the overburdened cell networks. It didn't work.
"Since it is our own set-top box, we can innovate around it," he says. "In the U.S., they buy their set-top boxes from other providers." That's a mistake and lost opportunity, Niel says and proceeds to outline how pivotal these set-top boxes are for his company and its future.
When I read your post, I can't help but reflect on the monthly recurring costs of the anything plans for most providers. Upwards of $100 for a cell phone. Think aboout how many people in this country have cell phones... In this day & age, with reasonable data usage, doesn't it seem reasonable that most anything plans should be less than $50??
One of the biggest bubbles in the world is the "cell phone carrier".
These guys are charging $70 to $200 a month for delivering a voice service that could be carried on a 44 Kpbs line (bandwidth for human voice).
Yes, when the iPHone came out, they started adding in "data services" but the raison d'etre for high prices is the tradition voice call. Meanwhile those calls have been dwindling as the younger people will more often text, Twit or otherwise ping their friends.
Take the Hotspot. If you wanted to carry around a Clear Wimax hot spot, and you had a phone that made wifi calls, you could do away with your "cell phone network" entirely. It's simply a matter of taking Skype or Google Voice with you.
If Free can get this model to work, learning from the failed attempts in the US, they've changed the game in the industry and are way ahead of their competitors.
Free's competitors are worrying and they have started developing strategies to fight back. France mobile services users will the ones who will benefit mostly from the outcome of this battle.
Interesting, and thanks for the clarifications, hounhosp.
I still think it's going to be a wait and see moment to see if Free's gambit pays off, but if I were one of their competitors I'd be worried. Anything less that a total bomb will mean that Free will have changed the whole game. Such is the price of complacency.
"Is that Free is using their member's Internet connection. "
That is what Free is doing and they have many valid reasons to believe that will work. The 5 million broadband members constitutes a loyal community that Free has built over 5 years (at least). Then Free is betting on their loyalty. You don't lose the trust of 5 million users overnight, right?
First of all Free mobile is relying on a combination of high-speed DSL connections delivered to its broadband subscribers and many wifi connections that are created with routers placed in each of the 5 million subscribers. Niel pointed out that the company's network of 15,000 macro-cells, together with its users's 5 million nano-cells constitute the backbone to its free mobile services. That's is a great challenge because they assume that the 5 million users' " access points" will always be working. It is like Skype relying on other users computers to create its peer-to-peer network. Those existing Free broadband users are given a free mobile service, a way to thank them for letting Free use their routers (even though they may not be aware of that).
The catch here is that, Free doesn't have to deploy additional towers in the city of Paris to cover its mobile services.
As you point out, users can terminate their subcriptions at any time, and my feeling os that Free will make sure that its services are reliable so that users will not have to leave. An it is counting on many subscribers to make a profit.
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