Ukko Mobile From Helsinki Eliminates Data Roaming
arcticstartup.com
arcticstartup.com
My first company was an ISP, and we thought the then current dial up prices (1995) were insane, and quickly worked out we could offer packages at 25% of the largest competitor and make a profit with only 1500 or so users. Problem was, the largest competitors could also make a profit at 25% of their then-current prices, and had large established user-bases. We were inexperienced enough in business to not worry too much about why their prices were to high - we assumed without thinking that their prices reflected their cost base. Instead it reflected their belief about the market at a time - they'd rather sell at that price with a ridiculous margin, than cut the price and grow the total size of the market.
We went in cocky about a big competitive advantage, and it took about 3 days after launch before the incumbent dropped prices to match ours, and while we kept growing, it obviously made things a lot harder.
This company might find the same in the mobile data market if they get any traction at all: Many of their competitors can drop the roaming charges massive pretty much over-night, have large warchests, and have roaming agreements in place that can quickly be re-negotiated if they and their partners start seeing this startup as a threat to their revenues. The massive benefit they can provide now, and the seeming headstart they have on their competitors can evaporate pretty much overnight.
The requirement of total competitivity in the market is needed for this to happen, so that no agent can win persistently through competitive advantage. Then, any lowering of prices is futile; it becomes a game of musical chairs, in which the telcos are constantly lowering prices until loss of profit, and costumers are just swapping between one and the others. So it's not done. Basic micro. Of course, if the market can tolerate growth, then you lower prices just enough to get the largest market share.
I guess this is yet another reminder that markets do not care for global optima, just for Nash equilibria. Right now, I'm thanking those individuals, specially R Telecomunicaciones, that disrupted the Spanish telecom market with a cavalier disregard for massive profits.
We were looking at a product which would increase paid for data usage across certain customer segments and several operators weren't interested simply because they didn't want usage to increase because they didn't have much surplus capacity.
It's a fabulous idea but badly executed (despite the fact that they have raised oodles of VC money) with poor call quality and slow (2G) data speeds. Still, so much easier than buying a SIM in the US. Also, has the wonderful property that you can call someone who is physically in the US on their UK mobile number for free for both parties - for which incoming call (for those of you who don't know how backwards the US cell market is in comparison with regulated Europe) a US cell customer would normally have to pay!
That said, if you mainly travel to the US and don't want to deal with T-Mobile or Virgin or whoever, I heartily recommend them.
The data offering isn't as wide spread, and they currently only offer per MB outside UK; but still a better deal than roaming.
...but the title was seriously misleading (just Europe, and not even specifying which countries yet); I'm still going to have massive roaming charges if I don't switch SIMs.
How hard is it to put "...eliminates European data roaming costs forever"?
My current solution is multiple SkypeIn numbers -- you can call me in the US or UK, for example, and either number will forward to my current (local) mobile number, which I don't give out.
The only serious flaw with this approach is SMS -- SkypeIn can't accept (and/or forward SMS), even to my Skype account.
In any case, 40+€ seems expensive unless you travel a lot.
The EU maximum roaming charges[1] have to some extend compensated for the lack of competition but this would be even better.
1: http://ec.europa.eu/information_society/activities/roaming/t...
If you get a SkypeIn number you can just remap it to a different local number whenever you change SIM cards, it works great.
OTOH, roaming fees while traveling can easily burn through several hundreds of euros, making 40-80 € / month a good plan even if you travel only once a year (but need data while traveling). Just the downloading the maps for navigating from airport to hotel and checking your email may cost more than a hundred euros (been there, done that).
It's not "free 3G", it's "free ebook shop browsing and delivery via 3G" - relatively small files, and Amazon directly profits from each one. Thus they can afford to pay for it, and they're big enough to negotiate reasonable prices. But note that it's very limited: audio books are not delivered via 3G, nor are files sent in by the user for conversion (actually I believe you can pay for that service). And for their 70% royalty option, delivery is actually charged to the author at 15 cents per MB: http://andrewhy.de/amazons-markup-of-digital-delivery-to-ind...