There are many challenges facing new players entering the UK mobile market, says James Atkins
The UK phone market is amongst the most challenging globally. Pricing is becoming increasingly aggressive, margins are being squeezed, even the mighty Apple is beginning to feel the heat. And what do we actually get as consumers? A ‘choice’ of near identical phones, differentiated only via a host of gimmicky features. Not forgetting, that the hard earned cash we’ve shelled out, is funding those big budget marketing campaigns and glitzy celebrity endorsements.
The same big brands are dictating the rules. Surely we need some new players to shake up the industry and provide some real choice? And what about a Brit brand to give these giants a run for their money? Aren’t we supposed to be a nation of innovation and entrepreneurialism? Shouldn’t we be supporting our local economy by providing more jobs?
But how easy is it to launch a new phone brand in the UK? Well, not as easy as it perhaps could be.
First and foremost – how do you actually differentiate yourself as a brand, in this increasingly commoditised market? I would argue as a new brand there are plenty of opportunities to do things differently, but it requires a new approach – innovating in areas often over looked. New brands aren’t shackled by massive corporate overheads and the mind set of ‘it’s the way we’ve always done it’. We can actually create and deliver phones and propositions people want. What happens if you drop and break your screen? Who do you call if you need help with the set up? If we want to a make a mark, we need to stand for more than pixels and processing power.
But, of course, success isn’t just down to a differentiated proposition. If you haven’t sorted your distribution channels, you’re in trouble. This is where the UK market becomes particularly challenging. The UK telecoms industry is driven by a combination of operators, manufacturers and retailers. Most people buy a phone on a contract, paying a highly discounted rate for their handset, which is subsidised by a two-year operator contract.
Of course, all phone manufacturers are jostling for market share. However, achieving operator approval is perhaps the greatest measure of success. As a phone manufacturer, you cannot sell via an operator, unless you have their network approval. To secure this approval, each phone needs to pass a series of complex network tests. For context, typically, network engineers have to conduct around 14,000 tests to check compliance with the network, compared with the 2,000 that a feature phone needed.
Every stage of testing represents a cost to the business and takes approx. 21 days. If you fail, you’re back to the beginning. What’s more, every operator has a slightly different testing process, getting it right takes a great deal of effort. If you plan to launch a whole range, that’s a whole lot of time, not to mention the investment. For the big players of course, it makes sense to provide a swift network approval, to ensure maximum sales. For the new brands, with lower brand awareness, and no assurance of huge volumes, it’s tough for the operators to provide adequate staff to support the complex testing. Chicken and egg.
The major difference in Europe is that phones aren’t subsidised by an operator contract. People are used to paying the true cost of the handset. It’s more popular for people to select & pay for their own phone via the open market, then choosing a SIM only package. This means, if you want to keep your phone for three years, you absolutely can. If you prefer the newest handset every six months, that’s possible too. Ultimately, in Europe, people are choosing the flexibility of the open market, which promotes choice.
As such, network approval is less of an issue, making it easier for new players to enter the market. Add in the fact that our European counterparts are less interested in the power of the brand and more focused on price and quality, the phone market has a very different feel.
Ultimately, we expect the open market model to grow over the next two to three years, which can only be a positive move for the new kids on the block. In the meantime, us newbies need to focus on delivering quality handsets, at competitive prices, with some distinctive differences thrown in.