Oh dear! Oh dear! That's Oh! 2

Take a look a this post at ZDNET and then put your head in your hands as to how the collectively small-minded operators never fail to snatch a PR disaster from something potentially so positive.

So, O2 is to impose a fair use policy of 200MB on the iPhone and a limit of 60 hours per month of Free WiFi.

That latter in particular is a joke. Wasn't free WiFi given as compensation for the fact that the iPhone would be considerably limited by the lack of 3G? And, given that there is a lack of 3G perhaps a limit on data is less relevant or should be waived as compensation for the poorer download times and hence user experience.

What bugs me is that it is all so unnecessary. A tiny minority of users would actually abuse the system, compared with the huge PR and market share gain from launching with the iPhone.

What operators are failing to realise is that they co-exist in a high tech space which is covered and scrutinised daily by a wealth of early influencers, by reverting back to penny pinching ways and not seeing the bigger picture they sustain a relationship with the customer which is one of a necessary evil: not that of day-to-day buddy.

Apple will see it and you can be sure their PR team will be backtracking from this mess and laying the blame squarely at O2's door.

Apple wins; consumer loses; O2 ?

There is a lot of commentary around the iPhone in the UK of course after the O2 announcement yesterday. The carrier had long been out as the worst kept secret in a while but the package has caused a stir.

To be honest I am a little surprised that O2 got the deal: it has the worst mobile data tariffs in the market (though Ewan here gives an insight into what is coming), it has the highest prepay base to whom it has never allowed access to the open internet and has already murdered one i-brand in the UK having recently shut down i-mode. These are quite compelling arguments for the prosecution case.

To its credit, O2 has always been the best marketer of services in the market when given a particular proposition to work with (e.g. messaging, music) and I am sure this played well in discussions with Apple.

What I am absolutely convinced of though is that the defining factor in the Apple discussions was not the maturity of the marketing, nor the pricing of data, nor necessarily brand fit nor customer fit but: just money.

Peter Erskine admitted in a Press Conference that there is revenue share back to Apple from the deal though it was ambiguous as to whether this was the service revenue or the handset revenue. If on the service revenue, it is arguably an industry first, though one could imagine it being packaged as a license fee for the software on the device such as that HTC pays to Microsoft for example which is less revolutionary.

The biggest stir in the press has been on the cost of the package with commentary on the £35 per month for 18 months together with the £269 purchase price adding up to £1000 over that period (a bit of poetic license in the tabloid maths there).

That's not the real scandal however. Dig a little deeper.

Apple has held the operators to ransom over being first to market with the iPhone - as it is able to do in a market where such a device might buy 1-1.5% market share in a market where less than that separates the top three. The net result is that it is not O2 that is paying for the Apple revenue share but YOU!

On any of the operators at the moment I can get any device for free on a £35 18 month contract. The £269 you are paying is O2's way of covering the squeeze applied by Apple. That an operator would take a decision which is sub-optimal for the consumer is really no surprise, I am sure however that Apple, the people's champion, will try and distance themselves as much as possible from this link.

As a post-script and a topic for another post: the UK market is completely screwed by the fact that no operator dominates. Even in this case, O2 is not arguably the winner. Forced now to deploy an EDGE network for this purpose and this purpose only is a large price to pay. All the operators should have turned to Apple and said no until a 3G device was available - I would bet that Vodafone did.

O2 and i-mode

I am sorry to post on this a week after the news but I have read yet another article on the abandonment by O2 of i-mode which missed the point.

O2 never gave this a chance. It was possibly the most inept launch of an additional data service in the UK ever. In fairness I should say two things: one, O2 is usually very good at marketing execution; two, there is a lot of competition from other operators for this award and I might have been too hasty.

If O2 were to launch i-mode it should have done it as its exclusive portal not as a possible alternative to O2 Active. To run two side by side is completely perplexing (are you listening T-Mobile with web'n'walk and t-zones? Nobody understands that! - not even your product managers).

If O2 were to launch i-mode it should have done so on the maximum available number of handsets. Not launch it on four devices that looked positively prehistoric to the market, the NECs were an embarrassment which could not handle the incremental traffic that such early adopting customers would want to see. Devices which would laugh out loud if someone even thought about downloading an app to them. Trying to mimic i-mode through using the same handsets was pointless; it is correct that the devices were a defining element of i-mode in Japan but that was only because NTT DoCoMo had the market power to say to suppliers - "you will build devices like this" - and then built them precisely for its market. That was never going to be the case in the UK.

Finally, if O2 were to launch it should have done so with the full support of the management team - the alternative would be not to bother or fire them. What you see here is a classic of a project which was always doomed to fail because the whole team was not behind it - such projects litter large corporate history and particularly operators.

However, O2 did launch i-mode and yet has failed to extend its good points into the rest of the business which is possibly even worse. Fairer business models for partners and all inclusive pricing for the data would considerably improve O2 Active. On the latter it is lagging the market considerably. On the former, i-mode succeeded on a 9% and then a 6% revenue share for the operator and not on the ridiculously outdated 50% that operators persist in asking for.

i-mode had a great brand amongst the early adopter community and could have been a considerable asset in the UK if the operator had been brave enough to shift its existing product into it and make it is mainstay. If I were i-mode I would be extremely annoyed, learn for the future and make sure that if someone destroys my brand in such a way in a key market again that I have cause to sue.

For O2, at least their approach is consistent and it is clear (for now) that the O2 brand is pre-eminent. Remember that it voluntarily shelved Genie - probably the most successful youth mobile brand in history - to focus around O2. Really that i-mode has ended in the dustbin is no surprise, the writing has been on the wall for some time.