Earlier this month Vodafone Germany announced a plan to start migrating all 4 million of its DSL subscribers to their LTE network using a combination of service bundles and incentives. Although the company signaled to the financial markets months ago that it intends to favor investment in LTE over fixed-line infrastructure going forward, the significance of this latest announcement goes deeper than the headline.
HSPA is the first mobile broadband technology to credibly compete against fixed broadband, however many subscribers still rely on a cable or DSL connection for TV and even for primary Internet access due to coverage, bandwidth, or service limitations. Vodafone's announcement implies they are confident their LTE network - which already serves 4 million businesses and households across Germany - will overcome any perceived shortcomings of HSPA and enable them to compete directly against 'fixed' services. Vodafone's instincts are right. And no doubt their experience in the large, developed German market will influence their plans in their other key markets. In a sense, Vodafone is betting fixed-mobile substitution (for all services) will finally become a reality.
And until Vodafone's announcement, most major mobile operators considered complementary fixed services as an essential bundling strategy to attract new subscribers and make existing ones more sticky. As recently as mid-2008, when it acquired the remaining 26.4% of German DSL provider ARCOR it didn't already own, Vodafone Group was aggressively pursuing this fixed-mobile integration strategy as a way to bolster its HSPA offerings. Vodafone Germany's latest move is partly attributable to the excessive fees they must pay for unbundled local loop (DSL) access, however CEO Vittorio Colao's team has been steadily divesting less profitable, non-strategic assets for the past two years, and they apparently now lump the German DSL investment into this category. This could presage a broader industry shift away from accepted doctrine about the value of fixed-mobile integration efforts.
Vodafone's decision also underscores how mobile data traffic continues to drive operator revenues and business decisions, and how, as more operators roll out and expand LTE services, many of the data traffic management challenges they face today with HSPA - most notably in the UTRAN - will persist and even amplify with LTE.