Just about everyone but the networks backed Nokia’s charge at the content space and interesting statistics were bandied around in making Nokia’s case.

“Average network churn rates are something like 30 per cent. Where’s the brand loyalty there? Customers choose networks on cost, not brand,” said one industry sage – a content provider himself, incidentally.

Content, hey? Everyone wants a piece of it. The networks, fearful of becoming utility pipes, have reinvented themselves as media companies, with limited success. They also claim they ‘own’ the customer relationship, in subsidised markets at least, and understand what, why and how the customer wants content.

“Yeah right, so what about all the complicated tariffs, the nightmare call centres and everything else,” retorts the Mobile News sub at such claims. He’s got a point. If that is understanding, the networks need to ‘over-stand’ their customers if they are going to make a success of content provision.

But what of Nokia throwing off its engineer’s lab coat to recast itself as a digital content provider?

The point about brand loyalty is fair and, despite the subsidy model in the UK, punters choose networks on cost and handsets on brand. And, among the big five manufacturers, Nokia’s brand and market reach is strongest. It has close to a billion users across the world; individual network subscriber figures don’t come close. It is worth noting Nokia’s market penetration dwarfs even the success of Apple’s portable music players.

The iPod has sold 100 million units in five years – a 10th of Nokia’s annual sales. Expected sales of the iPhone run to 8-10 million units worldwide, which again represents insignificant numbers compared with billion-selling Nokia.

And mobile phones, whatever the usability issues associated with engineers jamming multiple functions onto a handset, far outpace Apple’s portables for computing capacity.

As for brand, Apple’s devices are ‘must-haves’ in niche circles where there is plenty of disposable income, but Nokia is truly mass-market. It is like comparing LG’s Prada phone with the full global catalogue of Nokia handsets.

But does Nokia’s content push really threaten the network operators’ music revenues? Yes, probably, but the networks’ music revenues are miniscule anyway – even iTunes’s modernisation/crippling of the music industry is something of a misnomer. Excluding illegal stuff, 98 per cent of music on an iPod is ‘bought’ music – that is, uploaded from users’ CD collections. Just two per cent is purchased from iTunes.

If that is the case on Apple devices, carried by fashionistas and tech-heads, what percentage of music on the handsets of Vodafone subscribers is from the Vodafone portal? A content provider can expect four down- loads per month, per user. Not bad, but it hardly makes up the shortfall from declining voice revenues.

But there is another point: Nokia and Vodafone might ‘fight’ on, to the complete indifference of paying customers – because the real heavyweight content providers are elsewhere. Like Andrew Orlowski suggested last week in online tech publication The Register, it might end up like two bald men fighting over
a comb.

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It might have taken cold calls to MPs and Orange VPs, plus pressure from Ofcom, for Orange to move on misleading sales practices, but this action appears decisive and measured.

The fact its dealer review covers a six-month performance window will irk some of its victims, on the grounds they may have been loyal to Orange before the assessment period. Some will be unfortunate to have been caught in such a wide-ranging net, which is hugely disappointing and should be addressed.

But, and this statement perhaps risks alienating some Mobile News readers, Orange should be applauded for cutting off dealers in a way that other networks, which have taken similar measures during the past 18 months, should not.

Liberal approach

Orange’s approach to the dealer channel is, by and large, undemonstrative. It is not set on taking ownership of its routes to market in the kind of bludgeoning ways Vodafone and O2 are. And it is not reactionary like T-Mobile and 3 – both inconsistent, and both suddenly ruthless in their retreat from the channel.

Orange’s move to issue ‘do-not-deal’ notices to third party churn machines and to stamp out sharp practice is neither bludgeoning nor reactionary. If anything, it comes late in the day.

Orange has cut dealers in swathes before, but it has resisted wholesale changes to its code of practice for third parties. Here, it has merely refined it, and done so in a consultative manner.

It has not blamed distribution, middle men in the tumult, for high churn rates – far too soft an option. It has simply requested distributors to raise their games.

Unlike rival networks, Orange’s philosophy is not to cherry-pick partners or to ‘request’ them to pick sides with strong-arm money tactics. It believes the market will decide for itself which distributors will survive. That, alone, is a hugely commendable approach to business. Natural selection; survival of the fittest and all that.

At the end of last year, Orange was widely expected to persuade high street multiple retail to take poorer connection payments for exclusivity on contract sales, in the way that Vodafone and O2 had.

Networks at fault

And, to an extent, you get the networks’ dilemma about commission payments to the independent channel.

Market saturation and churn rates mean acquisition and retention are, basically, the same thing in multiple retail – a significant expense for negligible net customer returns.

But the networks have fuelled the machine and, so, such a dictatorial approach wears pretty thin. Of course, the acquisition/retention headache could be remedied by hiking upgrade remuneration for independents to discourage churn, and inviting new customers on the strength of the deal alone.

Which makes the headline figure of 150 in Orange’s dealer action fairly unpalletable.

But Orange never went beyond the negotiating table with any threat to terminate airtime contracts at the end of last year, which is entirely consistent with its liberal ethos for distribution, also demonstrated here.

Ultimately, the long-term benefits of its new code of practice for the distribution channel outweigh the short term costs of another 150 dealers falling by the wayside – because the networks still haven’t fixed their upgrade commercials.

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