Author(s): Kester Mann
Since launching more than 15 years ago, Three UK has endured a bumpy ride. Constrained by a lack of spectrum, negative perception toward its network and a quashed attempt to buy O2, the operator has struggled to achieve the scale needed to compete with larger rivals.
As the market inches toward bundled telecom services, this has led many people to question the long-term future of the pure-play mobile provider. Yet Three sees bright times ahead, and believes that its strong spectrum holding suitable for 5G services could be the catalyst to a turnaround in fortunes.
Last week, I sat down with CEO Dave Dyson to learn more about Three's strategy. I was immediately struck by his upbeat and ambitious outlook, one in stark contrast to the "everyone's against us" mentality that the operator has gained an unfortunate reputation for in the past.
Three believes that 5G poses an opportunity to overcome the hindrances of its earlier years. Buoyed by the canny acquisition of UK Broadband — the company behind the Relish brand — Three now owns about 24 percent of all spectrum suitable for 4G and 5G services. This, it says, places it ahead of BT (21 percent), Vodafone (19 percent) and O2 (15 percent). The remaining 20 percent, which consists of 700 MHz and 3.6 GHz airwaves, is earmarked for sale by Ofcom in late 2019.
Three's new-found spectrum wealth will offer greater capacity needed to support the seemingly inexorable rise in data usage. Customers of Three already use 7.6GB of data per month, more than three times the industry average. Based on projections from Ofcom, Mr Dyson sees a scenario in which this usage surges to 90GB per month in 2025.
The operator believes its still-to-be-deployed 4G and 5G airwaves represent a sixfold increase in usable spectrum, which, coupled with a fivefold rise in efficiency from 5G technology, will create 30 times greater capacity, excluding the benefits of adding more sites.
It expects its spectrum assets to support a more assertive push into home broadband services through fixed wireless access. This is a market that the operator has been serving using 4G for several years. However, Three says that although 4G can offer speeds competitive to existing fixed-line services, the limiting factor has always been capacity: for example, in the UK, the average use of a fixed-line customer is 190GB per month, far higher than the average of just 2GB used by mobile subscribers.
Mr Dyson believes that by rolling out a 5G network Three will overcome the challenge of capacity, enabling it to offer a direct alternative in the market for home broadband. This should allow Three to compete more effectively with bundled services and refocus its positioning toward households as well as individuals.
Significantly, the operator has no legacy fixed-line business to protect, which affords it freedom to disrupt without having to glance over its shoulder at the possible impact on its other operations. BT is also evaluating the potential of fixed wireless access, but needs to tread carefully how it positions it alongside "full fibre" and other home broadband offers.
Mr Dyson is also open to venturing deeper into content, for example, by teaming up with a TV provider once it has established an installed home broadband base. However, he ruled out the possibility of buying expensive sports rights or owning content production.
In the past, Three has largely shied away from the enterprise sector, as businesses have typically been more sensitive to the network perception problem. But it now sees 5G as an opportunity to make a serious foray into this market. Building off its consumer total into the small and medium enterprise market would be a logical first step.
It seems as if almost every operator believes that 5G can either cement a leadership position or create a more competitive challenger brand. But the reality is that 5G is no silver bullet; it will bring winners as well as losers. It remains to be seen which category Three falls into.
In my opinion, 5G isn't a "make or break" moment in the operator's history; the technology's early years will be much more about evolution than revolution. But there is a sense that the new generation of networks could be pivotal if Three is to ever achieve the scale it has long craved.
In our interview, Mr Dyson declared that "the shackles are off". After the challenges of the past, now it's time for Three to deliver.