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Tuesday, July 17, 2007

Truphone – Pyrrhic Victory

Truphone is claiming victory in the court battle against T-Mobile saying that T-Mobile is now forced by the injunction to interconnect by next week. T-Mobile will undoubtedly argue that it was never refusing to interconnect just complaining about the price and method of connection. Truphone never mentions this in its statement or mentions if the price and method of interconnect has been ruled on in the injunction.

The price of the connection is the most important element of the court case.


If we look at the table the first entry is the standard rate that BT Wholesale applies for connections to Truphone numbers. In the T-Mobile court skeletal they said T-Mobile offered Truphone a reduced rate, which MobileEurope is now saying was as low as 0.21p/minute.

If Truphone have been forced to accept this rate as a temporary measure, until either a full interconnect agreement is negotiated or the court case is resolved or Truphone changes course of action and decides to go to OFCOM for arbitration – it will seriously undermine their business model. After all now, revenues expected from calls to Truphone numbers will be around 30x lower than Truphone originally expected.

I have included for comparison in the rate table how much BT Wholesale charge for:
  • Calls to T-Mobile numbers;
  • Calls to Gamma Telecom fixed line numbers, which include part of the SkypeIn range. ie an example of fixed-VOIP termination;
  • Calls to TalkTalk numbers; and
  • Calls to Standard UK Geographical Numbers with transit of one local tandem (ie multiple physical connections are required onto the BT network)
Of course, in practice very few companies actually pay these rates as it is much cheaper to establish a direct connection with these third parties. This is exactly what T-Mobile wanted to do with Truphone, but Truphone refused saying the work would take too long and delay their launch (which has been in beta for goodness knows how long)

According to the T-Mobile legal skeleton, Truphone instead wanted a connection through BT Wholesale and a rebate scheme organised specifically for T-Mobile. It is almost certain the Voda, Orange and Hutch 3G will have been following the court proceedings and will call Truphone asking for a similar rebate on their interconnect rates. O2 is much more complicated because of course they actually own Manx Telecom and presumably has been making money all along from their relationship with Truphone and has not providing them with "test" numbers and interconnect for charity.

Truphone is also silent on the bundle issue. I cannot see how ANY court will force T-Mobile to give away free calls to Truphone customers. Almost certainly Truphone is facing its number range being outside the T-Mobile bundle. In other words, if a T-Mobile customer calls a Truphone customer they will be charged at a new rate yet to be determined by T-Mobile. Again, Vodafone and Orange will be awoken to the fact that billing for these types of calls are permissible and they were including them free.

This is a real downside for any Truphone customer – will they give out their Truphone number when they know their friends and business associates will be charged extra for the privilege of calling them? Or will the Truphone customers just give out their standard mobile number? Remember, in the Truphone setup, customers actually have two mobile numbers for each device. Again, this really damages the Truphone business model – reduced inbound termination volumes along with reduced rates will blow a big hole in the business model.

So Truphone will get its connection, but the big question is at what cost to its business model? and was this the T-Mobile strategy all along?