Wireless resale market changing south of border, post-paid coming on strong

New mobile virtual network operators (MVNOs) in the United States aren’t following the traditional model of offering voice service on pre-paid pricing plans, a recent web cast was told. Increasingly, MVNOs are looking to content and post-paid pricing as two keys to their growth strategies going forward. Amp’d Mobile is one MVNO that recently introduced such services in the United States. The company rides on Verizon Wireless’ network and is targeting primarily a youth market – those aged 18 to 35 – with hip mobile entertainment content, including video, music and 3D games. "Content is our big differentiator," said Chris Houston, senior VP of wireless at Amp’d Mobile, during The Key to MVNO Success webcast put on by Wireless Week magazine. The company has secured 175 different deals with content providers. "We’ve gone out and picked the best of breed in the market," he noted, adding the company is aggregating content produced in-house with that procured from third parties. Music downloads will be one of the company’s key content offerings in the future, a reasons why Amp’d chose a dual delivery platform that allows users to retrieve content from the PC or the handset. "This is particularly important we feel in the music area where people are used to being able to have that music to use on their PC for their home system or for transport to different portable MP3 players," Houston said. Amp’d believes that its user interface will make a big difference in attracting subscribers. Houston indicated that managing the customer experience is also another differentiator for Amp’d’s service, and the company has developed a user interface that mirrors the way people interact with their televisions. " allows us to present content to our consumers in a much more channel-organized way that allows them to see content in a way that they’re used to seeing it," Houston said. "They can go to a Gwen Stefani channel and be…presented with ringtones, downloads, wallpapers and blogs, and everything associated with Gwen Stefani rather than going through five or six different applications. It means that the purchase experience and the browsing experience for consumers is much quicker, much more aligned with the quick experience they expect on the Internet and channel surfing on television." Marina Amoroso, a wireless industry analyst with the Yankee Group, said Virgin Mobile, ESPN and Disney are also examples of content-heavy or data-centric MVNOs. "The mobile wireless space for them is another avenue to reach viewers of their content and entertainment," she noted. "So, their typical leverage with a customer is they try to offer a lifestyle brand; they try to personalize the wireless experience around the content and information that you, as the user, like. As a result, they make a very customized and personalized lifestyle experience which to some users is going to be very hard to turn away from." She indicated in her presentation, however, that content-centric or infotainment MVNOs are only one of four types she sees emerging in the near term: telcos, retailers and broadband ISPs, and cableco MVNOs are the other three. Amoroso noted that regardless of the type of MVNO, there are some basic premises that each has to follow if the venture is going to be successful in the market. "The key primary issue here is any MVNO has to come to the host operator and promise essentially not to cannibalize that host operator’s business model. They need to make sure they are not stepping on their toes," she said. A perfect example is the Sprint-Virgin Mobile relationship, she added, noting that Sprint is entirely focused on post-paid, so it was easy for Virgin Mobile to go with pre-paid "because it offered an alternative to Sprint customers who could not either afford or get on one of Sprint’s post-paid plans." Sufficient financing to reach profitability is also something the MVNO has to bring to the table, according to Amoroso. "You need to make sure that there is going to be stable revenue backing up the MVNO venture because it could easily take between two and three years to reach profitability," she said. Another factor in determining the potential success of an MVNO is the history of execution in its core competency. She explained that a retailer can, for example, point to successes in dealing with customer service problems and in distributing products across an entire country to millions of different types of customers. If the venture doesn’t have this experience and is a totally new start-up, "it makes negotiating with a carriers all the more difficult," she said, adding, however, that while this is important it is not required to launch an MVNO. The U.S. MVNO market already consists of approximately 20 to 30 players – that number could jump to 40 in the future – with about 16 million customers subscribing to an MVNO. Of that 16 million, 10 million to 11 million subscribe to the top four players (see chart on page 5 for details). Amoroso projects that by 2010 there will be 29 million U.S. consumers subscribing to MVNOs, generating upwards of US$11 billion in service provider revenue. U.S. MVNO Market, 2010Six large MNVOs of more than 1 million subscribers Tracfone Virgin Mobile Cable Consortium ESPN 7-Eleven (other retailers) Disney (other entertainment companies)Five medium MVNOs of approximately 500,000 subscribers each 25 small MVNOs of approximately 100,000 subscribers each

Wireless resale market changing south of border, post-paid coming on strong

News | December 1, 2005

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