Mobile virtual network operators (MVNOs) seemed poised to take advantage of the increased proliferation of wireless devices both here and abroad, but finding the sweet spot may prove to be a challenge for some of them.

A recent report by Chantilly, VA-based research group BIA Financial Network outlines some of the challenges MVNOs face on their road to deployment and profitability. The report cites 200 to 300 planned or operational MVNOs worldwide, with most of them located in the United States, Western Europe and Australia. The MVNO market in Western Europe has grown by more than 60 percent in the last two years, according to the MVNO Directory.

But MVNOs have also struggled to find their niches in a saturated U.S. mobile and wireless market. Mobile ESPN is the current poster child for a failed MVNO after ESPN pulled the plug on the service last year.

According to the report, an MVNO refers to an operator that doesn’t own licensed spectrum and generally lacks its own network infrastructure. MVNOs can have a remora-like relationship with wireless carriers by adding value through unique features and services that the wireless carrier doesn’t have. One example of a successful MVNO is TuYo, which is a prepaid wireless service for the Hispanic marketplace that offers downloadable, Hispanic-focused ringtones and graphics. MVNOs and cable MVNOs can also offer the same "fill in the nice" service to cable operators.

"MVNO deals get cable a seat at the quad-play game table," said Rick Ducey, BIA’s executive vice president. "Without the ability to package in a wireless offer, cable puts itself at growing competitive risk. MVNO offers a new, complementary service to package and sell and create revenue growth opportunities cable companies need.

"I’ve heard that Comcast will be offering video shorts like sports scores, weather and news. Other services include ‘universal inboxes’ that alert you when you’ve got voice mail on your home cable phone service and wireless PVR functionality that turns your phone into a PVR."

The Sprint/Nextel JV will give cable operators the opportunity to work with MVNOs if they desire.

"Two thoughts here," Ducey said. "One, that JV gives these MSOs a good entry point for a wireless play. But MSOs like owning their own infrastructure, so that explains the other JV the MSOs are running (SpectrumCo LLC) that spent $2.4 billion to buy some advanced wireless spectrum (AWS) that they can build out in the future. It gives them a short runway to get operational with a wireless play quickly with Sprint/Nextel and a longer term infrastructure play with AWS."

Ducey said even a company such as Verizon might consider a MVNO play until its competing services are ready to launch.

"Verizon can make money with MVNOs even as in the medium run they are launching competition," he said. "As we say in the report, MVNOs exist at the whim of the carrier in a sort of ‘prisoner’s dilemma’ game of, ‘Do I take their money or not?’ The price of taking the MVNO money at the moment is relatively low, so why not? If MVNOs get too successful, it’s easy to see how Verizon and the other telcos can respond. But that’s where the MSOs’ JV for SpectrumCo is interesting because this buys them their own infrastructure play so telcos can’t take that ball away and go home so easily."

In the near term, the report said to expect consolidation and churn as the MVNOs look to find their footing with various partners. – Mike Robuck

The Daily


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