Surviving the Recession: Finding Wireless Value

“They have been unique in this approach, and it may seem undistinguished, but everything is aligned around a more low-income consumer that wants to talk a lot, doesn’t want to spend a lot, doesn’t travel a lot so doesn’t need a lot of roaming and may not even need [long distance],” Altman said. “This service is very popular with its target audience…I think it’s a service that could become more popular in tough times, when people lose their jobs but don’t want to give up their cell phones.”

Taking the prepaid model further, mobile virtual network operators (MVNOs), which resell a carrier’s wireless service, are also being revisited as a potential way to appeal to price-sensitive customers. The MVNO model has had several notable failed attempts this year alone, but as the cost-conscious segment of customers grows, Cato Rasmussen, head of solution strategy for Martin Dawes Systems, believes MVNOs could become the ideal platform for selling cheap mobile phone service. Martin Dawes, what Rasmussen called the first MVNO, now helps other operators get off the ground with customer-defined BSS platforms. For a new MVNO to be successful in today’s climate, Rasmussen stressed owning the customer relationship, not just reselling the traffic, and using cross-product subsidization to tie the value of the phone to the network.

“In that flow of spending, to get more people on to prepaid may serve the customer because it gives them better control, but it also serves the operator because it gives shorter time to cash,” Rasmussen said. “It’s a win-win situation if done right.”

A company like Best Buy or another large retail chain would benefit most from launching an MVNO, Rasmussen said. As long as it focused on cross-promotion and the consumer relationship rather than just reselling what its carrier partner already offers, it has a chance at success. For example, a Best Buy MVNO could bring its virtual storefront to its consumers, much like Apple’s iTunes does, and establish a communication service to always be top of mind without physically going to the store. The carrier would benefit from the extra traffic, the MVNO would benefit from the cross-promotion, and the customer would benefit from a cheaper, targeted service.

“Best Buy has a strategy to own everything in the home and wants to expand outside the walls now,” Rasmussen said. “It’s part of a bigger picture, but if it’s just reselling what Verizon or T-Mobile is already selling, I’m skeptical. It’s nothing new. You need to provide something extra.”

Providing something extra – something of value – is the bottom line for all wireless carriers, whether they focus on reinventing their marketing, their business model or their service. If managed properly, it is the general consensus that, for the wireless industry, the economic recession will prove to be a road bump, not a road block, as many had originally feared.

“I think wireless has become so ingrained in people’s lives they would sacrifice cable over wireless,” Ho said. “That is their communication medium. Whether they have a landline or whatever, wireless survives only because the feature set is more affordable, and if someone has to relocate, they don’t have to worry about hooking up a landline. If you are going to cut out luxuries, I don’t think wireless is a discretionary item like in the old days.”