MVNOs get real
The MVNO market was once the domain of speculators, a place in which the rumors were always true because no one confirmed or denied them. At one time or another, many of the most well-known brands from retail, entertainment and other industries reportedly were considering launching wireless MVNOs. The rumors didn't always make sense, but that was part of the fun, because the MVNO model on its surface — the idea that companies that have no experience in the wireless industry begin to sell wireless service — itself seems to defy common sense.
The most interesting rumors were, not surprisingly, always trailing in the wake of the global and national economy's most legendary brands, the ones for whom “brand” connotes not only name, but a proven customer base, broad presence and its own culture. Over the last couple of years, those rumors have begun to solidify into truth, with the companies behind those brands, one by one — 7-Eleven, Time Warner, ESPN — confirming their interest in making wireless their newest product, until only the biggest wild card of all was left — Disney.
For some people, the Walt Disney Co.'s announcement last month that it will launch a wireless MVNO was the commitment that validated the MVNO model, the one that made all the previous MVNO announcements look that much bigger, wiser and more certain. For others, it wasn't much of a surprise because ESPN, which is owned by Disney, had already made its MVNO intentions clear, which itself was read as a sign of Disney's increasing interest. For these market watchers, Disney's announcement was just another big name confirming what they already felt was true, that the MVNO market is a real business opportunity about to pay off.
“The Disney announcement didn't really solidify that market opportunity for us, not as much as ESPN's [earlier] announcement did,” said Marc Denton, vice president of wireless product management at Bridgewater Systems.
Since the MVNO market began to pick up steam three years ago with the U.S. launch of Virgin Mobile's voice service, Bridgewater and other companies were setting their sights on a different MVNO benchmark — the emergence of a content brand with international recognition, but a well-defined and cult-like following of existing users. That brand presumably could take advantage of mobile networks that are evolving to broader bandwidth video and data capabilities by becoming a creative font of new, revenue-generating services.
“The term ‘MVNO’ was used very generically before, but now there is a lot more clarity and a lot more opportunity associated with it,” said Ramesh Barasia, president of Comverse Americas.
Manish Jha, senior vice president of ESPN Mobile, said the entertainment company's MVNO, which is currently in the systems integration phase and plans to launch next year, is targeting a market segment that he termed the “sports fanatic. That addressable market is about 15 million to 20 million people, typically male, and ranging in age from 18 to the mid-30s.”
What Jha described is actually a much smaller subset of the 97 million people in the U.S., or about one-third of the national population, that he estimated watch sports on TV once a week.
But Jha doesn't define ESPN Mobile's core business as delivering video clips to mobile users. He said ESPN Mobile is more interested in developing a quality mobile service with targeted content to build a community.
That's apparently the thinking that will permeate any wireless MVNO that Disney or a Disney property would launch. George Grobar, the new senior vice president and general manager of Disney Mobile, said the entertainment giant is not interested in simply enabling all of its content for mobile distribution. Instead, it wants to provide a mobile service that appeals to its existing constituencies of families and kids, but might even offer content from other providers if it improves the quality and value of the service, he said.
Disney hasn't outlined more specific plans yet for the Disney Mobile MVNO, which like ESPN Mobile, will launch sometime next year, but the possibilities are capturing the attention of market watchers.
Andrew Cole, vice president and communications and media practice leader for AT Kearney, said that even if Disney Mobile service is slow to build a subscriber base, it should still be a high-revenue service.
“This will be a high-value niche service,” he said. “Disney's brand is extraordinarily powerful. When you look at the statistics, it's primarily the adults who spend the money. They are not just targeting children, but also adults who are obsessed with Disney. These are people who spend an astounding amount of money on Disney stuff — DVDs, caps, flags, Disney characters and other Disney things.”
Disney and ESPN may have great niche opportunities but they also are entering a marketplace of competitive, established giants, and one in which they will face the traditional challenges of how to make money, differentiate service offerings and create operations that run efficiently enough that they are not a burden to the brand's reputation or the company's core business.
ESPN Mobile and Comverse, a company most known for delivering mobile messaging delivery solutions, recently announced that Comverse would support the MVNO's launch next year with a hosted content and data delivery platform. Using a hosted platform for content delivery runs parallel to ESPN Mobile's use of a network host (Sprint), but it also will allow ESPN Mobile to focus on creating value around its content, rather than focusing on the specifics of the service delivery process and investment in system ownership, said Comverse's Barasia.
Yet, implicit in reliance on hosted services is always the potential for a company to gain enough experience and enough of a comfort level to manage the service on its own. “ESPN doesn't have to make a decision now,” Barasia said. “We can run the service on their behalf now, but they could decide to own the solution in the future.”
Service delivery isn't the only area in which an MVNO can get an operational and competitive leg up. The billing and rating processes that guide service pricing and packaging are another area for potential strength in operational efficiency and competitive differentiation — and another area in which MVNOs can benefit from using a hosted platform.
Prepaid mobile services were not really seen as a viable option in the U.S. market until the emergence of MVNO Virgin Mobile. Telcordia, the software and OSS firm that supported Virgin Mobile's 2002 U.S. market launch with the installment of its hosted ISCP rating engine for the service provider's prepaid services, recently provided Virgin Mobile with a new Advanced Rater capability that will help the company dynamically create a wider variety of rate plans, discounts and promotions.
“In a highly competitive market, they need to be able to match the rate flexibility of the traditional mobile operators,” said Perry Passarotti, executive director of wireless product management strategy at Telcordia.
He said that while Virgin Mobile's launch was the “cornerstone” on which it has been proven that prepaid service can work in the U.S. (Virgin Mobile currently has just under 3 million U.S. customers), its success will give incoming MVNOs more reason to offer prepaid service and consequently put more pressure on Virgin Mobile to expand on its model.
“You're seeing a need right now for MVNOs to launch more sophisticated services and more dynamic capabilities,” Passarotti said. Those capabilities include faster methods for creating more targeted promotions and temporary discounts that can be launched quickly and terminated just as quickly, he said. They also include the capability to respond to competitive price movement in the market and to manage real-time charging for large numbers of users constantly starting, using and finishing their allotments on prepaid service plans.
Eventually, as more content-based MVNOs like Disney Mobile and ESPN Mobile are launching and other MVNOs respond competitively with their own voice, data and content offerings, there will be an evolution to cross-promotions between the different types of services, Passarotti said.
“You don't see anyone in the MVNO business doing that now, but it's part of the larger of evolution in real-time charging for voice and data,” he said.
Another somewhat related evolution that could be influenced by the emergence of the content-based MVNO is the move toward different classes of service governed by some form of policy management.
“MVNOs will be able to differentiate between different service package levels, such as premium and basic and whatever else they come up with, through the use of policy management,” said Denton, of Bridgewater, which offers policy management and other subscriber-related functions. “It can help an MVNO control who can access a certain type of service, when and for how long, which helps in particular with a prepaid service.”
Denton said service providers targeting the corporate enterprise market also can use policy management to support controlled access to corporate VPNs, just as a youth-focused MVNO could ensure its customers only have access to certain types of content.
“So far you've seen some MVNOs compete on price or on the handset package that they offer, but as each of their market segments becomes a little more crowded, they will have to look at different ways to compete,” Denton said.
Despite the amount of differentiation that can be realized through hosted service delivery, more flexible rating and service policy management, an MVNO's service, like any mobile carrier's service, may only be as good as the customer service operation behind it. Traditional wireless operators have never been particularly effective at customer service, and the nature of MVNOs as greenfield operations gives them some freedom to establish a new model for customer service.
Customer self-service relying on interactive voice response and other technologies could be an operational characteristic that, in particular, differentiates prepaid MVNOs from traditional mobile service providers.
“Prepaid MVNOs can hit the ground running with customer self-service,” said Steve Tran, co-founder and vice president of marketing at BeVocal, a company that provides a self-service software suite. “In the post-paid market, carriers are a little more protective of the existing customer experience, and they do not yet want to force the idea of self-service on them. Until those carriers come around, the MVNOs have an opportunity.”
Navigational self-service can allow prepaid customers to frequently check their accounts and balances, but it can also be designed to lead into an opportunity to up-sell customers on new services and features.
“Any successful completion of a customer interaction improves your ability to sell something new,” Tran said. “And it puts you in a better position to sell devices and services online and for the customer to self-provision services online because the expectation will be there.”
Customer self-service also provides operational benefits in that it ultimately lowers the cost of providing customer service “by an order of magnitude,” Tran said, because it reduces the need for live customer service agents to be involved in some calls. If customers calling or going online to ask questions about billing issues can navigate a series of frequently asked questions on their own, “we can take eight or nine out of about 10 calls away from a live customer service agent,” he said.
The MVNO market, though fast evolving from a domain of speculation to one of more certain opportunity, is still a young market. The major launches to occur over the next year or so will show us in further detail who will have different market niches cornered, and who will have more of a competitive fight on their hands. Even with official commitments from Disney, ESPN and others, there still remains some fodder for MVNO speculation. For instance, Wal-Mart long had been rumored to be considering launching an MVNO, but had not announced anything as of this writing.
With the MVNO model, the brand may literally be the business, but behind the brand, there are a wealth of operational and service-related functions that can quickly develop into valuable competitive differentiators. The sooner MVNOs look to leverage them the better.
Reporters Kevin Fitchard and Carol Wilson contributed to this story.
|MVNO||MARKET ANGLE||LAUNCH TIMING|
|ESPN Mobile||Sports fanatics||2006|
|SK-Earthlink||U.S. market/Earthlink users||2005|
|Time Warner||cable triple play||ongoing trial|
|BT||telco triple play||2004|
|Source: Company info|
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