If there is any mobile industry business model on this planet as intensely hyped as that of the mobile virtual network operator, it is that of the companies that are providing critical support systems for MVNOs — the mobile virtual network enablers.
It is distressingly easy for a company to call itself an MVNE, so easy, in fact, that many of the vendors that most accurately could be described as MVNEs don't like to overuse the term themselves. “‘MVNE’ I find a very ambiguous term,” said Ersin Galioglu, vice president and general manager, real-time billing and network, for bcgi, a provider of business support systems targeting MVNOs. “We're at the point where two guys can form a consulting agency and call themselves an MVNE. It's the same with MVNOs — as a vendor, we used to serve resellers, and now they are calling themselves MVNOs.”
Although some of the latest MVNOs — like Disney Mobile, which plans to launch this week, and Mobile ESPN and Amp'd Mobile, which launched earlier this year — share some DNA with earlier resellers, they also might be described as resellers on steroids. They are not focusing only on selling voice minutes on a low-end handset. More often, they are a successful brand with assets to leverage. They are planning to market content and data services, sell high-end phones and create a customer experience that vastly differentiates them from the storefront at the local strip mall that sells mobile phones and services.
“Resale started as a pure voice model, but with MVNOs, it has morphed into a model of companies with other kinds of assets putting themselves into a competitive position in the mobile industry,” Galioglu said.
The greater expectations require MVNE partners whose systems and platforms can better position their MVNO customers competitively. “These service providers need to see which channels are producing, and if they are offering content applications, they need controls in place to keep kids from getting at content that is inappropriate for them,” he said.
MVNEs are the companies that not only can help MVNOs set up their operations, but also can continue to keep them on the competitive edge. “As interest is increasing in MVNOs and their plans are becoming real, we are seeing more and more vendors positioning themselves as MVNEs,” said Ozgur Aytar, senior analyst for Pyramid Research and co-author of the recent report, “MVNOs and MVNEs: Analyzing the Potential of Virtual Mobile Players,” (see story on page 12).
Pyramid, for the purposes of its research alone, defined MVNEs as companies that combine “in-house solutions and partnerships with third-party suppliers to provide enablement services to would-be virtual network operators.”
Pyramid characterized three categories of MVNEs — aggregator MVNEs, offering consulting and integration services that partner with providers of back-office network components; aggregator MVNEs, which package their own platform components with platforms from other partners to provide end-to-end MVNE services; and specialized enablers, which focus on a single type of MVNE platform or element, such as a messaging system, billing platform or other solution.
More broadly defined, MVNEs provide a wide range of services concentrated primarily in the back-office functions that MVNO operations want to manage about as much as they want to manage their own networks — which is to say, not much at all.
The future of the aggregator MVNE hinges on the development of small, niche MVNOs, according to Pyramid. If the MVNO segment moves toward a fragmented marketplace with dozens of players serving small niche segments, MVNEs will ride the coattails of such an expansion, Pyramid's Aytar said.
If, by contrast, the MVNO space is dominated by a small number of much larger MVNO players, the future of the aggregator MVNE becomes less certain. This will largely be determined by the stance that traditional mobile network operators take on the number of MVNOs that they will allow to access their networks.
“The MVNEs that act only as intermediaries could become vulnerable,” Aytar said. “The network operators could become selective in the number of MVNOs and the number of MVNO subscribers they are willing to support.”
If the number of MVNOs launching or being allowed on traditional carrier networks becomes limited in some way, fewer MVNEs will survive. “There could be consolidation in the enablement space,” Aytar said.
Whether or not an MVNE survives could depend not only on how valuable their services are, but also how sophisticated their own business model is. In the MVNO universe, as the crowd of entrants is getting thicker, the business models of some serious players also are getting more advanced. Recently, the same thing started to happen in the universe of MVNEs.
Some companies are not only bringing back-office technical expertise but also their own experience in the resale environment. At the same time, they are not dedicating themselves to the MVNO market so strictly that they would be set adrift without it.
DBS Communications latched onto the MVNO business model early on and has operated in the Chicago area as a pre-paid service provider under the brand name of EZLink for the last eight years. Just two months ago, all the experience the company has gained as an MVNO culminated in the creation of its new MVNE subsidiary — Versent Mobile.
Versent is trying to differentiate itself from component-oriented MVNEs by pursuing a more comprehensive model, providing an end-to-end “enablement methodology” that includes provisioning, billing, retail and customer care technology platforms; wholesale carrier airtime access on the national networks of Sprint or Cingular Wireless; and of course, its own eight years of MVNO experience.
“We decided we had everything the MVNOs needed to get going, so we said, ‘Let's formalize this as a business,’” said Scott Merkle, senior vice president of Versent Mobile. “The MVNOs that we serve can ride the contracts that we already have in place with network operators.”
Versent's methodology starts with an initial phase of business planning and financial modeling of a company that wants to start an MVNO. The second phase focuses on developing the product offering and establishing network access terms. The third phase involves setting up logistics — Versent has contracts with providers such as Brightstar — as well as creating a revenue strategy. Phase four delivers customer care and business intelligence functions through Versent's call center in Schaumburg, Ill.
Merkle acknowledged that the MVNE sector is indeed getting crowded, but he said that Versent will be protected by its intention of not relying on a single national powerhouse MVNO for its paychecks. “There are some MVNEs that go by the ‘Accenture model’ — they really need the big-money guys to walk through their door. We don't want to depend on that.”
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