For MVNOs, business is unusual

The primary architect of EarthLink's wireless venture is setting his sights on a new type of mobile project: After building EarthLink Wireless and laying the groundwork for Helio, Brent Cobb is exploring a new kind of virtual wireless provider — this one focused not on high-end data or budget prepaid users but rather on small businesses.

As vice president for mobile services at Cbeyond Communications, Cobb is helping to usher the fledgling voice-over-IP and broadband service provider into the mobile virtual network operator (MVNO) world, reselling an unnamed CDMA carrier's voice and data services to its existing 20,000 small business accounts. What could distinguish Cbeyond from other resale dealers, however, is that the company is integrating its wireline voice and data services and managed applications with new wireless plans.

Cbeyond will distribute e-mail across both wireless and wireline customers, for example, and offer buckets of minutes spanning both mobile and long-distance accounts, all under the Cbeyond brand. The company even has plans to offer EV-DO high-speed mobile data services within the next few months.

“Sixty percent of businesses spend as much on mobile as they do on landline,” Cobb said. “Twenty-five percent spend more on mobile. But small businesses get treated like consumers — they go to the retail store, take a number and wait in line like everyone else.”

Cbeyond is banking on its experience in customizing its offerings to suit small business needs. “We understand small businesses,” Cobb said. “We know how to sell to them and where to find them.”

Although Cbeyond isn't the first to target the business segment with an MVNO strategy, it is first to launch service on any noticeable scale. One of the most lucrative mobile segments imaginable, business also is the hardest sector for most carriers to target. AT&T was expected to launch its enterprise-focused AT&T Mobile MVNO using the Sprint network, but its merger with SBC — which owns the majority stake in Cingular — killed those plans.

That's not to say that the industry doesn't consider business MVNOs a good idea, it's just a hard strategy to implement, said Ranjan Mishra, wireless analyst for A.T. Kearney. Business wireless sales typically revolve around the individual customer, which bills wireless charges back to a company, not a contract sale to an enterprise or business. Carrier still haven't figured out a way to effectively sell to businesses as a whole, Mishra said.

“You can go out and get a far better deal than your company,” Mishra said. “Price points change every two months in this industry, but it takes an enterprise six months to negotiate a contract.”

Even a carrier with a solid strategy for addressing those issues is likely to face challenges with a business MVNO play. Regardless of their lack of success in targeting enterprises, the large wireless network operators may not want to hand over such a potentially lucrative segment to an MVNO partner the way they might be willing to pass on other segments.

But some carriers are more willing than others. In fact, one of the reasons Cbeyond may have been able to get off the ground with little trouble is that it is targeting small business, in which most major carriers have little interest. If other business MVNOs emerge, they are likely to be in very specific and large vertical markets, Mishra said. In such cases, an MVNO would bring the specialized expertise a network operator couldn't offer, but would be targeting a small enough segment that a carrier wouldn't be threatened, he said.

Matt Johnson, CEO of MVNE Visage Mobile, said the business MVNO market may take an even more surprising turn: The MVNOs will be the businesses themselves.

“A company like Boeing could become an MVNO, buying network access from a carrier to support its own internal wireless provider,” Johnson said. “The only question for a corporation is whether it's large enough to support its own MVNO.”