Aug 1, 2002 12:00 PM,

Virgin Mobile USA: Pretty Young Face With a Nice Back End

Tim McElligott

Once upon a time in America, a company's brand was as recognizable as it was trustworthy. Today, while recognition is still the name of the game — consumers (especially young ones) have grown even more label-conscious than their disillusioned '80s predecessors — service is what wins it. And in order to control the quality of one's service, one has to be more than a reseller.

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U.K.-based Virgin has come from nowhere to be one of the most recognizable global brands of the young millennium. The conglomerate's new venture, Virgin Mobile USA, will try to convince its 15- to 30-year-old target market that the Sprint PCS pre-paid service it resells is more than their fathers' cellular service. If successful, Virgin also will show a curious and hopeful wireless marketplace that the mobile virtual network operator (MVNO) business model is for real.

However, a word of warning to promoters and image-makers: Don't underestimate the complexity of wireless service. Don't assume you can paste your client's famous name on the front of a cell phone like you can a restaurant. This takes work. You may not need a network to sell wireless, but to do it right you do need a back office, quality customer care and some intelligent network know-how. And if you rely on your vendors to put it all together for you and call you when it's done, your famous name could turn out to be Mud.

“Virgin Mobile may not have a network, but they still have 50% to 60% of the software necessary to run a company,” said Christopher King, director of telecom markets for BEA, which supplied Virgin with its WebLogic infrastructure hub for interconnecting the various systems and software.

And Virgin didn't just go out and buy the software. The company pretty much took charge of the integration, according to the operations support system (OSS) vendors involved in the launch and ongoing implementation — including Telcordia Technologies, which is used to being in the lead system integration role.

“They characterize ‘can do,’” said Tom Novak, director of product management for intelligent networks at Telcordia. “They took the project from contract to service rollout in less than eight months, which is unheard of considering they had to establish a relationship with [Sprint] and integrate half a dozen products.”

Those products include Telcordia's Pre-paid Services solution, BEA's WebLogic Enterprise Platform, ICT Group's Central Intelligence customer relationship solution, BeVocal's and ScreamingMedia's voice-driven entertainment applications, Siebel's eCommunications business applications and more.

King called it the fastest time to market he's seen.

Although Virgin made the call as to which vendors to contract with, it couldn't ignore the existence of the underlying network. “One of the things in the selection criteria was that not only was Virgin comfortable with the solutions, but that Sprint PCS also was comfortable,” said Carl Lewis, vice president of network solutions and services at Telcordia.

Telcordia and its OSS partners are hoping a successful MVNO model will spark some much-needed growth in the wireless space. “If they are successful, it will spur interest in the whole prepaid market,” Lewis said.

Altruism aside, Telcordia, like most vendors, also could use the work. “We would like to believe that a success for Virgin Mobile would make us a major player in [the MVNO] space,” Novak said.

The Strategis Group has projected the wireless market to grow by up to 184% by 2007 for users between the ages of 15 to 19 and by 93% for 20- to 29-year olds. It is unclear how much of that will be prepaid, especially in the U.S. where adoption has been much lower than in international markets. Virgin is hoping to break that pattern.

Wireless subscribers in the US, Q4 2001 (in millions)
Carrier	Wireless subscribers	Prepaid subscribers	Postpaid subscribers	Percent prepaid Subscribers
AT&T (affiliates)	20.5	1.8	18.6	9%
Cingular	21.7	1.1	20.6	5%
Verizon	29.5	2.4	27.1	8%
VoiceStream	6.5	1.0	5.5	16%
Alltel	6.7	0.6	6.1	9%
Sprint*	14.5	4.1	10.4	28%
U.S. Cellular	3.5	0.1	3.3	4%
Leap	1.1	1.1	0	100%
Other Carriers	26.1	3.4	22.7	13%
Total	130.0	15.6	114.4	12%
*27% of subscribers are ASL (clear pay) subscribers
Source: The Yankee Group
Second only to Leap Wireless, which is 100% prepaid, Sprint offers the biggest opportunity for MVNO hopefuls with 28% of subscribers already using prepaid .

While vendors are happy to be participating in this launch, most appear to be heeding the lessons learned from overly optimistic expectations for the CLEC market and are tempering their predictions for the MVNO business model.

“BEA views this whole MVNO thing as an interesting and important change in the way cellular phones are going to be offered,” King said. BEA's partners at ICT Group agree.

“Virgin has done this elsewhere, but the U.S. is the big apple. There's an awful lot of folks watching the launch of this model,” said Rudy DuBay, senior vice president of sales at ICT Group.

Investor, operator and vendor expectations are high, but so are the customers'. It's not because they are so demanding, but because they don't know any better — or any worse.

“The demographic Virgin is going after has never known a world without high-speed computing. They have never been without e-mail, and most have never known a world without the Internet, so they have very high expectations,” King said.

Because the network belongs to someone else, Virgin has only one thing to sell besides its name and a few fancy features (known as VirginXtras): its service. Customer care will play a big role in promoting Virgin's image, DuBay said.

ICT Group provides the voice and personality of Virgin through its outsourced customer service center in Spokane, Wash. “The call center reps have been very uniquely selected to match the profile of Virgin's target audience,” DuBay said. “They give good phone.”

Because Virgin's target market is so Web savvy, DuBay expects the Internet to be the preferred method for its young customers to communicate with Virgin in the long run. However, initially most of that will be through Amber, the company's electronic yet ebullient IVR interface between the customer and customer service.

“It's not like calling the phone company. It's like calling a buddy,” DuBay said. To make that happen, ICT uses voice recognition and natural language technologies from Nuance and ACD and IVR technology from Aspect Communications, which is linked to Siebel's eCommunications solution.

“It's a fun-filled environment, which is a bit different from the serious nature of most customer call centers,” DuBay said. With luck, this happy-go-lucky image will be only reminiscent of the environment created in the control centers of many a CLEC two years ago (NewEdge Networks comes to mind) and not indicative of the same miscalculation, which is that this is a serious business and people want serious service — even young people.

Another serious concern about the MVNO model in general is that unlike traditional reseller relationships, the MVNO (in this case, Virgin Mobile) has access to the primary network operator's infrastructure (in this case, Sprint's).

“It is opening up the network and might be the first instances where the other entity or operator within the U.S. is accessing another carrier's network, particularly the service control point,” Telcordia's Novak said.

The service control point provides the platform for activating and using services in the intelligent network. Other systems within Telcordia's prepaid service solution that help keep account balances and allow users to query and replenish their accounts include the SPACE service creation and provisioning system and the OpGateway.

Virgin could have shared Sprint's infrastructure but has implemented its own autonomous platform co-located in the Sprint MSC. So MVNO hopefuls must consider not only the complexity of buying, building, integrating and maintaining the best OSS possible, they must prove their worthiness to tap into the nearly sacrosanct Intelligent Network. That's the difference between a reseller and an MVNO. May the best model win.