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Get ready for MVNO 2.0

We’ve done our best here at Prepaid Reviews to not proclaim the death of the MVNO. Many of them have fallen on tough times — and that includes some that are still in existence, not just those which bit the dust. Mark Lowenstein at Fierce Wireless makes us feel better about it. He’s penned an article about the next generation of MVNOs, and how they will differ from what we’re currently seeing.

His main examples of evolutionary MVNOs: Apple and Jitterbug. The latter we know about. The former? It seems kind of strange. We heard that Apple had planned to form an MVNO, but that never happened. Instead, Lowenstein is using a more liberal definition of an MVNO. Apple might have the right formula in offering a top of the line device and basing its revenue stream off that, rather than minutes and services.

In one smooth paragraph, Lowenstein hits on a ton of major issues:

To understand how MVNOs might be successful in this new clothing, we should understand why so many Version 1.0 MVNOs struggled. First, as retail wireless prices declined, the “spread” between wholesale and retail disappeared, leaving little margin on voice. Second, the relationship between the host operator and the MVNO has often been strained. Virgin USA, Boost Mobile and TracFone have been MVNO success stories because the operators were happy to “outsource” their prepaid business. In many other cases, MVNOs were treated as second-class citizens with respect to the latest devices, data network availability, or advanced features such as GPS. Clearly, many made significant errors themselves. They were naive about the capital involved and mis-spent what they had in some cases; misread their segments; and faltered on execution. Finally, I would say that their value proposition was not differentiated enough. Again, look at Apple. In nearly all aspects, the customer experience is significantly different, which we can see in the way people are using their iPhones.

He goes on to talk about Verizon and their Open Development Initiative, which will allow new phone manufacturers into the fray. It will also open avenues for developers, who can offer their applications on those new phones. With Verizon’s strategy of allowing these entities to create MVNOs of their own, we could see the entire conception of an MVNO changed. Now, instead of just going to a specific, brand-driven MVNO, you can go to an independent retailer, get a quality phone, and MVNO service right in one package.

Like most issues, there’s a sports analogy with the MVNO. The press is wont to call a team dead late in the season. It either resonates with the fan base, or riles them up. Either way, the media entity sells more papers, or drives more traffic to its website. Likewise, the press is quick to play taps for MVNOs. In both instances, just because the press says its dead doesn’t mean it is so. With MVNOs, we might just be seeing the beginning.

One Response

  1. PrepaidWirelessGuy Says

    Very interesting topic indeed. I definitely see the market evolving, however, I think the definition of MVNO 2.0 is far too liberal. I see Apple as an OEM. They’re doing great things, and introducing the opportunity for some great application development, but they don’t buy wholesale minutes on a carrier network (the core of the MVNO definition), and they don’t operation their own backend wireless support systems, etc. As carriers become more and more focussed on the value of segments for which they previously ignored/outsourced (ex. prepaid), the need for MVNOs will continue to diminish. We’ve seen the large carries (ex. Verizon & AT&T) start to push their prepaid services, and there are significant benefits to both the carrier and the customer to have an integrated experience with the “postpaid mothership” so to speak. That’s not to say that the MVNO model is dead, but I think the discussion is a different one. Lastly, Boost Mobile is not an MVNO (they are a wholly owned division of Sprint Nextel) , and Virgin hasn’t turned a profit since the say they launched, so I would hesitate to denote them as successful ;-) . Please don’t get me wrong, I think this article is thought provoking and extremely well written. I just think that the definition of MVNO 2.0 requires further discussion, and would likely be along the lines of very unique, targeted products and services that can only be provided by a third party entity.


    Posted on August 15th, 2008 at 1:01 pm

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