MVNO as a concept has been there for almost 10 years now but has failed to gain significant subscriber market share or make profits. The MVNOs were envisaged to provide service differentiation or lower cost of ownership but most of the MVNOs failed to live up to the expectations. However, there is now an opportunity to look at a different value proposition which is data MVNO. One of the readers (Phil Solis) of my earlier post on MVNO (MVNO Demystified) had pointed to the concept of Amazon?s Whispernet as data MVNO and I completely agree with him that data MVNOs could work if coupled with a compelling service.
Whispernet is a wireless delivery system for the Amazon Kindle e-book reader that allows the user to surf the web and download books and other Kindle content without the use of an outside internet provider. Whispernet works through an EV-DO system offered by Sprint and is free with the Amazon Kindle. Through this arrangement, the customer gets a complete solution to his basic need of reading a book electronically. The customer gets a book reader device, content and internet connection for downloading content from Amazon. Kindles were launched by Amazon in Nov?07 and were sold out within five and half hours of the launch. Amazon had not anticipated this huge success of their book reading solution and hence was not able to replenish the stocks until Apr?08. The huge success was partly due to the solution approach of Amazon where the consumers need not get into the hassle of getting another internet connection for the new device. It was a plug and play device. In this case, Amazon is acting as data MVNO for Sprint and the purpose of its becoming an MVNO is to support its own service.
Dell in Japan has tied up with NTT DoCoMo to resell mobile data airtime along with its notebooks. The notebooks are preconfigured and are ready for plug and play providing convenience to its notebook buyers. The service provider brand is invisible though the service provider is responsible for billing and collection. Here also, Dell is moving in the direction of data MVNO to support its product, i.e. notebooks.
The underlying factor in both the above examples is that the players are venturing into MVNO space to support their products thus having a strong value proposition. In other words, data was required to provide a better experience to their customers and hence Amazon and Dell ventured into the MVNO space. This is very different from the earlier round of MVNO ventures in which companies from totally unrelated fields tried to make money in the mobile space by becoming an MVNO. The only asset was their customer base but had no experience in the mobile industry which resulted in some high profile failures like Disney Mobile in UK and ESPN Mobile in US.
Currently, the content providers are dependent on carriers for delivery and billing of their content. There are not enough mechanisms for micro-payments on mobile and for content delivery the bandwidth is provided by the carriers. The flat data rate is still not available in many parts of the world and hence it could be quite expensive to download content. On the other hand, the many operators do not charge data download charges when content is being downloaded from the walled garden. This means that the content providers do not get the level playing field if they are not on the walled garden. With the advent of mobile payments, content providers have a unique opportunity of bypassing the carriers completely by becoming a data MVNO. Players like EA (Electronic Arts) can actually become data MVNO and bundle data with their games. Customers can pay for the game by mobile wallets or Stored Value Accounts and get the game delivered from EA. EA may not charge extra for the data bandwidth and would still make more money by saving on the revenue share with carriers.
Apart from the content owners, I also see a lot of device vendors following the direct to consumer route it is possible that console game players like Wii or X-Box may bundle internet subscription with their devices. I would not be surprised if even the digital camera manufacturers like Canon or Kodak start to bundle data services with their camera for instant upload of photos on the web while one is enjoying the holidays (of course, I expect the cameras to have WiFi/ WiMax/ 3G chip embedded in them in next 2-3 years). Another area that is likely to explode in terms of growth is M2M (machine-to-machine) communications. M2M communications can exceed human subscriber base in future and it would use data as a medium of communicate. It is imperative that M2M communications use a solutions approach to selling to gain popularity. This means the customer would want one stop shop where he or she can get the device as well as service activated. The players in M2M communications can become MVNOs to bundle data along with their devices. In case of M2M, the carriers would find the business complexities too complex to handle and would be happy to partner with an MVNO to reduce its workload. Moreover, the MVNOs are also likely to bring in efficiencies that would help reduce the cost to justify substantially low ARPUs for M2M communications as compared to human communications. Examples of M2M communications are electricity meter reading, fleet management, automobile insurance, vending machines, smart homes, etc. Kore Telematics is an example of M2M MVNO that is providing an end to end integrated solution to its customers. CrossBridge Solutions is another premier data MVNO specializing in Telemetrics and Machine-to-Machine (M2M) solutions.
As more carriers across the world build 3G and 4G networks, there would be excess capacity that would be available with the carriers. Carriers understand voice very well but when it comes to data, their efforts and innovation fall short of expectations. They took a long time to understand the dynamics of voice but cannot afford to spend same amount of time to get a grip on data services. Collaboration is the only way out and hence carriers would be more open to data only MVNO.
Juniper Research had estimated that the data revenues of MVNOs would increase from $0.5 billion in 2006 to $25.2 billion in 2012. I firmly believe that $25.2 billion could be topped due to emergence of data MVNOs. What remains to be seen is approach of carriers towards the data MVNOs. If the carriers view them as partners, they are likely to see an increase not only in their revenues but also avoid their marginalization.
A mobile virtual network operator (MVNO) is a company that provides mobile phone service but does not have its own licensed frequency allocation of radio spectrum, nor does it necessarily have the entire infrastructure required to provide mobile telephone service. As per the MVNO directory 2009, there are 366 active MVNOs and there are another 89 potential MVNOs. The concept of MVNOs was coined by Sir Richard Branson of Virgin Mobile in UK in 1999 and Virgin is still the largest MVNO with over 4 million subscribers in UK. There are currently over 50 MVNOs in US and Netherlands. However in almost every country, the share of subscriber base with MVNO is less than 10%
There are various forms of MVNOs depending on the value chain activities they cover.
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