Sorry for the long posting delay … running a company and staying up on the news is tough, but a lot has happened in the time since the last post.
Today’s topic is the MVNO – Mobile Virtual Network Operator. If you read the blog periodically, you might have seen an article I did on the possibility that Google or Facebook might be your next wireless carrier. That article was written over a year ago and in the last year an interesting trend has been developing in the wireless industry, the rise of the MVNO. These operators have grown out of a regulatory construct that was similar to the law that created the CLECs in the wireline industry. It requires wireless operators to sell their excess capacity to competitive providers at wholesale rates. MVNOs basically don’t operate their own networks (hence the name “Virtual”), they buy capacity from the Wireless operators and resell them to customers, often at heavily discounted rates.
“Then how do they make money?” you may ask. Excellent question. The original idea was that the Virtual Operators would make money by offering less customer services and by not having the maintenance costs associated with running a nationwide network. Well, it turns out that one of the largest costs for the established carriers is “Acquisition Costs”, or the cost to acquire customers, and it is primarily the subsidies they offer for phones, which can run $200 – $250 for popular smartphones like the iPhone. MVNO’s offer no-contract, full-price phones that you can connect to their network for a greatly reduced rate. In fact, MVNO’s got their start as pre-paid carriers (Boost, Virgin, TracFone, etc). However, the new crop of MVNO’s are able to offer usage plans, share plans, and the whole crop of alternatives that customers have gotten used to, at rates that are quite low, sometimes only $19 a month.
There are lots of marketing models that the new providers are trying, prepaid, postpaid, sharing, etc, which are also saving money. Most of the MVNO’s sell via the internet, eschewing the more expensive shelf space of the retailers. One vendor, Solavei, a T-Mobile MVNO, is even marketing through a Multi-level plan, like Amway or Tupperware. Most of the cheapest plans rely on the increased availability of WiFi, offering discounts to customers who opt to use WiFi at home or wherever it’s available. Really, the only thing the new crop of MVNO’s has in common is their plans to disrupt the wireless industry in 2013!