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MVNO Summit 2007
Conference Highlights
By Ken Osowski |
The 3rd Annual MVNO Summit, held at the Ventana Canyon Resort in Tuscon, Arizona January 29-31, focused on ways that MVNOs in North America can help ensure the success of their rollout strategies. In particular, the well-attended conference highlighted the importance of developing value-added services to address emerging wireless market opportunities. The number of wireless subscribers in the United States is expected to reach 270 million subscribers by 2010, a relatively modest increase from the 230 million subscribers currently using wireless phones. With only moderate growth forecasted, it is more important than ever for MVNOs to create differentiated services that launch successful business models.
One trend heavily discussed at the conference was the increasing reliance of MVNOs on MVNEs, or Mobile Virtual Network Enablers. MVNEs have emerged over the last year to handle the infrastructure needs for MVNOs, namely CRM, billing, provisioning and even credit checking. TeleSPACE, an MVNE that exhibited at the Summit, is taking advantage of this trend. TeleSPACE CEO Paris Holt noted that provisioning an MVNO is a significant “back office” undertaking that some emerging MVNOs are not resourced to handle. Holt detailed how the technology intensive MVNO setup can be implemented by the MVNE, enabling the MVNO to focus on branding and distribution, absolutely critical success factors for launching a new service. MVNEs can also address the needs of smaller MVNOs that wouldn’t otherwise be large enough to be considered directly serviceable by large wireless carriers.
Every speaker who talked about what it took to be successful as an MVNO discussed the importance of combining data and content with voice services. The days are gone when pure-play branding MVNOs like Virgin Mobile can emerge without niche-specific features. It is at the point that subscribers are buying prepaid cards specifically for data usage and content services. Examples of content that were mentioned as popular included ring tones, music, games, and “appealing photos.”
Including content is a way of incrementally pushing up ARPUs (average from the $2 range initially to as much as $5 over time with a successful content launch). According to Dean Fresonke, CEO of ClearSky Mobile Media, ease-of-use is critical to the subscriber content experience. He said that media content of all types must be readily accessible through a mobile-optimized user interface. Fresonke projected that mobile browsing will become more widespread as browser-enabled phones hit under the $100 price point, and as prepaid plans can be used to access Internet browsing and/or make voice calls by the minute off of the same prepaid wireless card. He cited downloads and browsing as being “table stakes” features today for MVNOs, and observed that although location-based services have been hyped over the last year without significant take rates, this year seems better poised for growth of these services with more economical data plans in place to support this application.
The investment needed by MVNOs to get started was estimated as being anywhere from $1M to as much as $250M in total investment, with a few MVNOs having come and gone over the last year because of lack of capitalization or failed business models. Mark Thompson, VP of Wholesale Services for Verizon Wireless, noted that wireless carriers themselves are more interested in MVNOs that can create complimentary business models rather than competitive business models based on pricing lower than the host carrier. He said that this involves a sharp understanding by the MVNOs as to what their target market is. It also demands creating the right service with the right level of service customization to differentiate the product offering in the marketplace. Thompson commented that capitalized MVNO failures more often occurred where the MVNO business model was vertically focused on the enterprise market. He also mentioned that Verizon Wireless currently has 38 MVNOs they are supporting in their network.
Many conference speakers and participants agreed that data and content are the future for differentiating MVNO services. The reality of data usage today for data and web enabled phones is that SMS messaging is still the mostly widely used data capability; one survey cited that 37% of all cell phone users send text messages, with the next highest usage dropping to 13% for photo messaging. Instant messaging is used by less than 10% of consumers. The consensus was, that in order for downloadable content and data access services to scale, the wireless network provider supporting the MVNO has to build these capabilities deep into the core of their networks in order for the services to perform well and reliably under load.
In summary, the Summit underscored that the New Year holds many opportunities for the MVNOs, but beyond branding and distribution, challenges still exist in order to increase ARPUs from the $2 range to the $5 range. Value-added services that include data access and content accessibility that target niche subscribers seem to be the way to get there, but MVNOs have to research and define their markets more carefully than in the past. At this point, the market no longer supports reliance solely on hunches to launch a successful MVNO business model.
Ken Osowski is VP of Marketing and Product Management for Pactolus Communications Software, an IP service applications provider. He can be reached at keno@pactolus.com.
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