Where Can the MVNO Model Succeed?

It was a big blow to the telecom industry when ESPN announced that it was pulling the plug on its MVNO business. If ESPN, with the No. 1 male brand name in the country, can’t make it as a content-based MVNO, then who can?

Almost every major newspaper and trade pub has commented on the ESPN failure. In a nutshell, ESPN had several things going against it. The service was overpriced, and its marketing effort was weak. ESPN was charging for sports content you could get for free. It didn’t consider that people aren’t going to cancel existing contracts without a very compelling reason. All of this meant that ESPN missed its forecast of 250,000 subs in the first year. But even had it made those numbers, it wouldn’t have been enough to attract advertisers. Rumor is that it only had 10,000 subs when it decided to shut the doors.

Does ESPN’s failure mean the end to MVNO initiatives? No. This editorial looks at promising and today’s No. 1 winning MVNO business models.

So what are the promising MVNO opportunities? There are a few modest ones. Virgin Mobile appears to be making a go at pre-paid with 3 million or more subs, and Sprint—by far the largest wholesaler to the MVNOs—says that 10 percent of the 5 million users on its network come from MVNOs.

So there is an opportunity for newcomers, and of course there are those that can make the business case of the MVNO model to drive retail traffic, such as 7-Eleven, Tesco and others. And lastly, wireline or cable operators without mobile spectrum can make a quadruple-play business case for adding wireless via the MVNO route.

But which MVNO entrants are really going to rock?

Top 10 Reasons Why Enterprise MVNOs Will Be Winners

When the wireless industry talks about enterprise MVNOs, it means service providers like Cbeyond, which launched an MVNO targeting small businesses. That’s not what I am talking about here, but the giant enterprises becoming MVNOs themselves and providing wireless service to employees and customers. Here are 10 reasons why this will be a winning model.

1) Enterprise applications: Today’s wireless telecoms ignore development of special applications for enterprises. Why? Such application development and support requires a high-tech, hands-on software development workforce, which is not present en masse at wireless operators today. Also, sales cycles are too long. Plus today’s wireless network QoS is not sufficient to support tough SLAs. So an application vacuum in the enterprise space is waiting to be filled.

2) Big expenses: Today more than 50 percent of a large enterprise telephone bill is for wireless service. If there ever was a case for being your own phone company, this is it!

3) Mobile Terminal choice: Today’s wireless operators dictate the handsets and/or terminals that are available to enterprises. But enterprises want to go directly to handset vendors with their special requirements.

4) IP/IT expertise: There is more network edge IP and IT expertise in a large enterprise than in a wireless telecom to support customer applications.

5) Paying more: Enterprises can justify paying more for service than consumers.

6) IMS-ready: It’s proving very hard to make a near-term business case for IMS for the wireless operators. Also, the key to widespread IMS deployment is the availability of SIP terminals in the hands of the end users. Enterprises are flooded with SIP devices today.

7) Wireless security: The top concern by enterprise CIOs and CSOs today is wireless application security. It’s a no-brainer that security issues such as protecting confidential information or intellectual property would be easier to address if the enterprise provided employees with both wireless service and their own terminals. Think this way: How secure would an enterprise CIO or CSO feel if employee PCs were supplied by the telco, including an operating system configured by telco employees? In a few years, smart phones will have the same processing power of today’s PCs. Mobile security breaches are disasters waiting to happen.

8) New services: The enterprise worker created the market for mobile email and the demand for BlackBerrys. Just think what an enterprise MVNO could do in the arena of new service creation.

9) ROI: Today’s enterprises generate tons of revenue and profits for wireless operators. So the table stakes money is up for grabs. But it’s even better: take a giant company like IBM, with more than 300,000 employees. I don’t know how many of its employees have cell phones, but 95 percent is probably an underestimate. These employees have cell phones, either personal or corporate ones; you could probably make an enterprise MVNO business case on voice alone.

10) Competitive advantage: Picture this: You are a computer software company operating as a MVNO serving your employees, and have a leak-proof security infrastructure connecting data center to terminals, with confidential information and intellectual property flowing in and out of the data center. The employees can access only what they are authorized, and if the terminal is lost, no problem—it’s been further secured with biometrics. Your customer wants access to not only your content management technology, but your secure wireless distribution systems as well. That’s not only a new revenue stream, but also a competitive advantage.

If you need more information on enterprise MVNO opportunities, plan to attend TeleStrategies’ Mobile Enterprise Conference scheduled for March 22-23, 2007, in Washington, D.C.