Micro Mobile Model: MVNOs

The Walt Disney Co. hung up on its second MVNO venture, shuttering Disney Mobile in September, a year after it gave up on ESPN Mobile. In between, another MVNO, Ampd Mobile, filed bankruptcy and access to its customers was sold to Prexar LLC. The events call into question the future of MVNOs, which analysts said would thrive due to their strong branding and ability to cast a more targeted net.

Virtual operators are projected to have approximately 150 million subscribers by 2012, which would translate into nearly $30 billion in services revenue, according to Pyramid Research, which notes in a recent report that the global MVNO subscriber base grew by 24 percent last year to 84 million users.

Growth also is forecast in a 2006 report from Ovum, which predicts MVNO customer share of all wireless customers is expected to increase to 9.9 percent by 2009, with revenues expected to reach $8.8 billion by then.

Jitterbug is Great Calls answer to senior technophobia

Despite the shadow of high-profile failures, the MVNO micro-segmentation approach has produced a few bright spots among smaller players. For example, Flying J Communications Go Smart service targets truckers who want to communicate with family while on the road; kajeet Inc.s pay-as-you-go, kid-targeted, cell phone service has created a Whyville, a virtual world for kids (and its targeting stranded Disney Mobile users with a $50 credit to switch over); and Jitterbug for technophobic parents of the coveted Baby Boomer market has found success by keeping things simple and easy to use.

Since incumbents focus on the mainstream end-users the 18-to- 34 group they should wholesale the rest of their capacity to companies like us, contends Arlene Harris, founder and chairman of Great Call Inc., the company responsible for Jitterbug. Thats wishful thinking right now, but Harriss sentiments might foretell a powerful market change in years to come. In the meantime, with just one switch and one cell tower, Jitterbug has managed to send increasing amounts of traffic to its wholesale partners networks. We just want more opportunity to innovate and drive the cost out of delivery, says Harris, who believes the best way for the market to deliver on the promise of resale is to have carriers working through a model of aggregated access, where interfaces are served up cafeteria style so that the incumbents dont have to grapple with the competency of working with 50 or more smaller companies. That would enable resellers to pick and choose pieces they want from each carrier in a best-of-breed approach that would allow for more competition and innovation, adds Harris.

For now, she and others struggle to capitalize on their first-mover advantage over incumbents mainly because of the breadth of knowledge necessary to compete in what is already considered a mature industry. There are so many moving parts to manage how your content is distributed, and how to improve the service and maintenance of customers, how to tackle interoperability issues with manufacturers and wholesalers, and how to keep the product relevant and priced correctly all while making sure the marketing message gets across and that the price is right, Harris notes.

Jason Earl, vice president of Impulse Telecom Corp., an MVNO, CLEC and ISP focused on small business phone services, believes the VNO/reseller model would get a huge boost if wholesale carriers would allow their partners access to the same devices and premium services they offer over their own networks. Rather than leave us no choice but to use white-label phones because they want differentiation, wholesalers should realize they themselves could benefit from the grassroots marketing we can offer with billboards and customized signage. We can cater to a market of 20,000 customers and achieve the type of micro-segmentation a large company cannot achieve when trying to hit all people with one approach, Earl says.

Management of devices also is an ongoing challenge for resellers. Our customers want more functionality and more swapability than that which is possible when bundling handsets and services, according to kajeet CEO and founder Daniel Neal. He believes 3G screens, cameras, graphics and rich features will be critical to resellers abilities to reach subsegments. People no longer want to be forced into one phone/service bundle that hits them hard with activation fees, early termination fees and confusing taxes, says Neal.

Some resellers and rebranders hope the upcoming 700MHz spectrum auctions could become a beachfront for new players, like Google or Apple. That, they believe, might galvanize network operators to be more flexible in their restrictions.

If there were others providing delivery channels, perhaps this would turn into a broadcast model with advertising, and people could opt in or out. Maybe it would invite fourth-generation technologies and more opportunities for us and other resellers, says GreatCalls Harris. She hopes that ultimately network operators, OSS/BSS providers and resellers all get together to develop intersystem standards to drive down the cost and complexity of establishing real-time data exchange that inhibit the roll out of sophisticated, targeted services. The market just has pre- and postpaid, and a some resale of ringtones and applications, but the revenues for value-adds could be so much greater if we would be helped in our ability to target market.

Whether offering basic phone services, or more advanced data, content and multimedia services, most up-and-comers cannot be burdened with the complexity of managing relationships with handset manufacturers, or with establishing upstream and downstream systems for service creation, billing, customer care and data centers. For that reason, most choose to deflect risk through aggregators.

Since incumbents focus on the large enduser population the 18-to-34 group they should wholesale the rest of their capacity to companies like us.
Great Calls Arlene Harris

How much they deflect depends on how thin they really are. According to Ovum, the key components of an MVNO are spectrum, home location registers (HLRs), mobile switching centers (MSCs), subscriber identification modules (SIMs), branding, billing customer care, tariff and product development, brand visibility, and customer ownership. Ovum also points to elements for maintenance, such as campaign management, order management, and customer care (IVR and Web portal). Additionally, there are components for connectivity to wholesale partners: provisioning, mediation and call control. On top of that, there is billing and rating for pre- and postpaid, taxation, revenue assurance and payment management. With so many moving parts, its no wonder there is a very eager pool of MVNEs offering up hosted or ASP versions of existing OSS/BSS solutions. They want to come to the rescue with preintegrated solutions that link up to network operators through a blend of SS7 signaling, HLRs and proprietary and standard interfaces. They claim to have established mechanisms for network operators to pass along raw CDRs for mediation by the aggregator, which passes the data along to billing, revenue assurance and settlement systems all of which can reside with either the reseller or, in many cases, the MVNE.

There are literally dozens of companies that consider themselves to be MVNEs each with its own specialty: VoIP, prepaid, interconnect; or others for OSS, such as provisioning and activation, fraud management and revenue leakage; or, yet others for customer care, such as billing, Web portals and call centers and CSRs; or others that focus on mobile data services, such as WAP gateways, MMS, Wi-Fi.

They range in size and business model according to the needs of the individual VNO or reseller. The ones that are legitimate are those with a proven track record.

Disney Mobile and ESPN Mobile went with one of the more established MVNE players, Visage Mobile, whose service-delivery platform handles provisioning, mediation, call control and data and messaging integration for Sprint and its MVNO partners. In that relationship, Infinys rating and Geneva billing platforms are available through a Convergys Corp. partnership with Visage. Visage sets up the billing and systems, and resellers pay for access to data centers hosted by Convergys.

They usually pay a monthly cost, and as your subscriber base grows, the cost goes down as a percentage of the total. But, if they want to buy their own systems and have their own data center, we can also help the VNOs to set up their own data centers with blades and server rooms, explains Ted Fadick, director of professional services and information management for Convergys. CDRs are produced every 15 minutes for transmission to the MVNOs, which also get records from the [network operator]. With two sources of data, they have a system of checks and balances when looking at automated reports about daily balances on averages.

kajeet works with Telcordia Technologies Inc., a juggernaut in the MVNO space, boasting contracts with Movida, Virgin Mobile USA, KDDI and other MVNOs that work with Sprint. In all cases, we integrate with their customer care, and third-party applications so that we can enable balance checks, says Cathy McMahon, executive director, hosted solutions market management, Telcordia. The companys core product is its Converged Application Server for real-time charging, a network element that sits in voice and data networks for real-time transaction capabilities. When an MVNO subscriber makes a voice call, the operator switch sends the call to it, and we examine the information to determine the destination of the traffic, the time of the data, the rate of the call and whether the call is authorized to go through.

Great Call/Jitterbug went with a platform from DCA Services, which boasts real-time rating for wireless billing, account management and provisioning. The solution also is deployed with Sixtra Chile S.A., the first company to install a wireless prepaid platform in Latin America with Telefonica Moviles.

Despite their obvious value, it is important that resellers and VNOs be wary of too much dependence on MVNE choices about handsets and services. Down the road, VNOs and resellers will regret any compromise of control over content and customer choices. Rather than get locked into any vendors business model, resellers and VNOs should maintain control of core competencies. We think its important that we develop the service, the pricing, the marketing, the distribution and the care so that the customer is truly ours and not the carriers, says kajeets Neal. For that reason, kajeet makes sure to handle the frontend interfaces and to maintain systems and staff that support the customers.

To mitigate the level of reliance on MVNEs, resellers and VNOs also are pushing harder than ever for more access to their wholesale carriers systems and services. If they can leverage the network-grade OSS tools of their partners, they dont have to get locked into as many MVNE contracts.

Susana Schwartz is a N.Y.-based freelance writer and former editor of Billing World and OSS Today,

Convergys Corp.
Flying J Inc.
Great Call Inc.
Impulse Telecom Corp.
Prexar Mobile
Pyramid Research
Telcordia Technologies Inc.
Visage Mobile
The Walt Disney Co.

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