Monday, September 25, 2006

What the hell is an MVNO?

This week I'll be blogging from the MVNO Strategies & Markets Conference in New York (registration information here if you're interested). The posts will be more narrowly-focused than normal. Therefore, to orient our non-telecom-professional readership, I'll need to provide some background.

MVNO stands for Mobile Virtual Network Operator. In the old analog days, that meant cellular reseller; i.e., a company that resold cellular service under its own name. Three major changes have occurred in the US and many other markets around the world that have enabled this old reseller market to reform into what we now call MVNO.

  1. Digital cellular has replaced analog. With that transformation has come more open standards, such as GSM, CDMA and various advanced intelligent network (AIN) protocols. This has opened up wireless network technology to new suppliers and, important for the MVNO market, improved the ability for partners of the network operators.

  2. Creation of multiple, nationwide carriers. Both modifiers are important. Multiple network operators (preferably three or more) create a competitive environment that incents carriers to resell excess capacity to MVNOs. Nationwide coverage allows MVNO to sell service most everywhere in a country with a single carrier agreement, an important simplification that improves the marketing leverage of an MVNO and also reduces cost.

  3. Investment in wireless data infrastructure. Carriers throughout the world have spent tens of billions of dollars on 3G infrastructure. Gaining a return on that investment is important and again incents carriers to bring in MVNO partners.

The result has been an explosion of MVNOs around the world. Tesco, a grocer, has brought on millions of prepaid clients in the UK. Disney has created a specialized mobile family application that it is selling in the US. And PLDT from the Philippines provides service to hundreds of thousands of Filipino expatriates in Hong Kong and soon in Singapore.

Will MVNOs remain an important part of the wireless landscape? Or will the marginal ones fade away, and the strongest merely become subsidiaries of the ever-growing carriers? We'll have to stick around for a few years to know.

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