Friday Haiku #4 - Sprint searches for a new CEO

Gary Forsee's out
Third place and sliding won't do.
But who'd want the job?

Friday haiku leadership telecommunications

Is there a huge business opportunity at the bottom of the telecommunications market?

Everyone has a cellphone, right? Some of us have two or more. Nobody needs cable or satellite; we all have that. Maybe there's an opportunity to sell more people broadband, who knows?

At any rate, it seems as if every American who uses telecom services has more than they need. But averages can be deceiving. America's roughly 70% wireless penetration rate includes upper-income rates of 100%--everybody has a cellphone...and lower-income rates below 50%.

Hamilton Sekino, partner in Diamond Consultants' telecom practice, explored opportunities selling telecom service to the lower and lower-middle income brackets at this month's Next Generation Mobile Partnerships Conference presented by Informa Telecoms & Media.

It was a fascinating presentation. Hamilton pointed out that marketing for most telecom and cable operators focused on high-end customers. And while prepaid cellular in the US appeals to low-income customers, its high churn rates make it a daunting business.

Diamond's proposition involves someone reselling a modest bundle of telecom services (video, broadband, wireless, wireline) at a discount to this market. An example package is:

$99.99 monthly fee
unlimited local wireless (a la Cricket or MetroPCS)
unlimited local wireline using VoIP
40 channels of video
1.5Mbps broadband

The key success factor is to be able to minimize cost of acquisition (to 1 to 1.5 times monthly subscriber revenue) and maximize discounts from underlying operators. (I'd add that it would also be important to keep operational costs low, by sticking to very simple plans, billing and payment.)

Who can do this? According to Diamond, a retailer like Wal-Mart would be a perfect fit, given its appeal to low-middle income segments and ability to distribute cheaply. Or perhaps an internet portal like Google or Yahoo, or a video company like DirecTV or Dish. In the right hands, it could be a multi-billion dollar business, according to their analysis.

The response by the conference attendees: much skepticism. But I find something very intriguing about this idea. There's a market, with money (not a lot) to spend, whose needs are not being met. There are companies that could provide service to this market. Stay tuned to see if this proposition becomes a product, and if the product becomes a success.

wireless mobile telecommunications strategy innovation

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.

innovation, telecom, MVNO