Oh, Wireless, Where Art Thou?

By Tara Seals

NOW THAT CABLECOS HAVE PAIRED

with Sprint Nextel Corp. for mobile wireless service, what are other CLECs to do about achieving the desired quadplay? Many regional CLECs simply dont have the volume, expertise or resources to take on a full-fledged MVNO business. Fortunately, help is on the way.

Its now mandatory for a CLEC to have wireless, says Matt Johnson, CEO and co-founder of Visage Mobile, a mobile virtual network enabler or MVNE that works with a number of CLECs. They are up against the incumbent and the cableco, so they have two, sometimes three, competitors in most markets. The others have wireless, so how else will they survive?

For smaller CLECs, getting an airtime agreement is the greatest challenge. While all major operators have MVNO programs, Johnson says 100,000 customers is the baseline for signing an agreement with the larger operators. That leaves a large chunk of competitors out in the cold, he explains. To fill the gap, Visage is partnering with mobile carriers to create a structured program for smaller CLECs that will be available around March. While details are TBD,Visage generally will support the addition of wireless to the bundle by enabling a single bill and integrating wireless into existing CRM and order-entry systems. We will make it easy for reps to upsell wireless, says Johnson. We push our desktop out to them if they need it, or they can use their existing systems. They all have backoffice systems in place, but when they start to look at wireless its very different with wholesale access, unbundled billing and so on.

Consumer Cellular Inc. also launched a wholesale program last year to help smaller players enter the wireless fray. The company is an MVNO using Cingular Wireless networks, and charges resellers like CLECs on a perminute basis. It also gives them real-time access to the Cingular order-processing platform. CLECs can create their own rate plans and call functionality, perform order processing and set up billing.

While the customers should know theyre on the Cingular network, the bills and the SIM cards can be customized, explains David Gusky, president of the wholesale division at Consumer Cellular. We created our program to behave as an aggregator. If youre in telecom, you have to offer a wireless product. [Not to, would be] like running a bakery and not selling bread. But you have to figure out how to make it work because wholesale pricing and the general structure is challenging.

As an MVNO, CLECs pay upfront for marketing and the handsets to acquire the customer. So you buy a customer, who then creates a revenue stream, says Gusky. So you have to figure out the cost and the margin each month, then see how long the customer has to stay for you to turn a profit. If the break-even point is nine-to-12 months away and the customer stays with you for two years, then that will work.

CLECs going up against the marketing machines of Verizon Wireless, Sprint and Cingular may seem to have a tough row to hoe, but there are many ways to add value in the face of such competition. Carriers want to allow MVNOs to tap niches theyre not going after, says Gusky. But CLECs are broader, so they need to offer a range of service plans. That may seem to put them up against the big guys, but not so. The big carriers have done a great job brainwashing the consumer that they need a gazillion minutes. But if folks take the time to look at the bill, theyll realize they dont need that much.

Thus, CLECs can target the lower-usage customer by consulting and showing them a better rate plan. We cant compete with the 1,000- or 2,000- minute rate plans, says Todd Regan, vice president at GTC Wireless, the mobile arm of CLEC GTC Telecom. However, in the 700-minutes-and-less range, we have found a huge market with high profit margins. The company requires no contracts, and even offers a postpaid zero-minute commitment plan. Our customers are calling home to see whats for dinner, Regan says. Theyre looking for basic voice to get some things done, and we can bundle that for them and offer it at a lower cost.

Another advantage CLECs have in the market is a loyal customer base. The risk of acquiring a customer is lower, says Johnson. They can get a 20 [percent] to 50 percent conversion off an existing base, plus growth. They are strong, stable customers.

Gusky says it takes about two to three months to get up and running on Consumer Cellulars program, but cautions resellers to develop a realistic model for customer acquisition. Its much easier to sell wireless as part of a suite of services, and much harder to be a standalone wireless reseller, he says. Looking at that, most CLECs will sell wireless to their own existing base. Its quite an advantage CLECs have over carriers. Theres not a lot of loyalty with big carriers.

Competitors can add value through creative bundling, as well. From a consumer value proposition, the focus is on a single bill, and the primary motivation is the bundled offer, says Visages Johnson. So they can offer free calling to home and integrated voice mail, merged with broadband service its a suite of services for the customer. CLECs arent going after a niche segment.

Unlike mobile operators, CLECs also can bundle landline and wireless minutes. Carriers are loathe to do that because the two sides cannibalize each other, says Gusky. Its hard to buck the tens of millions of marketing dollars that go into saying you need two separate services, but theres opportunity there. CLECs have to get away from the notion that they have to compete head-to-head with the big guys and offer different plans.

In crafting a mobile strategy, CLECs should take into account strengths and weaknesses, and their customer bases. For example, they can add standalone international calling to their existing airtime arrangements. To that end, MobileSphere Ltd. launched CarrierILD last fall, an international long-distance service for MVNOs and wireless carriers. Using softswitch technology, it can provide integrated international calling services to wholesale clients. MVNOs and wireless carriers are grappling with how to provision international calling capabilities at competitive rates, says Gavin Macomber, executive vice president of marketing at MobileSphere. CarrierILD addresses the two significant issues facing wireless carriers today price and fraud control. CarrierILD includes discounted international termination to 220 countries, a turnkey provisioning, billing and reporting platform, anti-fraud control and usage monitoring, Web- and retail-based enrollment and replenishment options, and directdial solutions.

Consumers are increasingly utilizing mobile phones as their primary connection, foregoing land lines in greater numbers, says Jack Gold, president of J.Gold Associates, an independent wireless analyst firm. Many consumers are turning to MVNOs as their mobile choice for the particular features and/or functionality they offer. Since consumers want fullfeatured capabilities, international longdistance is a prerequisite for an increasing number of mobile customers, as the world shrinks and costs for international long-distance decline.

Directory assistance is another area. IFONXX Inc. offers a 411 service with live agent or auto-response versions that MVNOs can add on. CLECs can brand the directory assistance and offer transitional messaging that can be used for crossselling. INFONXX also offers enhanced content such as movie listings, flight times and location-based services, and can offer language options. Yes, 80 percent of queries are Yellow-Pages lookups, says Clayton LiaBraaten, senior vice president for customer relationships. But cell users are limited behind the wheel and need access to these value-added features easily. CLECs can differentiate themselves with this it strengthens that fourth leg of the table.

While data and content are seemingly everywhere in the news, most wholesale programs are voice-only. We expect to offer data within the year, and when that becomes available, that would really spark some excitement, says Gusky. CLECs could create some custom services with content.

GTC Wireless Regan says that while making it with the quad-play isnt a given, CLECs must at least try, given the wireless clout coming from cablecos and incumbents. Its very difficult to get into the wireless business without a loyal customer base, he says. Not every MVNO is going to make it. But if CLECs do their market research and target their customers with the right price points and feature sets, they are halfway there. Its not really a choice, you have to do it.