Big Big Brand MVNOs Need Back-Office Support

By Tara Seals

Mobile virtual network operators (MVNOs) are set to usher in a transformational era of brand marketing for wireless, and that’s bringing new backoffice considerations to the market.

The appearance of private-label resellers of wireless minutes is hardly remarkable, but here’s what is: MVNOs from outside the communications sector - with names like Walt Disney Co., ESPN, IKEA, Nike and perhaps even the world’s largest retailer, Wal-Mart - are expected to show up with wireless offers sometime this year. And the endemic lack of telecom expertise among these major consumer brands will drive a trend to prepaid billing and outsourcing OSS functions to specialized platforms and companies that exist to enable the nontelecom MVNO model.

“MVNOs are concerned with the three Cs: cost, customers and content,” says Allastair Hanlon, director of the Infinys product strategy at Convergys Corp. “Perhaps it’s not enough to differentiate on cost and customer service, so they need content and data services that no one else has got.”

Thus, brand MVNOs are banking on creating lucrative synergies with proprietary content. Atlantic-ACM reports that ESPN believes a significant part of the reported 89 million households that receive its channel would be ready to switch to their cellular service in order to access ESPN’s features. “Content providers, which constantly are searching for ways to expand their reach and to find new distribution channels for their products, are seeking access to new communication services such as broadband or wireless offerings,” write Atlantic-ACM analysts Maxime Cochet and Judy Reed Smith. “Entertainment providers have, more than ever, a role to play to prove that media convergence, done correctly, can be a great idea.”

On top of that, MVNOs go for micro-niches, “like prepaid offers for cost-conscious housewives that shop at Wal-Mart,” says Martin Creaner, CTO of the TeleManagement Forum. A look at the existing MVNOs in the United States tells the story: Virgin Mobile USA goes after the youth market, Boost Mobile attracts hip urban youth, and TracFone was created with truckers in mind. With such a preoccupation with brand identity, marketing and acquiring customers, implementing the back office to make it all work presents a distraction - and a challenge - from their core value proposition.

“MVNOs don’t have wireless expertise, and they don’t want to go get it,” says Tom Bobiche, senior vice president of marketing and product development at Visage Mobile, which was founded specifically to be an MVNO enabler, or MVNE. “They have few systems to manage wireless offers. Wal-Mart doesn’t have a subscribermanagement platform to track customers. ESPN doesn’t have billing. They are all interested in risk avoidance.”

Companies like Visage, which hosts OSS platforms on behalf of partners like Convergys, delivers back-office functionality to the reseller, tying all the parts together for a back-office in a box. “They want brand protection.”

One way to ensure brand equity is to minimize billing issues and bolster customer satisfaction. That translates to prepaid approaches to billing. “The vast majority of customers will be purchasing as a prepaid subscriber, requiring simple, automatic techniques,” says Creaner. “Most of it is by reverse-charge text message, where the sender pays a premium for a message requesting content, say $10. That acts as the financial transaction to purchase content, then the content is delivered after the charge for the text message is debited.”

Prepayment is one of the recent additions to EUR Systems’ newly productized MVNO enablement solution, MVNGO, which it rolled out at the beginning of 2005 and launched at the CTIA trade show in mid-March. “Prepaid is important to our MVNE offering in a couple of areas,” says John Caddell, vice president of strategic marketing for EUR and general manager of the MVNGO product line. “First, there are a large number of prepaid-only prospective MVNOs, and we want to be able to service them. Second, more and more of the typical post-paid operators - the ones we’ve served for years and years - increasingly see prepaid as another option they want to offer their clientele, not for creditrisk reasons but for balance-control and convenience reasons.”

While a prepaid approach makes business sense, a concern is whether Americans will accept the model as mainstream. “The question will be, is prepaid palatable and acceptable to the segment you’re trying to address?” says Amdocs’ Mike Michie, director of solutions marketing. “If they try to target retired people with fixed incomes and seasonal houses, where prepaid makes sense, with a co-branded offer with AARP, it sounds good. But they may find that group rejects the prepaid concept as completely foreign.”

But will MVNOs be able to support a post-paid business model? “One of the things that people coming from a history of being a service provider have an advantage in is a history and understanding of cycle payments,” says Michie. “Industries without that kind of background will have a harder adjustment and a steeper learning curve. They need to find vendors with deep experience in that capability.”

Amdocs has an integrated preand post-paid platform, so MVNOs can stay prepaid, or migrate customers between the two. For example, those youth customers will grow up, and a critical part of the process is growing with them. Some operators may want to offer voice and texting on a post-paid basis since there is less chance for bad debt and easier management, while higher-value content will be a prepaid offer.

Convergys also is addressing such MVNO-sparked needs, and soon will announce a deal with Siemens to create a joint pre- and post-paid solution called the Siemens charge@once with Infinys.

Putting in even prepaid billing platforms could prove taxing for a brand marketer, so some MVNOs want to leverage the assets of the host network. Yet this arrangement presents challenges for both MVNO and host carrier. “In the United States, carriers are less interested in letting people hook up to the network,” says Bobiche. “But MVNOs don’t want to be captive to carrier rate plans or features.”

Visage solves the issue by acting as an intermediary between the two. “Billing systems typically get records from a switch,” he explains. “For us, in a prepaid system we capture call as it is set up. The carrier will receive an MVNO customer, check in with us to check the balance, then enable the call. Then they get the call information and rate it. For content, the customer accesses the content via the carrier. The carrier sees it and sends it to us to find out what to do with it.”

Similarly, the Qpass Inc. managed service allows MVNOs to use the billing systems of the host operator, with a management overlay, says Steve Shivers, senior vice president of sales and marketing at Qpass, which offers outsourced content partner management for MVNOs and operators. “They can provide a highly differentiated service offering that way, because they can interface with the host’s BSS but maintain complete autonomy,” he notes. “Otherwise, they have to coordinate services with the host network, which likely has a competitive offering.”

Regardless of the back-office challenges for MVNOs and their hosts, it’s doubtful they will hinder the rise of these resellers.

“This industry is changing so rapidly and products are being introduced so quickly that you can’t put everything on hold for several months while you figure out the back office,” says Michie. “It’s creating quite a bit of activity and opportunity for vendors like ourselves.”

“We think there is a long-term, tremendously positive opportunity from MVNOs in the United States,” says EUR’s Caddell. “It’s as exciting an opportunity as we have seen since 1996” when the Telecommunications Act of 1996 spurred the CLEC market.

“There is a need for people between the MVNO and the MNO (mobile network operator),” he says. “The MNO wants to do it simply and generically as possible. Meanwhile, MVNOs need highly particular niche services. There is a yawning gap.”

He says that not only big brands but also wireline resellers, CLECs, cablecos and other service providers are candidates for the MVNO model, adding that there’s room for 50 to 100 successful operators.

MVNGO consists of capabilities EUR has provided to carriers, wireline resellers and MVNOs for anywhere from three to 30 years. These including billing, order management, payment processing, printing and mailing, customer service and Webbased self-service as well as handset fulfillment. To round out the soup-to-nuts offer, EUR is adding in a few new ones like prepayment, handset acquisition, carrier relations and content management.

It is the content and applications components that are becoming the latest province of enablement. “The MNO wants to offer vanilla services not create a competitor to its own offer,” says Caddell. “MVNOs need cool and interactive services.” EUR plans to facilitate this by certifying its hosted applications platform with the mobile operator and using it to deliver services for its virtual operator clients. It is building the offer for a third quarter release with the help of partners that operate service control points, application servers, AAA services and wireless-enablement for content. A bonus of the plan is that EUR serves as an aggregation point so that mobile operators don’t have to integrate with every MVNO. This also lets mobile operators be a little less picky about which resellers they partner with,” says Caddell. “If an MNO is trying to pick among the winners, they will be wrong. Let us host them and let Darwin decide.”

Syniverse Technologies, an SS7 provider and wireless clearinghouse, also is filling this gap with its new MVNO Enablement solution, also announced at the CTIA event. Through the Syniverse Short Message Service Center and Short Message Peer-to-Peer Protocol service offerings, the company enables its MVNOs to provide SMS services. It also provides a voice mail platform and number portability services.

Comverse, an enhanced services platform provider, also is taking on the delivery of personalized content, applications and billing for MVNOs with its new MVNO solutions suite announced in early April. Based on the Comverse Total Communication environment, the suite offers a range of services, including messaging and data services (voice mail, video mail, call management, SMS, MMS) and content delivery and infotainment applications. Marketing, hosting, billing and third-party support also are provided.

One of the perks of working with Comverse is that it is one of the largest U.S. aggregators of ringtones through the major record labels. MVNOs can have access to that library to offer their customers.

Eran Yaniv, associated vice president of multimedia for Comverse, says the company has been working with MVNOs in North America for a few months, but declined to disclose any names. He says Comverse traditionally has been an infrastructure player, but recently developed a partitioning mechanism that enables it now also to offer its solutions on a hosted basis.

“Some want to build their network and some want hosted. Some want to lead the hardware and software and put it in their network,” he says, explaining that while MVNOs use an operator’s radio network, they often have their own IP network.

Excel Switching Corp. also is helping MVNOs take control on the application side with its MSP1010 multisignaling platform. “The MVNO uses the 1010 to receive SS7 signaling to support Intelligent Network (IN) services,” says Mike Twomey, vice president of marketing for Excel Switching. IN services include SMS, caller ringback, prepayment and location-based services, he says.

Excel Switching has deployed the MSP1010 with an Asia-Pacific-based virtual operator and has a half dozen additional non-U.S. trials in progress.

The manufacturer is just beginning to market the pizza box-sized 1ru unit to MVNOs in the United States. It typically costs $1 million for the hardware and another $500,000 for servers and software using a traditional SCP. In contrast, Twomey says the 1010 is about $50,000 for the hardware and another $50,000 for the servers and software.

The company is adding media gateway capabilities to the 1010, which will add support for H.323, in second quarter. SIP support is planned for September. “A lot of people with firstgeneration media gateways don’t have support for SS7,” Twomey says, noting the significance of the pending enhancements. “Ours is integrated so it’s less expensive.”