Where Have All the Cowboys Gone?

By Tara Seals

AFTER THE HIGH-PROFILE DEMISE of MVNO maverick ESPN Mobile, the hype surrounding MVNOs has dimmed causing many back-office companies to stop trumpeting their enablement services for the sector. Now, a more chastened MVNE posse faces the looming specters of consolidation and evolving back-office requirements. Those that havent abandoned the saddle altogether continue to explore what they say are areas of opportunity in the MVNO frontier.

There are fewer of those classic customers to chase, says Chris Ruff, CEO at UIEvolution, which provides a content-discovery platform for MVNOs and others. A year ago, we were being approached daily by a potential client with a brand and a niche, but since theres been some shakeout, thats just not the case. Were having to adapt.

Because the MVNO market is no longer strictly a stable of prepaid, branding- and content-heavy companies with hasty business plans, service-enablement companies have had to meet more in-depth needs. It is really difficult for the pure-play MVNEs, who are less flexible and nimble, and set in their ways, to continue as pureplay MVNE companies, says D.P. Venkatesh, CEO and founder of mPortal Inc., which provides data services enablement for Disney Mobile and others. For instance, postpaid MVNOs will not see as rapid penetration or subscriber growth and must have the financial strength to be in the market for the long haul, at least three-to- four years. We will see postpaid MVNOs finetune their strategies based on understanding of target segments preferences, attitudes, usage and spending behavior.

Its also a question of underlying technology. MVNEs must be ready to embrace the latest and greatest technology with new innovative services, which continue to deliver value and enhance the overall subscriber experience for the MVNO, says Mike Morash, product manager for Bridgewater Systems. This includes the challenge of supporting the latest and greatest technology with devices that both meet branding needs of MVNOs, at pace with network innovation.

Tom Bobich, general manager and chief services officer at Visage Mobile, says he is encountering more solid, more considered MVNO opportunities. The companies that are interested in becoming MVNOs are looking even more diligently at the criteria for success, he says. MVNOs need to have strong value propositions that are relevant to their target markets. They have to cover the basics by providing a competitive offering in terms of handsets, rate plans and services. MVNOs also have to invest to build solid distribution channels. Lastly, MVNOs now realize it takes more than a few months to gain momentum for their wireless offering.

There may not be as many examples of the classic MVNO entering the market anymore, but new areas of opportunity are beginning to crop up: An MVNE can branch into the traditional wireless network operator market, or help wireline telcos looking to attack a niche or vertical market. The high volumes that a wireless network operator experiences almost preclude niche marketing, which would have a tremendous impact on the billing, ordering and customer support systems when the operator may have tens of millions of subscribers and hundreds of millions of transactions over the network in a single day. An MVNE, with experience in handling niche targeting and the associated backoffice needs, could really bring a lot of value here as an outsourced provider, says Ruff. It takes the same amount of time to test a small service as a large one, and its not cost-effective for that traditional segment to do themselves.

Another area to watch is the cable industry. For instance, the Sprint Nextel Corp.-cableco joint venture is about to bear fruit, with Time Warner Cable Inc. and Comcast Communications live with cell service in a handful of markets with more to follow. Cox Communications Inc., Comcast, Time Warner Cable and Advance/Newhouse Communications have all been in trials with blended quad-play services since a partnership announcement with Sprint one year ago. Thus, the offers will go beyond a typical MVNO arrangement, and require a more robust set of enablement services. VoIP, for instance, will be integrated; cable voice subscribers can receive alerts on their handhelds when a message is left at home and can access messages via a unified voice mailbox. And Time Warner reportedly has been testing dual-mode at-home Wi-Fi/ cellular service. Down the road, users will see remote DVR programming and wireless PVR functionality that will allow them to record cable programming on the handset.

In fact, the cableco may end up being the face of MVNO 2.0. The primary change in the market is that there is a move away from just anyone becoming an MVNO, to more balanced strategies toward the target audience the MVNO will pursue, says Scott Kolman, director of product marketing for Amdocs. While a strong brand is clearly a plus, the point is that the providers must create a sense of community whereby like individuals sign up with the MVNO in order to communicate with one another.

With all the changes in the market and a smaller customer field, signs of consolidation among MVNEs are starting to happen. Many already are partnering to provide a one-stop, best-ofbreed solution. And Lucent Technologies snapped up Mobilitec recently, which provides content-management software for wireless service providers. Oracle Corp.s acquisition of MetaSolv Inc. will give it a holistic MVNE competency in both the front and the back office. And some MVNEs deliberately are exiting the space to focus on other ventures.

We may follow trends of the European MVNOs, where some of the MVNOs will get gobbled up by larger players or incumbent mobile operators, and others will coexist happily in the market, targeting niche segments of the market, says mPortals Venkatesh.

Given the diversity of businesses that consider themselves to be MVNEs, it is more likely this would lead to combination of complementary businesses, rather than a combination of similar businesses to achieve scale, adds Visage Mobiles Bobich.