Virtual networks aka Virgin and others
by: datsun310 (37/M/the real one) 10/17/01 11:29 pm
Msg: 311180 of 311184
Silicon Insights: Vitual Wireless Networks
By Commentary
By Andrew Seybold ABCNEWS.com
Catering to the constantly mobile consumer, Sprint PCS launches a new venture.
Sprint PCS and Virgin Mobile are gong a step beyond providing voice wireless networks. This past week, the two announced the first Mobile Virtual Network Operator, or MVNO, arrangement in the U.S.
Building on its already existing MVNO in the U.K. and Australia, Virgin Mobile will sell wireless devices and offer pay-as-you-talk wireless services under its own brand using Sprint PCS' network as its delivery mechanism.
Until now, wireless operators in the U.S. have resisted the idea of working with virtual network operators because they were afraid they will become nothing more than wireless transport companies. We all know from watching the long-distance carriers slide down that slope that there is no upside to being simply a transport company.
So why did Sprint PCS decide to sign a deal with Virgin Mobile? Part of the decision motivation came from the fact that the wireless space is becoming increasingly competitive, pricing has come down and customer acquisition is getting tougher. While Sprint PCS is one of the top 10 wireless carriers, it has less than a third as many subscribers as Verizon .
Sprint is looking beyond the transport jitters and sees a chance to increase the number of users on its system with this new venture. It already has plenty of capacity and is upgrading the entire network to cdma2000 1x, which will just about double its voice capacity.
Although new customers will primarily be considered those of Virgin Mobile, Sprint PCS gains a distribution channel, and stands to benefit nicely because it won't have to invest in additional marketing or sales activities, all of which cost money.
The Future
I see the future of wireless voice and data differently from the wireless carriers and I am giving credit to Sprint PCS as being ahead of the curve. I believe that within a few years affinity marketing of wireless services and devices will become mainstream in the U.S.
Virgin Mobile is only the first. Brands such as MTV, Disney (parent of ABCNEWS.com), the latest fad-based clothing — any company with a brand name and easy access to a market segment — will be selling wireless services over existing networks.
The wireless carriers won't cease to exist, nor will wireless phone vendors such a Nokia , Sony , Motorola or Samsung.
However, many wireless phones will no longer carry any of these brand names. They will carry the MVNO logo — Virgin, MTV, Coke , and so on. Motorola has already bought into this vision by offering to provide other manufacturers with reference phone designs as well as the pieces and parts to build them. Just add a shell and your own logo and you, too, can be a wireless phone vendor.
The Bottom Line
In practice, Virgin Mobile is not really the first MVNO to break into the U.S. While WorldCom doesn't own a wireless network, it has been selling wireless services using its own brand for a number of years. However, since it is a telecom provider, the service is considered merely a resale agreement.
Virgin Mobile was the one to really break the ice and other MVNOs are sure to follow.
AOL has an agreement with Sprint PCS to offer AOL Messenger to PCS subscribers. Suppose AOL decided to become an MVNO offering not only its instant messaging services but voice services as well? It could sell an AOL-branded phone, add the monthly charges to an existing AOL account and offer voice access to the AOL portal. AOL has millions of subscribers. If only 10 percent of the company's million of subscribers signed up for the service, AOL would have an entirely new source of revenue.
Nextel has already proven that affinity group sales work. Its contractors' network has been a huge success. Virgin Mobile may be counting on being able to gain brand recognition in the U.S., but from my perspective I think its biggest accomplishment is to have broken open the MVNO floodgates. Companies that already have a strong brand and an affinity group will step up to the plate and take the virtual network to its next level.
Andrew Seybold is a consultant and top computer industry analyst. He is considered by many to be the leading authority on the mobile computing industry. He's based in Los Gatos, Calif.
Posted as a reply to: Msg 311180 by datsun310 |
