Judith,
re: QCOM - CDMA - W-CDMA cdma2000 - GSM - "Network Effect" in Wireless
This morning, one of our friends from New Zealand - an occasional visitor to our thread - mentioned the 'Network Effect' as being the strategy of the GSM "Guild" in the technology battle between cdma2000 and W-CDMA:
Message 15298321
I responded and encouraged him to comment further since I hope to attempt a "QUALCOMM Network Effect for Dummies", to get the ball rolling.
Later this morning I clipped an article about "Mobile Virtual Network Operators" which I've pasted below. These MVNOs are quite literally virtual networks, and I was reminded of a paragraph in the Introduction to "Network to Net Worth" by Michael J. Mauboussin, I had just read.
"Physical networks, from traditional telephone to high-capacity fiber-optic systems, abound. But virtual networks also exist. And even though users in a virtual network are not physically linked, they greatly value the ability to interact. The one element that unifies all networks is that their value depends on the number of people connected to them."
MVNOs are an interesting phenomenon, and one of them (Virgin) has attracted a lot of publicity. While most prevalent in GSMland, I suspect we'll be seeing them in CDMAland as well, and some wireless watchers here may have some examples of same.
I thought "Network Effects" watchers here, might be interested in this article:
>> Growing the MVNO model - a Goal Shared By All Parties
James Moore
Paul Mitchell
EMC Cellular
05-Feb-2001
IBC's second MVNO conference, held at the Cavalieri Hilton in Rome on 18-19 January 2001, presented an excellent overview of the MVNO arena and was attended by 370 delegates. During the last six months, the market has seen the emergence of many new and potential MVNOs, the majority of which are in Europe; especially the UK and Scandinavia. Several case study presentations focused on these new MVNOs and from these examples, it came to light that brand and the ability to offer genuine value added services were seen as being key an MVNO's success. The conference also highlighted the fact that MVNOs can be seen as examples of the convergence currently taking place in the telecommunications industry.
Defining an MVNO
MVNO stands for Mobile Virtual Network Operator. Once past the acronym, it becomes more problematic to provide a concrete definition. Over the course of the conference, many different definitions were offered and the difficulty of providing one definition has arisen because there are many different shades of MVNOs (see below).
The result of the discussions regarding a definition is that an MVNO does not own spectrum, it leases it from a network operator with whom it has a relationship. An MVNO has full control over how they interact with their subscribers and organises its own billing. It also has full freedom to offer differentiated tariff options to the network operator.
Though varying definitions of what makes an MVNO were expressed at the conference, it is apparent that there are some companies which are universally agreed to be MVNOs. These include the following:
Country MVNO Network Operator
Australia Virgin Mobile C&W Optus
Denmark Tele 2 Europe Sonofon
Ireland Cellular 3 (Imag!ne) Eircell
New Zealand Telstra Vodafone NZ
Norway Sense Communications Telenor
UK Virgin Mobile One 2 One
UK Carphone Warehouse(Value Telecom) One 2 One
UK Energis Orange
As can be seen from the above examples, the proliferation of MVNOs is, at present, largely limited to Britain, Scandinavia, Australia and New Zealand. This is primarily because these markets are ahead in terms of encouraging the growth of MVNOs (though regulatory support is still lacking).
There is no doubt that there is a large potential for MVNO growth, the majority of delegates who attended the conference would like to see the MVNO model succeed. Reasons why MVNOs could become more common in future markets include:
* Greater regulatory promotion of the MVNO model
* Companies taking advantage of their expert knowledge and resources to promote content services
* Network operators seeking to establish an international footprint
* The need of network operators to maximise revenue, especially from unused spectrum. This is particular relevant for those new entrants in the UMTS market place who will have to build networks from scratch.
Regulatory Regime
Telecommunications regulators vary between countries. Therefore, any potential MVNO needs to take account of the regulator with whom they will be dealing. This is an important measure for the potential MVNO to take, and has not lessened in importance despite comments made by Leo Koolen, from the European Commission, regarding the EU wishing to harmonise MVNO issues across the continent. It is clear from his comments that the EU wants to encourage MVNOs and any open-access regulatory model which comes out of an EU led initiative will have clear benefits for those operators seeking to establish a pan-European footprint.
The details of how any such harmonisation will be achieved have not yet been set down. The EU is currently seeking public consultation as it proceeds with the drawing up of guidelines. Marja Heinonen from the Ministry of Transport and Communications in Finland commented that the regulator was there to 'provide a level playing field'. She said that it is up to the industry to specify what would be reasonable conditions for international MVNOs (and not the regulator). Marja Heinonen argued that it was important to avoid over-regulation. There clearly has to be input from operators and potential MVNOs into the creation of regulatory guidelines, but these guidelines should also be dynamic and 'non-tyrannical'.
Michael Richardson, Senior Policy Advisor of OFTEL, talked about regulatory issues in the UK. He highlighted the fact that since 1984 there have been resale obligations in the UK market which have chiefly affected Vodafone and BT Cellnet. Many service providers (such as Martin Dawes) have been bought by network operators. There are currently 50 independent service providers of which ten have over 50,000 wireless connections, a consequence of the fact that the UK, unlike other countries, does not have an operator with a clear dominance in terms of market share. OFTEL is currently in the process of reviewing its position on MVNOs. It is unlikely to mandate MVNO access, but if it did, it would do so on a 'retail minus' basis. Michael Richardson also said that it should not be down to the regulator to (i) define what an MVNO is and (ii) decree which current service obligations need apply.
Establishing an Agreement With An Operator
The conference took a look at how to establish MVNO operations, with particular emphasis on the agreement with an network operator. The point most often made was the need for a 'win/win' agreement. Both parties need to come to an amicable agreement in which they both stand to gain. At present, due to the lack of regulatory guidelines, the balance is in favour of the network operator, who is able to push for an above-market price to lease its spectrum. Thus those MVNO arrangements which have been made already have not been either easy nor as favourable as they could have been to the MVNO.
However, whether an ideal arrangement can be reached in the future is another matter. Legal issues can come into play, as in the case of Telia, Sweden, which wanted to arrange an exclusive MVNO contract, but has been thwarted in this design by Swedish law. The operator has now put these plans on hold and has stated that it will sign MVNO agreements after it has launched 3G services.
One of the factors which has held up the development of MVNOs so far has been the fear amongst regulators that MVNOs will be able to strike multiple agreements with network operators. This will allow them to offer the best possible service - better than any offered by the incumbents. For example, their coverage will be superior to the network operators as the MVNO will be able to select the strongest signal at any geographical point. More specific regulatory guidelines will encourage the growth of MVNOs.
However, regardless of the terms of the agreement between the MVNO and the network operator, the key will be either a successful brand or a unique offering. The MVNO is essentially a new entrant to an already competitive market and needs to act accordingly. If a strong brand is readily available, for example Virgin, then the MVNO has an advantage. If it does not, then the brand will need to be promoted well. Any company with a well known name or valuable assets will find themselves placed in a good position to enter the telecommunications market and this is one further reason why such companies may be encouraged to draw up an MVNO agreement.
The MVNO in a Specialist Role
As wireless markets reach maturity, MVNOs are in a position to move away from the simple resale and discount model to the provision of niche value-added services. Specifically, these will be orientated to content provision with regard to data services. This means that many different players will be able to enter the market, all offering specialist services and knowledge. Companies may enter the telecommunications market under their own steam or they may find themselves approached by network operators who have valued the content a company is able to provide. Within the next few years we could see a plethora of MVNOs fighting to market their own services and offerings.
Over the two days of the conference delegates heard that this situation could lead to someone with a terminal handset becoming a subscriber to several different operators. Firstly, there would be the network operator, and then there would be however many more MVNOs the subscriber wished to tie themselves to. For example, they could subscribe to one MVNO for specialist sports news, another because it is their favourite publication and another because it is where they shop most and they want to be informed of current offers.
Two factors will affect the development of such a scenario. Firstly, network operators are well aware of the need to grant subscribers what they want and are already establishing SMS and WAP services which inform their subscribers of a wide range of material. Secondly, it has frequently been repeated that subscribers want simplicity (with tariffs, services and contracts) and this fact does not lend itself to the development of multiple subscriptions.
The MVNO as a Strategy To Expand Operator Footprint
MVNOs will not be exclusively drawn from fixed line operators or new players to the telecoms market. They will not be focused solely on specific content, neither will they be part of media empires or retail. They will include existing network operators too. How many MVNOs there will be in five years time remains to be seen, but the model is one which network operators can use to establish international footprints.
Those network operators who have missed out on UMTS licences may yet be able to launch 3G services in target countries by means of MVNO agreements.
For existing operators, these arrangements will prove much cheaper than purchasing a licence or arranging a merger or takeover. They will allow operators to launch services in foreign markets, to seek to carry through their plans for a global brand and to gain revenue from leasing out their own spectrum. This last point is an important consideration given the enormous fees paid by European operators for UMTS licences.
Conclusion
The number of MVNOs is almost certain to grow. There are clear advantages in any agreement for both the network operator, who wants to maximise revenue from spectrum, and the MVNO, who will be able to use their unique position to attract subscribers. This increase will come from existing operators expanding their operational sphere, fixed operators entering the wireless market and companies who understand that their strong brand and expertise grant them an opportunity.
If there was one thing which the conference brought to light, it is the fact that there will be many levels of MVNO. Some will be little more than service providers, others, like Virgin, will control their own billing and customer relations. This has given rise to a wide variety of definitions regarding what an MVNO is. A clearer definition may come with time, but for now, the vast majority of attendees at the MVNO conference showed a strong desire to get the MVNO model working. <<
- Eric - |
