Since 1999, the MVNO model has been replicated and adapted around the world with varying degrees of success; depending on your precise definition, there are something like 300 MVNOs up and running around the globe.
However, the position of the MVNO within the mobile telecommunications sector is far from an easy place to be. Some incumbent mobile network operators see MVNOs as a threat and rail against those regulators who promote their launch; other network operators see MVNOs as a unique opportunity to re-sell excess capacity and reach outside their traditional core customer group. Many regulators view the MVNO model as the ideal lever to open up telecom markets. However, in the past year telecom and competition regulators in several jurisdictions have fought against each other as they exert their respective influences over their local telecoms markets.
As mobile phone consumers become increasingly sophisticated in their buying habits, simply reselling airtime is not necessarily a recipe for commercial success. Successful MVNOs are often led by strong brands and content. Differentiation is key. In mature MVNO markets — primarily western Europe, the
Disney Mobile was launched in the
While content delivered over mobile can promote a successful MVNO, it can also be its downfall. Despite this, many entertainment companies are looking at the MVNO model. They see that in their own organisation they have a strong brand and a suite of content such as music, videos and games, but not all content is ideal for delivery via mobile. There are physical and technological challenges. A screen of a mobile phone is a wholly different creature to that of a laptop or TV screen. The experience of listening to a downloaded music track is one thing, but viewing a downloaded music video over your mobile is quite another. Equally, consumer appetite for content far outstrips that available for distribution via mobile.
There are two ways of looking at the role of a content-driven MVNO — it can be seen as a mobile network with added-on content, or it can be seen as a portal to content which happens to come with a phone. The latter is a harder sell and one that has not been successfully market-tested to date. Eventually, the line between these two vantage points will blur. The rise of internet portals to support mobile propositions and drive content helps to bridge this divide, but an internet portal for mobile content can be more than the model of an iPod and iTunes. In a community or content-driven MVNO, the internet portal must become not only the feed for content but in itself a bridge to the community which underpins the MVNO proposition.
These two vantage points are mirrored from a commercial perspective. Is it the sale of airtime or content which generates a profitable revenue stream? As mobile airtime has moved from luxury item to utility service, so the value (and profit) derived from the sale of airtime minutes is ever-decreasing. Therefore, if content is to provide a profitable revenue stream, then providers will need to raise the bar on quality. The crucial element in the quality equation is in understanding what is suitable for mobile content and seeing it as a distinct product, not merely another outlet for content distributed through more traditional channels such as print media or TV.
A different MVNO model which is soon to launch has turned the role of content on its head. Some believe the cost of airtime is the biggest driver to acquiring customers. Therefore, in a move to reduce all those costs, an MVNO model is arising which is funded out of advertising revenue streams from advertising content driven to customers. Whether this model works remains to be seen but in a mirror image of other elements of a consumer-driven society, so mobile advertising and marketing cannot be ignored.
As MVNO models become increasingly more sophisticated in mature markets, so the regulators are opening up new jurisdictions. In
However, in some jurisdictions it is not the regulator which puts up the highest barriers to entry into the market. Changes in market conditions, rather than any change in the regulatory landscape, is fuelling a rise of MVNOs. In
As the MVNO business spreads around the globe, the jury is still out as to what makes it commercially successful. Content and brand are not the only ingredients needed to succeed. In the future, it will be difficult to imagine an MNVO surviving which is not community or content-driven (or both). In particular, consumer appetite for entertainment content — whether delivered over TV, internet or mobile — grows apace. If content-driven MVNOs are to be successful, they need to understand the unique platform mobile offers, while at the same time, in a ever converging (digital) world, how a mobile proposition fits into other media.
Rory Graham is a partner and Simon White an associate in the
