While matching the impact of the first wave may be difficult, a new wave of MVNOs is reaching the market now with equally disruptive business models, such as dramatically reduced acquisition and service costs, low-cost voice and data services, and exciting new capabilities. Here’s how they’re doing it:
Handset subsidies can be a large part of the acquisition cost for traditional carriers (in the case of the iPhone, for instance, several hundred dollars per unit). In contrast, many new MVNOs are adopting Bring Your Own Device (BYOD) strategies, with SIM-only MVNOs like Simple Mobile, Red Pocket and Ultra on the GSM side, and a new BYO Sprint Device solution for MVNOs like Kajeet, Tingand others on the CDMA network.Sprint’s BYOSD program has the added benefit that no SIM kit or installation is required; the handset is activated simply via its serial number.
With BYOSD, for example, Kajeet offers network-based parental controls, web filtering and location services on recycled handsets. BYOD solves two problems for the MVNO – eliminating handset subsidies and reducing logistics cost (kitting, shipping, warranty repairs and returns). Even where customized handsets are used, MVNOs sell them above cost, eliminating costly subsidies.
Many new MVNOs bypass the retailer and dealer channel altogether and save a bundle by embracing online distribution, web marketing, social media, viral and multi-level marketing. In lieu of paying retailers high commissions and sales incentives while still fighting for shelf space, these MVNOs rely on newer, lower-cost targeting. SEO and SEM are just the beginning. MVNOs like Ting sponsor selected podcasts and weekly Facebook caption contests to reach their target audience. Solavei uses multi-level marketing, Facebook, and tried-and-true referral incentives. And Kajeet uses a “Mom Sales Team” referral program (that interestingly relies on old-fashioned word-of-mouth among parents).
Service – airtime and data – costs can also be reduced. With increasing data usage, many MVNOs utilize dual-mode phones (cellular and Wi-Fi) to offload voice and data traffic to Wi-Fi networks, which is increasingly available in homes, offices and businesses. And an added benefit for providers: offloading to Wi-Fi turns off the carrier’s meter.
Ting appeals to early adopters and Internet-savvy folks with a completely different take on pricing. Self-described as “Geek-powered,” Ting lets customers design their own rate plan, buying only as many minutes, messages and megabytes as needed, with plan sharing for just $6/device. Alternatively, customers can simply pay for actual usage at the end of the month. Is it prepaid or postpaid? Ting’s answer: “We call it fair, and trust you.” Customers manage usage from an online dashboard, and customer care is friendly, unscripted and helpful. Bring your Sprint device to Ting, or select from a range of Android handsets.
When Republic Wireless introduced its $19/month unlimited plan as a beta trial, everyone asked how they planned to do it. Republic relies heavily on Wi-Fi networks at home and work, using “hybrid calling” or cellular offload where traffic only rolls to Sprint’s cellular network when Wi-Fi is unavailable. Republic is now shipping a Motorola Android smartphone, running proprietary Republic software (for $259), which completes the no-contract package. And apparently the beta trial worked just fine: the same $19 plan is now available to all.
FreedomPop guarantees 500MB of free 4G mobile broadband data every month, with no data caps or throttling, and attractive plans ($17.99/month for 2GB of data, a cent per MB additional). Customers can earn additional data for each friend referred or unlimited data by engaging in partner promotions. The Freedom Hub Burst, a 4G Wi-Fi router that offloads cellular to wireline and supports up to 10 devices, is free with security deposit. They also offer the Freedom Sleeve Rocket, an iPod Touch case that turns it into an iPhone. Plans include trading bandwidth with other FreedomPop users, and creating bandwidth-sharing communities. Launched on Clearwire, FreedomPop will add Sprint’s LTE network next year.
Voyager Mobile , a Tennessee-based company with just nine employees, nonetheless thinks big. With unlimited talk at $17 to unlimited everything for $39, Voyager’s shrinking service plan program drops monthly rates by $1 for every six months of on-time payments. Last month, Voyager announcedProject Global Voyager for calling “across the world, without any roaming charges.” Using dual CDMA-GSM handsets, on Sprint here and GSM everywhere else, Voyager promises international voice, messaging and data worldwide “without a penny of roaming charges” in first-half 2013. Voyager says demand is strong. Two other MVNOs are also addressing international roaming costs – Karma in the U.S. and GlobalGig in London.
And everybody is watching Solavei, a T-Mobile MVNO that, under an elaborate compensation plan, pays bounties to members for signing up new customers. Members are encouraged to share with family and friends, and post on social networks in a marketing scheme described as “more like Amway or Tupperware.” Last month, Solavei announced it reached 65,000 members just six weeks after launch and had paid more than $1 million in commissions. This would be a roaring start, but not losing steam is often the challenge for multi-level marketing.
These and other new MVNOs are introducing attractive pricing with innovative technology and business models. As always though, execution and deep pockets will determine winners and losers.
Source: (gigaom.com) — http://money.cnn.com/news/newsfeeds/gigaom/articles/2012_12_22_watch_out_wireless_carriers_the_future_looks_bright_for_mvnos.html