16 Comments

Summary:

It’s been a decade since MVNOs first challenged major wireless carriers, and now they account for more than 10 percent of mobile users. Telecom veteran Whitey Bluestein says the latest crop of MVNOs are poised to trigger a whole new round of disruption.

shutterstock_98951471
photo: Michaelstockfoto/Shutterstock.com

More than a decade ago, the first wave of MVNOs – TracFone, Virgin and Boost – brought consumers the option of prepaid service. No-contract cellular was disruptive then; today, it accounts for more than one out of five mobile users. The original three MVNOs still account for about half of the U.S. prepaid market (Virgin and Boost are now units of Sprint), and hold a 10 percent share of total wireless subscribers.

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:

Low-cost model

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, Ting and 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.

Not sold in stores

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.

MVNOs to watch

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 announced Project 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.

Whitey Bluestein, a 25-year telecom veteran, is a strategic advisor and corporate development specialist focused on prepaid, mobile applications, payments and roaming services. Visit whiteybluestein.com.

Photo courtesy of Michaelstockfoto/Shutterstock.com.

  1. Where is the mention of fabulous Straight Talk that everybody I know seems to be on?

    1. I believe Straight Talk is part of Tracphone. I use Simple Mobile for my Android and really like them. My daughter’s iPhone is on Straight Talk and other than no MMS she hasn’t noticed a difference.

  2. So, I had to duckduck what a MVNO is! WTF!!

  3. the biggest MVNO is tracfone, the only competition from a big MVNO is tracfone subsidiaries, that include Straight TAlk( has plans for all 4 major networks- att, VZW, TMo and sprint), NET 10 and simple mobile(tmo only). This is the 1000lb gorilla in the mvno market, since it is owned by America MOvil(carlos slim helu- the richest guy in the world).
    the reason these are disruptive is that i get a unlimited talk,t ext and 2 gigs of data for 45$ on ATT network with roaming on other GSM carriers, the cons are CS sucks, and they have a bad habit of sometimes messing number porting and losing your number, plus excess data use will get you kicked out. The data allowances are relevant to smartphone users.
    All the other mvno’s are fun to read about, but usually are pretly light operations, with just marketing and branding done by them, whil carrier supports the rest. As you can see the mostt innovative optionsd seem to come from Tmo and Sprint, both seem to lack in coverage and data speeds, except if you are in a very special place, right next to the tower….

  4. Rule #1 of writing. Explain what the fuck you are writing about. I am not going to go google MVNO then come back here to read what you wrote.

    1. MVNO means mobile virtual network operator. Like Virgin Mobile. Like Boost Mobile. My feature phone from Virgin Mobile costed me $19.99 with tax and costs me $19.99 + tax every month for 400 minutes. If I need 1500 minutes + unlimited SMS, I can use $29.99 + tax plan. I have saved myself from getting raped by Samsung, Apple, Google, ATT and Verizon. Now please go back and get cluster raped by your Apple on your iPhone or iWhatEver device paying $100 or more for service every month for nothing and $199 for a subsidizied new phone every 6 months until Apple continues to exist on planet Earth. Collectively, I have saved myself over $12500+ on my bills by not ever using a stupid smartphone.

  5. richardmgarrett Sunday, December 23, 2012

    I’ve been happily using StraightTalk for four months after being a VZWsub for 13 years. The service is great (in my area it uses Verizon towers) and saves me about $35 p/mo. Nevertheless I’m now experimenting with RepublicWireless. If it works it can save another $25 p/mo. (My take so far is that it does work but its biz model could be roiled by subs expecting top 4 service and quality and by others hoping to tweak their phones). I appreciate this roundup and was glad to see the links to a variety of MVNOs, many of which I’d never heard of. Good to see the byline, too.

  6. I’m interested to seeing the impact on these that the new t-mobile plans have. No contracts & lower plans but you pay full price for the phone (upfront or broken down into payments)…sounds like an established prepaid carrier to me.

  7. Whitey Bluestein Tuesday, December 25, 2012

    Interesting that half of the commenters use (and like) one of the TracFone brands, but with more than 21 million subs, TracFone is the largest U.S. prepaid provider, and largest MVNO in the world, so no surprise. Their five brands are: TracFone, Straight Talk (sold only at Walmart), NET10, SafeLink (government-subsidized service for income-eligible) and Simple Mobile, acquired last May. A subsidiary of América Móvil backed by Carlos Slim, the world’s richest man, TracFone is well-financed and is, as KC above points out, indeed “the 1000 pound gorilla” in the MVNO market. It also took TracFone more than 15 years to grow to what it is today.

    The companies described in my article are newcomers with great ideas and strong financial backing, and thus, new U.S. MVNOs to watch. To me, the trends toward lower-cost acquisition models (BYOD and online distribution, web marketing, social media, etc.) as well as offloading data to Wi-Fi, will be key to their success.

    1. On the road in a truck, I want to minimize the chance of having no signal when disabled out in the middle of nowhere, so I carry a GSM phone and a CDMA phone. Previously I used a Straight Talk CDMA phone (which used Verizon) and a Net10 phone (which used primarily ATT). Both services were very satisfactory. It was easy to activate, reload, and manage these phones online. However, after I got a VOIP phone for my home, I was not using a whole lot of cell phone minutes, and I was paying Straight Talk $30 a month for 1000 minutes, but was using much less. I switched to Page Plus (which uses Verizon) You can pay as little as $10 every 3 months (at 10 cents a minute) or $12 a month for 250 minutes, $30 a month for 1200 minutes, or $40 for unlimited talk and text. You supply a regular Verizon phone. (go to KittyWireless.com for more info) My ATT coverage is now provided by Pure Talk. I have the plan where they debit me $10 a month, and the minutes roll over. You can use a Locked ATT phone or an unlocked GSM phone. They sent me a free flip phone, which was fairly decent. They offer an unlimited plan for $38. Out of curiosity, I also got a SIM from Spot Mobile (which uses T-Mobile) It costs 10 cents a minute, and roaming is not available. You can pay as little as $5 every 3 months, and the minutes roll over. I put both SIM’s in a dual SIM phone. It’s interesting to watch both signal strength meters side by side for comparison. CDMA Roaming: I sometimes leave the Verizon coverage area and enter the US Cellular coverage area. My Straight Talk CDMA phone read “No Service” , while my Page Plus phone still works, but has the Roaming Indicator displayed, at the cost of 29 cents per minute for Roaming.

  8. So what is MVNO?
    This writer thinks that anybody reading this material “is supposed to know” that?

    1. MVNO is a Mobile Virtual Network Operator. These are companies that buy airtime from the established cell phone companies and re-sell their services, usually at a much better price, and with No contract or penalties if you leave them. Many require that you buy the phone from them, which will be pre-configured to work with their system, but is often not usable elsewhere if you decide to quit using it. Presently there are a few that use Verizon and T-Mobile, more that use ATT, and many more that use Sprint.

      1. Oh thanks for the definition. Should I chose this type of service, I appreciate that one should try to discover who the underlying cell provider is since it could? Would? Effect your coverage depending on your area? Do you know?

        Thanks again Fawjessyah

  9. I have been with Pure TalkUSA for a couple of years and I wouldn’t go anywhere else for my cell service. They are an AT&T MVNO. I recommend them to everybody.

  10. Hurry! The first month of FREE mobile service promotion ends in just a few days! Now until December 31, enroll your friends and family with unlimited voice, text and data mobile service and their first month and SIM card are FREE! View details at http://www.solavei.com/dreamteampr

Comments have been disabled for this post