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Watch out, wireless carriers: MVNOs are gaining momentum

Whitey Bluestein, Bluestein & Associates, LLC — Sat, 22 Dec 2012 18:30:59 +0000

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.

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Sprint Galaxy Note 2 LTE lands on Oct. 25 for $299

Kevin C. Tofel — Tue, 16 Oct 2012 14:38:01 +0000

Sprint will release its first quad-core smartphone on Oct. 25 with the debut of Samsung’s Galaxy Note 2. The part-smartphone, part-tablet device supports unlimited data on Sprint’s fledgling LTE network and will cost $299.99 with a contract. Sprint will release the phone with Android 4.1.1, which is a recent version of Google’s mobile platform, in two colors: Marble White and Titanium Gray.

I have the Titanium Gray one myself, although it’s not for Sprint’s network: I purchased an international GSM version from overseas and use AT&T’s network with a low-cost Straight Talk SIM card. My Galaxy Note 2 doesn’t have LTE support, so those living in an area with Sprint LTE coverage will see far faster mobile broadband speeds.

Like my Galaxy Note 2, Sprint’s version has a large 5.5-inch display with 1280 x 720 resolution, 8 megapixel camera and a digital pen that works for inking and navigation. The phone also runs two apps on the screen at once; here’s a video look at the international version that Sprint’s will closely resemble.

Watch this video for free on GigaOM

Prior LTE handsets for the U.S. market have generally run on Qualcomm processors as the chip company has an integrated LTE solution available. Sprint’s Galaxy Note 2, however, shares the same 1.6 GHz Samsung Exynos quad-core chip as my own unit. The carrier hasn’t mentioned the amount of memory in the new handset, but if it’s 2 GB like is in the international edition — and it likely is — then this handset will be a stellar performer.

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Why Sprint is pushing LTE for 100 cities in “coming months”

Kevin C. Tofel — Mon, 10 Sep 2012 16:16:13 +0000

Sprint is continuing its big network push for fast LTE service, announcing on Monday that 100 cities will receive LTE in the “coming months.” That’s not a very precise timetable, but what is definite is that Sprint is quickly trying to catch up to its U.S. rivals who already offer LTE. Sprint’s key differentiator is unlimited mobile broadband service, which can help it keep or attract customers, provided it gets the LTE network up and running sooner rather than later.

In the press announcement of its network plans, Sprint says the following major markets are part of the LTE expansion over the coming months: Boston; Charlotte, N.C.; Chicago; Indianapolis; Los Angeles; Memphis, Tenn.; Miami; Nashville, Tenn.; New Orleans; New York; Philadelphia; and Washington, D.C. A full list of the 100 cities where Sprint is deploying LTE during this phase can be found here. The carrier expects to complete its 4G LTE network build by the end of 2013, essentially covering its current 3G footprint of today with LTE.

What’s the rush? Sprint’s bet on WiMAX back in 2008 cost it both money and time as rivals chose LTE for its speed and GSM compatibility. As a result, Sprint has watched Verizon roll out 371 LTE market since 2010 while AT&T is at 60 and growing. Even T-Mobile is on the LTE bandwagon: It has a strategy to refarm spectrum and launch its own LTE 4G service. Add all this up and Sprint’s early mover advantage in U.S. 4G is long gone and so too might customers be who can’t wait for the carrier’s network upgrades.

On a related bet, Sprint decided to spend billions to bring Apple’s iPhone to its device portfolio in 2011. It will take several years to get that money back and even longer if Apple does add LTE support to its next iPhone as the Wall Street Journal reported last Friday. Sure, Sprint may offer unlimited data plans, but if a shiny new iPhone is stuck on an older 3G connection that’s up to 10 times slower than LTE, will consumers pick a Sprint iPhone or one from a Sprint rival?

History suggests faster speeds are trumping unlimited data; at least when it comes to the iPhone.

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T-Mobile and MetroPCS working a deal? No way.

Kevin Fitchard — Wed, 09 May 2012 19:52:51 +0000

Bloomberg is reporting yet another merger rumor about T-Mobile, this one involving MetroPCS. According to the report, T-Mobile USA parent Deutsche Telekom would either take control of or outright buy the regional CDMA and LTE operator. Maybe someone from Metro is talking with someone from DT in some backroom somewhere in the world, but they can’t seriously be considering the deal.

Merging a regional CDMA operator with a national GSM carrier would be a disaster on the highest order and T-Mobile would gain little from the transaction – certainly not enough to offset the enormous hell it would have to endure to try to integrate the two operators completely incompatible network technologies. You thought Sprint Nextel was a mistake? T-Mobile-MetroPCS would make that deal look like the royal wedding.

Mergers are supposed to be about ‘synergies’ and economies of scale. T-Mobile would have to sell separate handset portfolios. It would have to maintain two separate sets of networks. The only thing T-Mobile has in common with Metro is an LTE network in the same spectrum band. That might seem like a big advantage until you actually look at the spectrum. MetroPCS is running a mishmash of CDMA and LTE carriers over its Advanced Wireless Services (AWS) airwaves, spectrum that also happens to be limited to the 14 cities Metro currently offers service.

Fourteen cities’ worth of prime 4G airwaves may be better than no spectrum, but it’s really a paltry amount if you consider the enormous lengths T-Mobile would have to go and the enormous sums of money DT would pay to get it. This deal ain’t going to happen. Ever month we see the same T-Mobile story, just with a different acquirer or acquiree inserted into the headline. Not to pick on Bloomberg, but I really wish the financial media would wise up – or at least bother to question the merit of these so-called deals.

Image courtesy of Flickr user, bods

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Motorola v. Apple 3G patent suit tossed by German court

Erica Ogg — Fri, 10 Feb 2012 14:46:23 +0000

Just a week after Motorola was awarded two significant victories in a German court over Apple, the companies’ luck have changed. On Friday, a judge ruled he would not grant an injunction against Apple products on the basis of a 3G/UMTS patent claimed by Motorola and dismissed the suit.

Patents blog FOSS Patents explains:

The judge explained that the court does not hold Apple to infringe claim 9 of EP1053613 on a ‘method and system for generating a complex pseudonoise sequence for processing a code division multiple access [CDMA] signal’. In the court’s opinion, MMI failed to present conclusive evidence for its infringement contention.

Motorola had argued that the patent named above was “essential,” meaning that someone — in this case, Apple — would have to use technology covered by the patent if they’re using an industry-standard practice. The problem is, the judge didn’t see it that way and says Motorola didn’t present a convincing case that the patent was essential.

Just a week ago, Motorola claimed victory on two separate rulings related to its ongoing intellectual property battle with Apple. In the first, an injunction was granted against older iPhone and iPad models that infringed on a GPRS-related patent. And in the second, Motorola won an injunction against Apple devices that receive push email notifications from its iCloud system in Germany. Apple said it would appeal both.

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Is Ericsson rolling out 3G using someone else’s technology?

Kevin Fitchard — Thu, 09 Feb 2012 00:08:07 +0000

When Ericsson bought Nortel’s wireless business in 2009 it instantly propelled itself to the top of the North American mobile infrastructure heap, largely because the deal exposed the Swedish vendor to the dominant network technology in the U.S., CDMA. But the CDMA portfolio Ericsson bought wasn’t entirely Nortel’s own. Rather than develop CDMA’s 3G component, EV-DO, internally, Nortel licensed the technology from radio specialist Airvana. Now Airvana is claiming that Ericsson is reneging on its licensing deal and is instead selling a “knock-off” version of its EV-DO technology to Verizon Wireless, Sprint(s) and other CDMA operators.

Airvana is better known today as a femtocell technology company today, but its early pioneering work on EV-DO a decade ago caught the attention of Nortel, which was trailing behind its primary CDMA competitor Lucent Technologies in 3G development. The licensing agreement wound up being very lucrative for Airvana and effectively made Nortel its only customer.

According to Airvana’s lawsuit, filed today in a New York state court (pdf), Ericsson sought to renegotiate its licensing deals with Airvana shortly after the Nortel acquisition closed. Airvana didn’t want to come to new terms, and, according to the filing, Ericsson soon started developing an “in-house” version of EV-DO to sell to its new CDMA customers, all of whom were experiencing huge surges in mobile data demand. In late 2011, Airvana said, Ericsson revealed that it had designed its own EV-DO products in collaboration with LG and planned to start testing them in Sprint’s network this year. But Airvana claims that’s all a front, and that the new EV-DO platform is a thinly veiled version of Airvana’s own product software developed from its source code. Airvana is asking for $330 million in damages and demanding Ericsson stop selling its new EV-DO product line.

We reached out to Ericsson for a response, and spokeswoman Kathy Egan Wummer said that while she could not speak directly on the lawsuit, Ericsson wouldn’t be backing off any of its current or future customer contracts to deploy EV-DO gear:

“We are aware that Airvana has initiated legal proceedings against Ericson. While we will not comment on ongoing litigation, we can say that we are committed to supporting our customers and will take appropriate action to protect both their interests and those of Ericsson. Accordingly, we will vigorously defend our right to deploy the Ericsson EV-DO Global System in customer networks according to existing commitments.”

There’s no way to know whether the lawsuit presents a serious threat to Ericsson. But if it does, it puts the vendor in a tough position since the 3G market is in astate of flux. It needs EV-DO technology today to meet current 3G network demands, driven by devices like the iPhone. But EV-DO sales will soon start petering off as operators move to LTE. Operators certainly won’t shut down their EV-DO networks when LTE arrives, but they will stop adding 3G capacity.

Image courtesy of Nikhil Verma

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Sprint can barely wait to rid itself of Nextel network

Kevin Fitchard — Wed, 08 Feb 2012 15:11:41 +0000

Sprint CEO Dan Hesse

For the first time in six years, Sprint’s aging Nextel and wireline businesses didn’t overwhelm all positive gains from its primary CDMA business in its quarterly results. Sprint was helped along by 1.8 million iPhone activations, leading to big gains in revenue per subscriber and boosting its total wireless customers to a record 55 million. Still, Sprint is anxious to get rid of the Nextel albatross and spent a good of its fourth quarter financial earnings call detailing its plans to shut down the iDEN network.

Sprint plans to winnow down its total cell sites by 44 percent, from 68,000 towers to 38,000 over the next two years, said Steve Elfman, Sprint president of network operations and wholesale. In 2011, Sprint plans to decommission 9,600 towers by culling cell sites from many of its markets, maintaining its Nextel and Boost Mobile services while shutting down excess capacity. Sprint has started publishing maps on its website identifying which sites are targeted for the scrap heap.

Sprint is simultaneously building its new network architecture, called Network Vision, which will support its current CDMA network and future LTE network across its myriad of spectrum bands. Elfman said Sprint’s infrastructure vendors Ericsson, Alcatel-Lucent and Samsung have already begun work on all 38,000 Vision sites and plans to bring 12,000 of those towers online in 2012. The commercial LTE service will launch by mid-year in 10 markets. Sprint CEO Dan Hesse revealed two more of the 10 today, Kansas City and Baltimore, adding them to the previously announced Atlanta, Dallas, Houston and San Antonio.

The launch of Vision, combined with the shedding of the iDEN network burden, will fundamentally change Sprint’s cost structure for the better, Elfman said. He estimated that the operational and capital investment costs of delivering a gigabyte of data will drop by 50 percent. The cost of delivering a voice minute will also be halved, he said, though it wasn’t clear whether Elfman was talking about those savings coming from its CDMA 2G network or its future implementation of voice over LTE.

If Sprint can really halve its data delivery costs, it may be able to breath a second – or even a third – life into its unlimited data plans. Sprint is the only nationwide operator that hasn’t given in to the pressure of capping or throttling data, but enormous demand for mobile broadband services has to be threatening that strategy. The longer it can keep up with its customers’ unlimited use, the longer it can maintain its key competitive advantage against AT&T and Verizon Wireless.

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Updated: Your Verizon Galaxy Nexus almost lost its Nexus

Kevin C. Tofel — Fri, 03 Feb 2012 21:53:24 +0000

Updated. The Verizon Galaxy Nexus LTE handset is reportedly no longer a Google-supported developer phone, which could have software update implications. Droid-Life has some screen shots indicating that the CDMA Galaxy Nexus — and as well as Sprint’s Nexus S — no longer appear on Google’s page showing how to get devices into fastboot mode. This mode is used to lock down the phone’s software.

I hit up some web pages that I recently bookmarked to help me flash images on my GSM Galaxy Nexus and I can validate what Droid-Life is seeing. The CDMA stock images for the Galaxy Nexus, for example now show a status of “archived, for reference only.”

I’m reaching out to sources to see what this means, because it could imply nothing more than the removal of developer options in the Settings screen of the CDMA Galaxy Nexus. But if not, I wonder if this is Verizon’s effort to gain complete control over the software on its Galaxy Nexus. It’s worth recalling that Verizon was expected to get the original Nexus One, but that never happened and no explanation was ever provided. It’s not a stretch to think that a control issue at that time entered into the situation.

The other possibility here is that this is related to Google Wallet and Verizon’s push for its own mobile payment solution in Isis. A Google statement provided to The Verge indicates this to be the case. If Verizon does have ownership over the Galaxy Nexus software, the handsets could lose a key advantage: Gaining the most recent software updates before other phones. That attribute is a key selling point of the Galaxy Nexus and if this does happen, I’m sure current owners of the smartphone will be upset.

Update: On a Google Groups page for Android Contributors, the following clarification was written after this post:

For various technical reasons, recent CDMA Android devices implement core telephony functionality in .apk files provided in binary form by the carriers. To function correctly, these .apk files must be signed by the so-called “platform” key. However, when an individual creates a custom build from the AOSP source code, they don’t use the same signing key as these CDMA flies were signed with.

The result is that these files don’t work properly, and pure AOSP builds running on these devices can’t place calls, access mobile data, and so on. Because we aim to make sure that we are as clear as possible about the degree of support that devices have, we updated the docs over atsource.android.com to reflect this reality.

We will still make available as many as possible of the closed-source binaries for these devices, and Nexus devices will continue to have unlockable bootloaders. And, of course, GSM/HSPA+ devices are still supported, as are any other devices we’re able to support. We’ve simply updated the documentation to be clearer about the current extent of CDMA support.

So this doesn’t appear to be an issue with Google Wallet or a wresting of control; it’s more of a clarification on CDMA support for Nexus phones. Whew!

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As CDMA dies in Latin America, 3G drives a data boom

Kevin Fitchard — Fri, 03 Feb 2012 18:40:15 +0000

Mobile data is picking up momentum in Latin America as the number of 3G connections in the region doubled in 2011, according to a new report from Wireless Intelligence. Operators in Latin and South America are shutting down their CDMA networks, replacing them with the UMTS systems used by the GSM world, and even making their first moves to LTE. That could produce a huge surge in mobile data use over the next few years similar to what the U.S. and Canada experienced after the launch of HSPA and the first 3G iPhone.

At the end of 2011, the total number of 3G subscribers hit 100 million, accounting for 15 percent of all mobile connections, according to the report. That huge uptick in data connections makes Latin America the second-fastest growing global region, just behind the Middle East/Africa market. The region also passed 100 percent penetration in 2011, which means many customers are now sporting multiple devices.

Wireless Intelligence predicts mobile data adoption will only accelerate. The monthly run rate of 3 million 3G additions in 2011 is increasing to 4 million this year. By 2016, 3G and 4G connections will account for just under 50 percent of total subscriptions. Two operators, Columbia’s UNE and Uruguay’s Ancel, launched commercial LTE networks in 2011, while AT&T extended its LTE network to Puerto Rico. The research firm also counted 12 new HSPA+ networks going up in the region since June.

Total CDMA connections saw a huge drop, falling from 6 percent of total connections two years ago to just 2 percent as of the new year. In December, Telefonica shut down its CDMA networks in Ecuador completely, but the global operator will deal its biggest blow to CDMA in June when it packs up Brazilian operator Vivo’s 2G network, the region’s largest.

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CES 2012: a recap and analysis

Thu, 02 Feb 2012 23:40:31 +0000

This year’s CES was the biggest in the show’s 44-year history, boasting 15 miles of exhibit hall aisles, 3,100 booths and 153,000 attendees. The Kerton Group sent three delegates to CES to scout out new products, listen to keynotes, watch announcements and get tips from insiders. This report, which bundles those findings together, serves as an outline of the major launches and overarching trends at CES (think smartphones for $0, Androidification and connectivity) as well as an analysis of what those developments mean for the larger consumer electronics picture. Companies mentioned in this report include Apple, Tesla and T-Mobile. For a full list of companies, and to read the full report, sign up for a free trial.

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