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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But when you look at the rest of the world closely, less than half of the addressable population has a mobile connection according to Wireless Intelligence, the analysis arm of the GSM Association. The GSMA estimates that only 45 percent of the population who could get a mobile subscription (this might be a phone or a tablet or a cellular modem) has one in 2012, but it predicts that number to rise to 53 percent by 2017. That means in the next five years, we’ll cross over the point where more people have mobile access than don’t. That’s a good thing.

The research is part of a larger report that my colleague Kevin Fitchard reported on earlier this week, and expands on the idea that it’s important to measure the number of people with connections, not just the connections themselves. In poorer areas of the world, for example, people tend to have multiple pre-paid SIM cards to get the best rates, which can then make penetration numbers look higher than they really are. Thus, the report estimates there are 1.8 billion potential subscribers that operators must try to reach.

That’s a significant number, although many of these new subscribers will be in developing countries where the average revenue per user (ARPU) is far lower than in places like the U.S., Japan or Europe. From the release discussing the research:

However, there is a significant gulf in penetration levels between developed and developing markets. By the end of this year, the developed region is forecast to be close to 80 percent unique mobile subscriber penetration – the threshold above which subscriber growth will begin to slow. In contrast, subscriber penetration in the developing world is forecast to increase from 39 percent in 2012 to 47 percent in 2017.

This suggests that the vast majority of the 1.8 billion opportunity over the next five years will involve connecting ‘unconnected’ users in developing economies, which will require building-out network coverage into rural areas.

And my hunch is since those networks will have to be built at lower costs so companies can profit despite the lower ARPUs, this represents a big opportunity for vendors like Huawei and ZTE. It may also lead to innovative plan structures that strike a balance between operator profits and growing the base among people who have less money but a great demand for a mobile connection. And getting those people online should serve to drive up their income and living standards.

Image courtesy of Flickr user kalleboo.

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The SIM, known as a Subscriber Identity Module, is used by carriers to activate cellular phones and enable services. Consumers can also use the SIM cards to store a limited amount of information, such as contact data. That allows people to switch from one GSM phone to another by swapping the SIM card without losing service or contact data. With the new specification and smaller size, hardware manufacturers can gain a small amount of additional room for handsets and tablets with integrated mobile broadband service, which could lead to larger batteries or additional components.

Of particular note is that the approved SIM design appears most similar to Apple’s original submission. Why is that important? Apple was the first handset maker to start reducing network operator control from its smartphone and tablet products. The company has also hinted at completely owning the cellular customer relationship; through either a SIM card or an embeddable SIM. Our thoughts from earlier this year:

“But there’s more in it for Apple. If it’s able to control the SIM card in phones, it holds more sway over the subscriber. My colleague Stacey Higginbotham has covered this extensively, and was first with evidence that Apple is aiming to cut out the carriers eventually with even tinier embeddable SIM cards made by Gemalto. If they succeed in embedding these cards, iPhone or iPad buyers could buy the device direct from Apple and simultaneously choose the carrier they want to use, and Apple could activate service right at the point of purchase. It also means easier roaming on other networks.”

Granted, with the new standard, all hardware makers have access to the new SIM design. But Apple may be the one to gain the most in the end thanks to its patent for choosing and switching cellular providers directly on a smartphone.

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Since trying the service, I’ve received a number of questions about it and the company noticed. So in order to help me answer them intelligently, Straight Talk sent me a loaner unlocked iPhone 4, two AT&T SIMs (regular sized and micro SIM) and some pre-paid monthly service cards.

Unlimited isn’t quite unlimited, except for voice and messages

So here are some follow up experiences I’ve had with both my phone and the loaner iPhone 4, which hopefully helps you decide if Straight Talk’s $45 month to month service is an option for you. First, let me point out the two key exceptions that I’ve found.

1. Apple’s Visual Voicemail isn’t supported by Straight Talk, so if you go this route, you’ll be calling in to hear your messages. I don’t think that’s a huge issue, at least not for me personally as I use Google Voice for all communications. However, some folks may not be happy with the feature loss.
2. For $45, Straight Talk advertises unlimited voice minutes, messages and HSPA+ data (There’s no LTE support, even if your phone is capable of using AT&T’s LTE service). Based on user-reported experiences, Straight Talk won’t cut you off provided you keep your monthly usage to 2 GB or about 100 MB per day. Hit either of these and you might get a message about excessive use, along with the threat of service termination. History shows that I use about 1 to 1.5 GB of mobile broadband a month on my phones (I use Wi-Fi a ton), so this works well for me. If you want truly unlimited data or use more than 2 GB per month on your phone, this isn’t the plan for you. Don’t even try it, would be my recommendation.

Note: I asked Straight Talk about the limit and was told that company is trying to “focus on trust and communication with customers.” It’s likely that TracFone has no way to throttle after any limits, since it doesn’t operate the networks. As a result, the company will warn folks for excessive use and potentially disrupt service if you don’t limit your usage.

Good value or no?

If you can live with those two caveats, I think the service is a great value. I was using a $30 data-only T-Mobile SIM in my Galaxy Nexus paired with low-cost VoIP calling but due to coverage issues with dropped or missed calls, I’m much happier with the Straight Talk SIM. My first month of service ends next week and I’ve already added 3 months to my account for $130 thanks to a $5 bundle savings. And because my kids have T-Mobile Sidekick 4G handset and share 1,000 minutes, I ordered a pair of Straight Talk SIMs for them as well. They use very little data but tons of minutes and messages. Now I’ll save on their service and not worry about voice minute overages.

Some questions people have asked me along with answers:

• How hard is it to set up a Straight Talk SIM on an iPhone? Great question since you can’t directly access the network or APN settings on an iPhone without jailbreaking it. It’s quite easy to set up the new SIM. Just pop it in your iPhone and hit this site in mobile Safari over Wi-Fi: http://unlockit.co.nz/ Here you’ll get a small file to download after choosing Straight Talk as your provider. This file will set up the phone to work with the new SIM and the process takes all of two minutes.
• Is it difficult to set up the service on an Android or other phone? Nope, this is super easy as you can access the APN settings directly on most smartphones. You simply enter the settings provided with your SIM card. It takes a minute or two at most to type the data in.
• What about MMS on the iPhone? The above setup solution doesn’t enable MMS, so there are several manual methods to enable both data and MMS. First, back up your iPhone in iTunes with its current SIM. Then swap SIM cards and restore your iPhone backup with the Straight Talk SIM in the handset. Again, this isn’t an issue for me personally as I use Google Voice for messages. There’s plenty of information on Straight Talk setup in this wiki page if you need it. If you have a cut-down T-Mobile SIM, you can follow these simple instructions as well. Or you could jailbreak your phone to get access to the settings.
• Are the network speeds the same? According to my testing: Yes. I’ve used my Galaxy Nexus with both a T-Mobile SIM and Straight Talk SIM for T-Mobile’s network and found the speeds to be equal. On T-Mobile’s HSPA+ network where I live, I routinely see between 6 and 8 Mbps down, 2 Mbps up and ping times around 120 milliseconds. The same test on my iPhone 4S with a SIM from AT&T and then from Straight Talk showed no difference either.
• How’s the coverage? Since Straight Talk is paying AT&T and T-Mobile for their networks, the coverage is the same as if you were paying those operators directly. I haven’t seen any coverage differences at all. If you get good coverage now from one of the two carriers, you should get the same with a Straight Talk SIM.
• If I can save money with this SIM, why wouldn’t I do it? First, if you’re a heavy data user, I wouldn’t recommend this option, as stated above. Second, you’re bringing your own phone. That means you either pay full price for your phone — which can be anything from $400 to $700, if not more — or you keep your current phone and close out your contract with an early termination fee. You’ll have to check with your carrier to see how much that will cost. I’ll be closing my T-Mobile contract on the two Sidekicks, for example, so my break-even point is a few months out. Lastly, if you use a CDMA phone (such one from Sprint or Verizon) or you want LTE service, this plan won’t work for you.
• What about tethering or using the phone as a mobile hotspot? That’s expressly forbidden in the terms of service. You might get away with it for a short bit here and there, but once you bump up against some heavy usage in a single day, you’re raising the red flag to Straight Talk’s systems.
• Can I port a number to Straight Talk? Yup, not a problem. You do this when you activate your SIM card online. I didn’t do this for my account. Although I now have another new phone number, nobody knows it because of Google Voice. I will, however, port my kids’ phone numbers next week.

No, this service isn’t for everyone. Heavy-duty data users, folks that want LTE, use a CDMA phone or don’t want to pay full price for their handset are unlikely candidates. But for someone like myself that buys unsubsidized hardware, doesn’t want a long term contract and can supplement mobile broadband with Wi-Fi usage, the BYOP plan at Straight Talk offers solid savings and the same level of service found from national carriers.

Disclosure: The free 30-day service provided by Straight Talk was for testing purposes, not for my personal use, and the iPhone will be returned, per our editorial policy. I pay for my own phone service and provided my own Galaxy Nexus and iPhone 4S  smartphones, which I bought out of pocket last year.

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I sat down with Codecademy co-founder and CEO Zach Sims to hear about how the company got to this point so quickly, and what’s on deck for the months ahead. Here are a few key takeaways:

Necessity breeds invention

The idea behind Codecademy emerged out of the founding duo’s frustrations with the status quo of learning how to program. Co-founder Ryan Bubinski was already an experienced programmer who spent his weekends and free time during college teaching other students how to build web applications; but Sims was not nearly as familiar with coding. When the two entered Y Combinator’s summer 2011 class together in the hopes of launching a web startup, Sims tried to learn how to code on his own so that he could be of more help on the technical side of whatever business they founded.

“I was watching videos and tutorials and reading books,” Sims said. “But I found I learn best by building things and breaking things, not by just reading something. I wanted something interactive where I could learn in bite-sized pieces, and actually practice what I learned along the way.” So Sims and Bubinski decided to use their time at Y Combinator to build exactly that — and Codecademy was born. The company is now backed with $2.5 million in venture capital from a handful of elite investors including Union Square Ventures, O’Reilly Ventures, SV Angel and Yuri Milner.

Timing is everything

Codecademy’s message — that knowing how to write computer code is becoming just as important as knowing how to read or write — could not have come at a better time. While many sectors of the economy are suffering from layoffs and underemployment, the tech industry is having a full-on hiring crunch. Nearly every tech industry executive I talk to is currently looking to hire as many good engineers as he or she can find. The only problem is that not enough people right now have the programming skills necessary for those jobs.

Screenshot of an introductory Codecademy lesson (click to enlarge)

“Programming is the new literacy,” Sims said. “We’re all walking around with these phones in our pockets, using all these apps, but no one understands how any of it works. There are just not enough engineers, and this is the job of the future.” That Codecademy launched just when this started to become apparent on a larger scale has been key to its early success.

Listening to users — online and off

When Codecademy’s users started getting together offline by scheduling real-life meetups, the company decided to follow them. Last week saw the launch of official Codecademy meetups, and there are now official meetup groups in 171 regional areas worldwide to let people get together in person to discuss their progress learning how to code. Also last week Codecademy launched a Q&A feature within its web product to let people talk to each other via online forums while doing the Codecademy lessons.

Getting bigger, but staying scrappy

For now, Codecademy does not make any revenue, but in the future it could start charging for more advanced lessons and premium services, Sims said. Any revenue generation plans are a bit farther out on the horizon, as right now the company’s focus is on growing its user base and adding new lessons to the core free service. One thing is certain, though: Codecademy has no plans to become an accredited learning institution that charges for a degree.

Sims, who studied Political Science at Columbia University but dropped out several credits shy of graduation, said that Codecademy is founded on the belief that skills are the most important factor in getting good work — not educational credentials. “If you look at a lot of Silicon valley companies, they don’t hire based on a degree. A lot of the best programmers in the industry never even went to college at all,” he said. “Your skills should speak for themselves.” That sounds like a worthwhile lesson in itself.

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The new handsets may sound and look familiar to those who follow Samsung closely. The Galaxy Y lineup was first announced back in August, along with several other models, as Samsung decided to expand the Galaxy brand. Those phones with the “Y” label are described by the company as “entry models or strategic models for emerging markets or a younger audience more sensitive to price.” That’s why the specifications of the new Duo phones are skewed towards the low end: 832 MHz processors, 320 x 240 resolution displays and 3-megapixel, fixed-focus cameras, for example.

This combination of affordable features paired with dual-SIM capabilities, however, could appeal in countries where handset costs push some to share handsets, which is one of the uses of a dual-SIM device. One look at the targeted countries for the new Galaxy Y smartphones illustrates this: China, India, Latin America, and Africa, to name a few.

One phone can easily be used by two or more people thanks to the multiple SIM functionality: a feature Nokia has offered in the same regions. Nokia is still offering low-end devices with two SIM slots, but its move to Windows Phone opens the door for Samsung to broaden its audience in emerging regions. Essentially, the new Galaxy Y handsets allow Samsung to experiment in a new market to see if it’s a viable area for continued sales growth. In fact, I noted five reasons in June why Samsung will be the next smartphone king; dual-SIM support could become reason no. 6.

There’s another opportunity afforded to Samsung, however: The growing trend of BYOD, or bring your own device. Corporate employees have begun to carry two mobile devices; one provided by their employer for work purposes and their own handset of choice for personal use. Carrying two phones isn’t optimal, so one device that can separate work activities from personal ones has appeal. A dual-SIM smartphone helps with the BYOD movement by separating voice and messaging communications between personal and work modes.

Will these new low-end Galaxy Y devices start appearing in the corporate world? That’s doubtful, because they lack the oomph needed in today’s tech world. However, Samsung could migrate the dual-SIM capability up the “food chain” of its Galaxy line into the higher end phones, and that feature could be supplemented with Samsung software customizations to allow for “work” and “personal” modes. During the workday, the phone environment would be geared toward corporate activities, while off-hours, games and social networking apps would be accessible. In both cases, the dual-SIM feature would ensure both work and private communications continue to flow.

Update: Clarified that these are Samsung’s first Android-powered dual-SIM smartphones, not their first dual-SIM smartphones.

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To its credit, Sprint was always upfront about the fact that the originally unlocked Apple iPhone 4S handsets sold on its network would not remain so for long. It said following the 4S launch in a press release that “a SIM lock [would] be pushed to the devices shortly,” in order to bring the handsets in compliance with its policy of having the phone “locked to [its] network domestically and internationally.”

You can call Sprint via its Customer Care number to have the device unlocked again, as mentioned, so long as you’re in good standing, but Sprint also took the opportunity to point out that it has some very attractive international voice and data roaming plans of its own. In other words, it’d rather you just didn’t call and used its own services when abroad.

The iPhone 4S is Apple’s first true world phone, which is no doubt a selling point for international travelers. What isn’t a selling point is having to ask your carrier permission to allow you to use your device overseas ahead of actually traveling. Having the first iPhones get out the gates unlocked was likely a mistake on the part of Sprint and Apple, but it could’ve easily been spun as just a nice perk for customers. Sprint does have a lot of money-making to do before it can recoup its initial iPhone investment, however, so it makes sense that it wouldn’t leave a potential revenue source unexploited.

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Gemalto first demonstrated its Facebook for SIM at February’s Mobile World Congress event in Barcelona, Spain. While any phone today can shoot Facebook status updates via SMS, Gemalto’s solution brings a richer, more robust experience without the addition of an expensive data plan. The software provides a menu system for sending Facebook updates, viewing Facebook posts from friends and even commenting on their status.

Although the unique service doesn’t require a costly data plan, there is a fee involved. A free trial is offered, but once it expires, customers are charged a subscription — $1 for a day, $3 for a week, $9 for a month — for unlimited access to Facebook for SIM. This provides an additional revenue opportunity for both the carrier and Gemalto, while allowing customers to get more usage from their basic handsets.

In regions where smartphone adoption is fast progressing, Facebook for SIM likely has a limited audience. Those consumers already have a capable handset and data plan for the full Facebook experience. But as Erick Tseng, head of mobile for Facebook, told me on stage at our Mobilize event last month, mobile access to Facebook is nearing half of all usage. Facebook is moving to a common HTML5 code base and bought Snaptu to help it reach more feature phones, but those strategies require a data plan.

When you realize that most of world still uses a basic phone — without a data plan, but with SMS capability — it’s easy to see Gemalto’s Facebook for SIM has huge potential for a few years yet, even as Facebook itself tries to target the same feature phone audience.

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The answer may lie in a tweet which is related to the news we broke last year regarding an embedded SIM solution from Gemalto, a company that currently makes SIM and micro SIM cards.

@KevinCTofel @drizzled Crazy speculation but what about those rumors of Gemalto SIM from last summer?—
  (@Lessien) February 07, 2011

What if Apple wasn’t trying to bypass the carriers with the specially-designed hardware SIM, which would be built-in to the iPhone and be programmable to work with the carrier of a customer’s choosing? What if, instead, Apple is planning on doing away with the SIM card tray and multiple versions for the next iPhone, instead introducing one model that can work on both CDMA and GSM networks out of the box?

Based on Stacey’s original description of the Gemalto SIM, this makes a lot of sense. It would still allow users to sign up for and keep contracts with carriers at the time of initial purchase, but when travelling or roaming, a user could simply download an app or configuration setting to swap out carriers as required. Of course, it may mean that iPhones wouldn’t be as easy to lock to a specific carrier as they have been, but in markets outside the U.S., Apple has been selling iPhones unlocked off-contract since the introduction of the iPhone 4 anyway. Now that it’s opened up competition in the U.S., it might have enough leverage to make this happen.

A dual-mode iPhone 5 would also decrease Apple’s supply chain costs in the long run, and make the phone usable in a number of previously unreached international markets, too. CDMA isn’t nearly as popular as GSM internationally, but there are markets where it on fairly equal footing with GSM. Apple would be gain significantly from selling a phone in these markets with network interoperability.

Finally, it’s worth considering that Apple’s design preferences tend towards fewer and fewer outward protrusions and ports on the device’s surface. Steve Jobs and Jonny Ive would jump at the chance to make the iPhone’s minimalist lines even cleaner. And by removing the SIM slot, Apple could have more design room to fit additional components or utilize extra space for a larger battery.

If Apple wants to make a splash with the next iPhone with under the hood changes, this is definitely one that would do it.

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