There are some parallels being drawn between Amp’d and Virgin, which isn’t going to help the latter’s planned IPO. Of course, Amp’d is also being compared to the MVNO business model in general, and the ESPN MVNO fiasco is also being brought up in relation to the Virgin IPO, such as in Forbes. It’s not a strictly fair comparison — while Amp’d and Virgin are both MVNOs in the US, in terms of strategy they are completely different. Virgin targets the budget consumer with cheap handsets and plans while Amp’d is going after the heavy media user with high-end content. However, I have to agree with the general consensus one problem MVNOs have is a misconception that not having to run a network means services can be run cheaply. In fact, the cost of customer acquisition is high (Virgin’s was $121 last year), the cost of customer service is high and both companies showed higher-than-average churn rates. While Virgin has much lower ARPU than Amp’d, about $20 vs about $100, at least it has worked out how to collect its bills.
Alex Besen, founder and managing consultant of The Besen Group, has given a short interview to InformationWeek about Amp’d and MVNO’s in general, and he calls into question Virgin’s customer figures: “They count their subscribers on 150 days, rather than the 90-day industry standard. So if you do the math the correct way, they have 3.2 million vs. the 4.8 million they claim“. Bessen suggests that successful MVNOs include Movida and Tracfone.