Do You Know MVNO?

Amid the usual barrage of beer, car and fast-food advertisements over the past several months, regular TV viewers might have also noticed ESPN’s blitz for its new mobile phone service, called Mobile ESPN. It formally debuted during February’s Super Bowl XL telecast, and the ads promised real-time scores, stats and video highlights all delivered to your ESPN-branded mobile phone. The blunt tagline: “Life will never get in the way of your sports again.”

With this campaign, the self-proclaimed “worldwide leader in sports” announced its latest incarnation as a mobile virtual network operator, or MVNO.

OK. So what’s an MVNO?

An MVNO doesn’t operate its own wireless networks, like a traditional carrier such as Verizon Wireless. Businesses such as ESPN purchase minutes of use from mobile phone operators, in ESPN’s case Sprint, and offer wireless services with their brand firmly attached. In essence, the MVNO experience is the marketing department at its finest -- extending the brand of an already well-known entity to offer more of its (presumably) unique services to (naturally) make more money for said entity.

The first company to do this was Virgin Mobile, which launched in 1999 and has largely been held up as a success. Virgin’s business model relies on a pre-paid (or pay-as-you-go) plan for its mobile phone customers. Many other companies are following in Virgin’s footsteps -- Boost Mobile (uses Sprint) and Amp’d (uses Verizon Wireless), as well as Disney, which owns the TV networks ABC and ESPN, and is set to launch its MVNO service. The target audience for many of these offerings is young people who have highly specific interests and no desire to sign long-term, legalese-ridden contracts. For example, there’s the pay-as-you-go, teen-fashionable mobile phones for fans of singer and actress Hilary Duff, which launched last year. There’s even an MVNO specifically for the rich and famous called Voce, which has insanely high charges -- there’s a $1,000 set-up fee and a $400 monthly bill.

The MVNO play is an intriguing business strategy for many companies, and it’s gaining considerable traction in the United States. Deloitte’s Technology, Media & Telecommunications group speculates that this could be the year that MVNOs take off -- especially as content providers seek additional channels and telecoms look for new revenue streams (though, in some cases, wireless carriers risk cannibalizing their business if they’re not careful).

But because of the huge financial and technological investments, an MVNO is an extremely risky endeavor for companies, says Wes Henderek, a senior analyst for wireless services at market researcher CurrentAnalysis. “The market is just being flooded, and there’s no way all of these MVNOs are going to survive,” he says, noting that there are around 60 in the U.S. right now that have launched this year or are planning to launch.

However cheesy or half-baked the Duff phone may sound, ESPN was dead serious about its MVNO launch and spent a year and a half of strategizing its push. To read more about ESPN and its technology chief, and how he’s trying to manage the inherent difficulties with new initiatives such as Mobile ESPN, see my May 1 story.

The first incarnation for ESPN’s MVNO offering is a Sanyo MVP phone, which started off selling at $199 and can now be bought through ESPN.com for $99. One of the big challenges for ESPN was figuring out the best way to edit the content, scale down the rich media offerings for a mobile phone screen, and enable the seamless delivery of sports clips, stats and scores. Make no mistake, all kinds of technology is needed for this level of service delivery and content, as was the case at ESPN.

As CIO or IT manager, chances are you won’t be rolling out ESPN-branded or Hilary Duff-inspired phones for your sales force (unless, maybe, you work for some kind of sporting or teenage-related enterprise), so how will MVNOs affect your life, besides on a consumer level? For many IT departments, CurrentAnalysis’s Henderek says, if employees prefer an MVNO-specific phone, then IT will have to service and enable data connections with the company’s systems, which means more devices to manage from a back-end data integration and cost and rate-plan perspective.

Also, if you’re in the IT department at a content-rich company, with a big marketing budget and even bigger branding aspirations, then you may be called upon to help enable an MVNO initiative with the marketing department  -- like the IT folks at ESPN. According to Henderek, the key to success for ESPN (and similarly for other companies) is simple: “How many sports fanatics are out there who are willing to subscribe to a wireless service just for sports content? How big is the market?” he asks. “If they only can sign up 500,000 subscribers in the first two years, it’s not going to make financial sense for them. And if they don’t make this appeal to a wide enough audience, then the whole ESPN brand won’t be tied together.”

That said, Henderek does think that ESPN’s MVNO service will be successful in the long run. But like the games ESPN covers so zealously, anything can happen from now until then.

How about you? Are you interested in an MVNO offering at your company? Drop me your thoughts on this hot topic.

Copyright © 2006 IDG Communications, Inc.

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