Earthlink, SK Telecom Try To Show The World How An MVNO Is Done
By Mike Masnick, Thu Jan 27 01:45:00 GMT 2005

Earthlink and SK Telecom kicked off quite a joint venture today, by planning to create an MVNO that takes what SK Telecom has learned in South Korea and brings it to the United States. Are Americans ready? Even more importantly, are other American operators ready?

Of all the companies to do this kind of deal, Earthlink is probably the least surprising. Unlike its larger and more well known competitor AOL, Earthlink has never been shy about testing new technologies. While it was initially a dialup ISP, Earthlink quickly embraced broadband, offering both DSL and cable broadband where they could, and even experimenting with Wi-Fi, broadband over powerlines and fixed wireless. The company also was an early provider of anti-virus, anti-spam and anti-popup tools, as well as an early supporter of VoIP, both in a partnership with Vonage and in offering its own SIP-based softphone solution. Clearly, the company is not afraid to take risks on new technologies -- and when it sees customer demand, it doesn't seem to worry about either cannibalizing its own business or upsetting legacy players. It just dives right in. As such, Earthlink seemed like the company to watch a few months back, when everyone else was fretting about changes to line sharing rules.

The deal today with SK Telecom to launch an MVNO joint venture shows just one part of how Earthlink plans to continue to grow. SK Telecom, also, seems like the perfect "other half" in this particular marriage. The company was the first in the world to launch both 1xRTT 2.5G service and EV-DO 3G service, while also providing plenty of innovative features and services. While it hasn't received nearly as much publicity as NTT DoCoMo in Japan, for years, many have looked to SK Telecom as the operator to follow when it comes to next generation wireless offerings. However, SK Telecom was bumping into a lot of walls back home, facing increased competition and fewer subscribers due, in part, to government regulations designed to prevent SK Telecom from becoming a mobile operator monopoly.

Details on the actual offering are still somewhat sketchy. It's clearly going to be an MVNO relationship. The initial reports that leaked out last night claimed that the network partner would be Verizon Wireless -- which makes sense, given SK Telecom's existing relationship with the operator, along with Verizon Wireless' network, which already has EV-DO deployed in many cities throughout the country. The official announcement, however, didn't name a network provider, saying it would be announced later. Other reports claimed that the company would use both Verizon Wireless and Sprint as providers of EV-DO networks. It's easy to argue over whether or not this makes any sense. Working with Verizon Wireless makes sense because of the reasons stated above. Working with Sprint makes sense because of Sprint's well-known experience being the network operator for just about every major American MVNO offering. Sprint also is hard at work deploying EV-DO, and doesn't face some of the spectrum holding limitations that have caused Verizon Wireless problems (including the lack of an EV-DO offering in the San Francisco Bay Area -- an easy target for early adopters). Working with a single network operator seems like it would be easier for a variety of reasons, but it's becoming clear that SK-Earthlink isn't looking for the easy way of doing things, but the right way of doing things.

That point may be what makes this either the most interesting or worrisome announcement for American mobile service in a while. At the announcement today, the new company focused on how it planned to bring SK Telecom's advanced features and services to the US, suggesting that US consumers were somewhat clueless on all that a mobile service could be. The big question that many have had in the US over the past few years, however, is whether or not the American consumer really wants the same features and services out of their mobile phones and devices that other areas of the world seem to want. That debate has gone on for ages, but there should be some empirical evidence as this offering moves forward.

Some, of course, will be tempted to compared it to NTT DoCoMo's move into the US with its tremendous investment in AT&T Wireless a few years ago -- resulting in the mMode offering, which many considered to be a weak copy of i-Mode. In that case, AT&T Wireless was held back by a variety of legacy issues and a terrible marketing plan that focused more on the name and the concept of an "mLife" than on actually telling users what it was good for. It seems unlikely that SK-Earthlink will make the same mistake. In fact, by doing this as an MVNO, it has to feel very freeing to SK Telecom. Had they done this directly with Verizon Wireless or another carrier, there would have been a number of legacy issues making it difficult to offer a truly customer focused offering.

This raises the final issue brought out by this announcement. While the world seems to be cheering on MVNOs right now, many of them seem to miss the mark, where it almost becomes a vanity play, rather than a serious attempt at offering something different that the market wants. MVNOs have mostly targeted niches and under-served markets. However, SK-Earthlink is taking a different approach. In the wake of merger mania in the mobile market in the US, it looks like SK-Earthlink is viewing the entire US market as an "under-served market." That is, it feels the American people aren't being offered a mobile phone service that really is all a mobile phone service can be -- and for that reason alone, other mobile operators (even SK-Earthlink's network operator partners) are going to want to watch very carefully what comes out of this joint venture.