Who Wants To Be The Carriers' Carrier?
By Mike Masnick, Tue Feb 01 19:45:00 GMT 2005

Sprint is getting a lot of attention for being a major player in the US MVNO market -- providing the "NO" part of the deal for many. Some are wondering why others haven't become as involved.

The MVNO market has been capturing a lot of buzz lately, and it seems like there are new stories of MVNO offerings every other week or so. Sometimes the deals fit a strategic reason, while other times, they make very little sense. There certainly are some questions about whether or not providing the network services turns partners into competitors, but so far, some carriers feel that it makes perfect sense for them to act as a "carriers' carrier" to help attract users in niche markets.

Sprint obviously has become well known for its ability to provide MVNO services in the US -- to the point that some are wondering why it appears to be the only provider in the US. Of course, the simple answer is that Sprint is not the only carrier in the US going after the MVNO market. All of the other major US carriers have at least experimented with MVNO offerings. Nextel has embraced the MVNO concept with Boost Mobile (even if it's now going to be acquired by Sprint), and contrary to what the original article claims, the new SK-Earthlink MVNO is expected to use both Verizon Wireless and Sprint for its network. Also, T-Mobile has made it clear that MVNOs are likely to be an important part of its future in the US -- specifically targeting cable providers as partners, while Cingular (and AT&T Wireless before it) has dabbled in MVNO offerings as well.

With so much activity, why is it that Sprint gets so much coverage, in effect drowning out all other attempts at MVNOs in the US? Partly, it's true that Sprint has embraced the space more rapidly than others. It appears that Sprint recognized early on the ability to grow its market cheaply by going MVNO, and signed high publicity value deals with Virgin Mobile US and Qwest. Most of the other offerings have been lower profile. While the CNET article suggests that Sprint is taking a big risk in partnering to create MVNOs, because bad service will reflect poorly on the operator, that seems unlikely. Most subscribers won't know who is actually operating the network they're using. At the same time, Sprint has had a strong spectrum position, relative to its competitors (made even stronger thanks to the Nextel deal), meaning that it has fewer fears of capacity problems that could plague some of its rivals.

The real question, however, isn't why the other operators haven't embraced MVNOs more, but where will this all lead? While it may make sense as a way to offer MVNO deals to explore markets that the original operator knows it can't effectively target, at some point, the network operators do risk competing with their own partners. A more likely scenario, given the recent trend in telecom consolidation, is that successful MVNOs will become acquisition targets by their own network operators. The MVNO marketing partners take on the marketing risk, and then the network operators will later pay a premium to buy those customers back. However, this is evened out by cutting loose (or simply maintaining basic support for) the less successful MVNOs. It's similar, in a sense, to large companies doing corporate R&D by investing corporate venture capital in startups -- who they may later acquire. Overall, it still seems unlikely that MVNOs will be as big as some predict. While some of the deals make sense, it's not clear that people will really want mobile phone service from a TV network such as ESPN. However, as a simple way for operators to hedge some of the risk in attracting newer customers, it seems like a reasonable bet.