Google’s MVNO in Spain turned out to be fake but one of the big tech players launching an MVNO remains one of the mobile operators great fears.
Last weeks news that Google were issuing their Spanish staff with branded SIM cards which, when inserted into a mobile, would allow them to choose a network of their choice wasn’t true. It did however draw attention to the huge potential for Google to disrupt the mobile market and enable customers to choose their own network.
As Google have almost certainly considered an MVNO and such a move is open to many other brands, both tech and non-tech, lets have a look at MVNO’s and whether they’re important?
What is an ‘MVNO’ ?
MVNO’s are Mobile Virtual Network Operators. They lease network access and space from mobile operators and resell it direct to customers under their own brands. They can use the operators billing and services or develop their own.
In recent years in the UK MVNO brands like Virgin, Tesco, Lyca, Lebara, Ikea and GiffGaff have made significant inroads into the mobile market using different approaches. Tesco Mobile have gone for the mainstream and acquired over a million mobile customers through the use of their huge marketing assets like Clubcard; Lyca and Lebara have targeted niche customer segments in ethnic and international calling markets; GiffGaff are SIM-only and focussed on a low cost offering to customers who can support themselves.
What do mobile operators think?
MVNO’s give mobile operators something of a quandary - they’re good for volume and can be profitable if you can negotiate a good price for call, SMS or data traffic but if you don’t get the business one of your competitors will and the mobile operator is by definition reduced to the role of a pipe - they provide access and capacity to another company who brand, price, sell and support their own services.
And this is a problem because the MVNO provider will own the customer relationship and be able to offer additional premium services and earn new revenue streams from advertising, mobile payments or whatever.
What stops Google, Apple, Facebook or other tech players from launching an MVNO?
The tech players, in particular the hardware and OS manufacturers like Apple, Google and Microsoft, might like to but they already have a lot of control over the mobile ecosystem through the phone hardware, operating system and apps. If they added in controlling network access this would almost certainly lead to unwanted regulatory authorities.
2. They can achieve what they want with needing an MVNO
Google, Apple or Microaoft can create value from the hardware, the OS and the services that they offer through the use of their app stores, billing relationships and payment wallets without having to resort to leasing the actual network and all the complexity that this implies. They can simply go ‘over-the-top’.
Similarly with LTE networks already available in the US and soon to arrive in Europe over-the-top services will soon be easier to provision with improved quality of service, faster networks and access to richer features than are possible today.
3. The mobile operators might not do a deal?
Another consideration would be that the mobile operators might not cut a deal with companies that are so clearly trying to kill them? There might be regulatory disapproval of such an approach but operators can drag their heels, not make the best commercial offer or make it harder in so many ways.
4. There is always the option to do a ‘full’ integration deal with a mobile operator
Any of the players do a deal direct with a mobile operator like Sprint did with Google Voice rather than launching their own MVNO. They then get the best of both worlds - a deep integration into the operators business and access to their customers but none of the costs of running the network.
MVNO’s from new entrants and non-tech brands like Tesco and Ikea have certainly kept the market on its toes and added in genuinely new competition.
But with a tech MVNO you solve the problem that the mobile operators have all the control and replace it with the problem that Google, Apple or Microsoft have all the control. Choosing which of these is preferable is probably Hobson’s choice.