MVNOs must differentiate with specialty services

Jessica Scarpati
04 Aug 2010

Purchasing wholesale telecom services used to be a straightforward move for carriers that leased capacity to extend services where they didn't have infrastructure. But today, regional and niche operators that lease wholesale telecom services are doing more than peddling the excess capacity of larger service providers. Instead, they differentiate themselves by developing specialized services their network landlords couldn't or wouldn't bother to market.

When mobile virtual network operator (MVNO) agreements emerged about a decade ago, companies like The Walt Disney Co. and ESPN invested in wholesale telecom services to become virtual wireless carriers. But many MVNOs slinked out of the market within a few years because the revenue never materialized -- in part because they mostly offered simple access as opposed to market-tailored services. Faced with undifferentiated services, consumers gravitated toward traditional wireless carriers.

But the MVNO business model -- like all wholesale telecom services -- is beginning to change. The emergence of more advanced services, either resold wholesale or developed by the MVNOs themselves as differentiators, is gradually reshaping the market.

"In the past, [wholesale vendors] have been very much focused on a traditional carrier-subscriber relationship development. [Their outlook] was basically, 'You go find another way to get traditional wireless customers for us," said Paul McAleese, CEO of i-wireless, a Sprint Nextel Corp MVNO that has differentiated itself by incorporating wireless services into grocery shopping. "I think their wholesale attitude has changed dramatically by acknowledging there are places where the Sprint brand doesn't reach."

The growing immigrant population in the United States is one area where major carriers have fallen down. McAleese said there is money to be made from specialty services for immigrants, such as cheaper calling plans for their home countries or services in their native languages. MVNOs and other wholesale buyers can step in and offer these "things that big carrier would never really do," McAleese said.

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