Question for Mr. Daley:
From a business perspective, how do MVNO's exist? Is it mandated that discounted voice and data be made available to such entities for resale? Or is it by the good graces of the big companies that they are sharing?
I ask this because I wonder if my AirVoice $10/mo plans will ever be in danger should AT&T, for example, ever feel threatened by the growing market share of the MVNO's?
There is no mandate that the major carriers offer discounted voice and data service. That said, the major MNOs will likely always offer wholesale pricing for larger businesses looking to buy huge gobs of network traffic, because it makes financial sense to do so. The discount of volume business, and all that.
That said, you could technically say that the MVNOs only exist because the major carriers allow it due to the wholesale discount pricing model, the billing access, etc. There is an advantage to the model, however. MVNOs allow the major carriers to continue to extract further profits from a section of the population that they wouldn't otherwise choose to try and make money off of themselves due to the risk/reward factor or the profit margins. They want big, easy money. The MVNOs help get those of us too smart to spend colossal wads of money on wireless service to still spend colossal wads of money on wireless service for their networks; only now, it's some small rinky-dink middle-man chump company working for peanuts who has to support these people instead of AT&T or Verizon having to do it themselves.
As for the stickier specific question of "how" an MVNO exists, it's a cutthroat market. It's why I try to stick with providers who have proven themselves successful in the market over the longer term, because failed MVNO businesses... whoof. The churn is impressive, and the littered corpses of industry giant owned MVNOs is not insignificant. Disney, Comcast, 7-11, Circle K, ESPN and Cox have all tried and failed. Margins are thin, and it's one of the things that's got an eyebrow raised with me about the recent P'tel outage. Not that I don't trust Ahmad's ability to run a profitable ship, quite the contrary. They've survived for nearly 15 years at this point, and that's not by coincidence, but the subtext to the operations outage this past week due to extended catastrophic technical failure can get expensive for any
business. If any MVNO could recover from a setback like that, it would be P'tel, but the real question longer term is will
they. Well, I'm staying put. They have flourished thus far and I will do what I can to ensure they continue to flourish.
"Why?" I can hear you ask. Well, of all the MVNOs on the market, P'tel, Airvoice and Consumer Cellular are probably the three most important in the American market right now, in my humble opinion. Without them, all that's really left for the consumer after that point is a few smaller brands with negligible savings, a revolving tide of fly-by-nights, the MNOs with an even tighter pricing grip, and Carlos Slim
. I don't say this out of disrespect to any of the other MVNOs on my recommended list, but P'tel and Airvoice are two of the oldest MVNOs on the market and Consumer Cellular is a newer 800lb. gorilla. Ting may be getting there, and I am quite fond of some of the other scrappers, but a loss of one of those three specifically would have repercussions that you wouldn't get with say Ultra, Republic or Lyca drying up and blowing away.
Truthfully, the American MVNO market is a little insane when you look at it and what's involved to actually save any real money on service when you factor the middle man issue, but if you're cautious and assess risk appropriately, it can be worth it. Also, it's worth noting that the MVNO model is so successful that even three of the big four carriers have their own boutique brands to cash in on the larger smaller spenders, such as with GoSmart Mobile and MetroPCS (T-Mobile), Cricket (AT&T now), Virgin and Boost Mobile (Sprint). About the only MNO that hasn't gotten into the game as such is Verizon, which is no coincidence as they're the largest carrier in the market, the least MVNO friendly carrier, has some of the strictest wholesale reseller contracts... and well... you get the idea. It's also only recently that AT&T has gotten more serious about competitive wholesale and MVNO pricing as well (it was only after the T-Mobile merger failure and T-Mo's recent push back into the MVNO market that they started pushing there), historically T-Mobile was just a mess with wholesale up until a couple years ago, and Sprint has been the only long term wholesale market scrapper due to market share (there have been periods where, IIRC, up to at least 30% of Sprint's revenues were exclusively from wholesale sales).
There you have it. It's not pretty, but it is what it is. It's also another snapshot into why I'm so picky about my recommendations and I just don't go flailing about with my recommendations for anyone that might catch my fancy like others have in the past and still do today.
As for your final question: the MVNOs really don't pose any real threats to the major carriers. After all, the MVNOs have to buy their service from someone
. If attitudes were to change, expect the major carriers to choke the resellers with rising prices instead of just terminating contracts. Keep tabs on the "discounted" monthly package prices of the MNO internal prepaid boutique brands for the network you're on. When the primary carrier starts undercutting their MVNO resellers in the prepaid market, start paying attention. What I'm saying is, you should be watching with a wary eye what AT&T is doing with their new toy Cricket Wireless.