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Virgin Mobile Undercuts Everyone
24 Jun, 2008
Virgin Mobile, the prepaid wireless MVNO, has undercut all wireless carriers with their latest wireless plan. The “Totally Unlimited” plan will launch on July 1 for $79.99/month, and will offer unlimited domestic calling. For an additional $10/month, customers can add unlimited text messaging. The $79.99 plan undercuts most existing unlimited plans by $20. Another appealing aspect to Virgin’s plan is the lack of any contract.
Virgin typically appeals to value and credit challenged customers. It remains to be seen if their typical demographic will see this plan as appealing, and from a competitive standpoint, will it impact the efforts of the $99 plan group. For consumers who need pure wireless voice minutes in bulk, this plan may look quite appealing. Additionally it’s “risk free” nature may have an impact on AT&T and Verizon’s voice only unlimited $99 plans.
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googleDeath of MVNO Model Predictions Premature
28 Sep, 2007
The recent announcement by Disney to pull the plug on their second MVNO (ESPN Mobile was the first) has many an analyst predicting the death of the MVNO model. While the MVNO graveyard is littered with high profile failures, including ESPN, Amp’d Mobile, and now Disney, the business model is far from dead. Perhaps the shining success example is Virgin Mobile, but there are certainly others.
The MVNO model may be a great business school case study. It makes for great study and analysis, with extreme failures and solid success stories. Perhaps a low profile with a slow and steady approach may be the winning strategy. Failing MVNOs seem to share similar characteristics: high profile public relation campaigns, tons of cash and investment (accompanied with obscene burn rates), and high (perhaps unrealistic) expectations. On the contrary, successful MVNOs like Virgin Mobile seem to generate press only when warranted, utilize conservative cash burn rates, and don’t create overly high expectations. Other successful examples include Embarq, and to a lesser extent, Qwest. Both have been able to weave wireless into their bundling strategies, using Sprint’s wireless network. When’s the last time you’ve seen a big splash or headline for Embarq’s wireless play? There are also a number of successful MVNO’s that target niche markets. For many smaller and independent carriers in the U.S., MVNO’s are their only mobile wireless option (at least for the time being). Those carriers would welcome an MVNO model that is win-win and profitable. Ultimately, all things being equal, telecom carriers would like to build and own their own wireless network. But wireless’ tremendous CAPEX and OPEX requirements put it out of reach but for a handful of carriers. Until such time that these requirements can be overcome, MVNO’s will be of interest. The headlines over the past year not withstanding, the MVNO model is very much alive.
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Should Telephone Service be Free?
12 Oct, 2008
Comcast announced a new promotion last week that offers 12 months of free basic cable service for new customers who also sign up for an additional service. Customers who don’t want an additional service can get Comcast’s basic service of about 20 -30 channels for $10/month. The promotion is tied to the digital TV transition of February 2009 and entices potential customers to avoid the transition “hassle” by getting “free” cable service. “The simple fact is that basic cable is the easiest path through the digital transition and now consumers can get it for free,” said Derek Harrar, General Manager and Senior Vice President, Video Services for Comcast in a company statement. This move is similar to strategies pursued by other video service providers, who are hoping to leverage the digital TV transition for new subscriber additions.
But is this strategy a leading indicator for the future? Should basic core services like basic cable and basic telephone service be offered for free, used as a “carrot” to entice customers to buy “more important” services like broadband? Maybe a very basic phone service, with no LD, access to landline 911, and maybe outgoing service only (to avoid telemarketers) should be a free component of a bundled offering. Such a wireline service may appeal to a customer who previously cut the cord for wireless only, but also needs broadband. There is a growing portion of the population who find the value of traditional wireline phone service elsewhere – either through wireless or broadband/IP services. But, if they could get the security of landline 911, and an extra dial tone in their home as a free value add for subscribing to broadband (or video from a telco’s perspective), maybe a telco’s bundled offering may look more attractive than a comparable cable offering. I realize this idea is not appealing to the hundreds of ILECs who are a part of the current access/settlement system (in fact, it couldn’t work in the context of today’s regulatory structure), but I wonder whether it’s inevitable. In this possible future scenario, the current settlement system adapts to broadband as the underlying service, as opposed to voice.
This scenario cuts both ways. From a cable company’s perspective, a growing portion of the population is turning to the Internet as a source for their video content, and no longer see value in paying for a broad package of video as a part of a traditional subscription pay-TV service. But, if they could receive basic TV (which includes local broadcast affiliates) as a free value add for buying broadband, maybe the cable bundle is more attractive. In a true IP/broadband world, very basic phone and video service is relatively easy to deliver, and has little impact on bandwidth and network performance. Maybe the digital transition is opening the door to a future where free basic services are a regular component of a bundled offering. Thoughts?