Verizon wireless - NEWS: MVNO bubble about to burst in the US?

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NEWS: MVNO bubble about to burst in the US?

John Navas

2006-08-15, 10:33 am

<http://www.theregister.com/2006/08/...ursting
/>

The much hyped bubble in MVNOs (Mobile Virtual Network Operators) in
the US is close to bursting, according to new research from Strategy
Analytics.

It has found that many of the best funded MVNOs have misunderstood
their core target markets, and that, while the better established,
youth oriented outfits like Virgin Mobile, Tracfone and Sprint
Nextel's Boost have thrived, the new breed - such as EarthLink/SKT's
Helio, Disney Mobile and Mobile ESPN - have adopted more ambitious
business models but have failed to capture the consumers'
imaginations.

The heavily marketed new entrants have "failed to learn lessons from
their predecessors. The handsets are boring, pricing uninspired, and
the distribution strategy is flawed. This is a threefold recipe for
failure," writes Strategy Analytics' David Kerr.

At the end of 2005, Tracfone, Virgin and Boost accounted for 65 per
cent of the US MVNO market, relying on the prepaid services that
their youth audience prefers. The new wave does not look set to make
much dent in this market share in 2006, and already all the big names
have been forced to adapt their business models to put more emphasis
on basic voice services and less on advanced data and multimedia
options - which consumers may buy as extras, but do not want bundled
into a standard price that then looks expensive.

[MORE]

--
Best regards, FAQ FOR CINGULAR WIRELESS:
John Navas <http://en.wikibooks.org/wiki/ Cingu...less_FA
Q>

Isaiah Beard

2006-08-16, 10:33 pm

John Navas wrote:
> <http://www.theregister.com/2006/08/...ursting
/>
>
> The much hyped bubble in MVNOs (Mobile Virtual Network Operators) in
> the US is close to bursting, according to new research from Strategy
> Analytics.
>
> It has found that many of the best funded MVNOs have misunderstood
> their core target markets, and that, while the better established,
> youth oriented outfits like Virgin Mobile, Tracfone and Sprint
> Nextel's Boost have thrived,

Virgin and Boost have thrived because their "host" networks don't offer
a prepaid service of their own. If you want prepaid Sprint service, you
MUST get Virgin. If you want a prepaid iDEN handset with PTT, you MUST
get Boost.

And TracFone has survived because it pioneered the prepaid concept, and
thrives now because it has a mature distribution network, and is
ubiquitous in stores like 7-Eleven, Target and Wal-Mart. They
successfully attract the lowest common denominator of the wireless
market: teenagers and those adults with no or absolutely abominable
credit who cannot get or cannot deal with postpaid service. Yet the
risk is virtually zero because those customers must pay up front.

It probably also helped that TracFone clung to TDMA to the bitter end
before finally offering a GSM handset lineup. For a good while they
were selling refurbs and manufacturer discards of old TDMA models that
they received for practically nothing and sold for a tidy profit.

> the new breed - such as EarthLink/SKT's
> Helio, Disney Mobile and Mobile ESPN - have adopted more ambitious
> business models but have failed to capture the consumers'
> imaginations.

I didn't see a point in these MVNOs, because at their base they are
merely re-treads of the host carriers. Even the handsets are the same,
albeit with different color schemes and sometimes a re-done user interface.

>
> The heavily marketed new entrants have "failed to learn lessons from
> their predecessors. The handsets are boring, pricing uninspired, and
> the distribution strategy is flawed. This is a threefold recipe for
> failure," writes Strategy Analytics' David Kerr.
>
> At the end of 2005, Tracfone, Virgin and Boost accounted for 65 per
> cent of the US MVNO market, relying on the prepaid services that
> their youth audience prefers. The new wave does not look set to make
> much dent in this market share in 2006, and already all the big names
> have been forced to adapt their business models to put more emphasis
> on basic voice services and less on advanced data and multimedia
> options - which consumers may buy as extras, but do not want bundled
> into a standard price that then looks expensive.
>
> [MORE]
>

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Transpose the c's and a's in my e-mail address to reply.

jgrove24@hotmail.com

2006-08-16, 10:33 pm

Isaiah Beard wrote:
> John Navas wrote:
>
>
> Virgin and Boost have thrived because their "host" networks don't offer
> a prepaid service of their own. If you want prepaid Sprint service, you
> MUST get Virgin. If you want a prepaid iDEN handset with PTT, you MUST
> get Boost.
>
> And TracFone has survived because it pioneered the prepaid concept, and
> thrives now because it has a mature distribution network, and is
> ubiquitous in stores like 7-Eleven, Target and Wal-Mart. They
> successfully attract the lowest common denominator of the wireless
> market: teenagers and those adults with no or absolutely abominable
> credit who cannot get or cannot deal with postpaid service. Yet the
> risk is virtually zero because those customers must pay up front.
>
> It probably also helped that TracFone clung to TDMA to the bitter end
> before finally offering a GSM handset lineup. For a good while they
> were selling refurbs and manufacturer discards of old TDMA models that
> they received for practically nothing and sold for a tidy profit.
>
>
>
> I didn't see a point in these MVNOs, because at their base they are
> merely re-treads of the host carriers. Even the handsets are the same,
> albeit with different color schemes and sometimes a re-done user interface.

The services are often "second hand" that have been tested by the
postpaid
crowd and debugged. For $80/year one gets basic service of about 320
minutes and the emergency usage capability. Many users
determine that a prepaid service is cheaper for them.

JG

Larry

2006-08-16, 10:33 pm

Isaiah Beard < sacredpoet@sacredpoe
t.com> wrote in news:12e74c3o9fgk060

@corp.supernews.com:

> If you want a prepaid iDEN handset with PTT, you MUST
> get Boost.
>

Will a Boost phone talk to a Nextel user group? I'd be interested in
that....

--
There's amazing intelligence in the Universe.
You can tell because none of them ever called Earth.

SMS

2006-08-17, 10:33 am

jgrove24@hotmail.com wrote:

> The services are often "second hand" that have been tested by the
> postpaid
> crowd and debugged. For $80/year one gets basic service of about 320
> minutes and the emergency usage capability. Many users
> determine that a prepaid service is cheaper for them.

The other ones that have thrived financially, if not in market share,
are the ones that _don't_ spend money on marketing, but have lower
prices. I.e., $80 will get you about 600 minutes a year on PagePlus or
the old BeyondWireless. These MVNO's probably only have a few employees,
no advertising expenses, and minimal customer service expenses.

The heavily hyped MVNOs are usually the worst in terms of coverage. Look
for a CDMA/AMPS MVNO that allows roaming,

Joseph Huber

2006-08-17, 10:33 pm

On Wed, 16 Aug 2006 17:43:30 -0400, Isaiah Beard wrote:
>And TracFone has survived because it pioneered the prepaid concept, and
>thrives now because it has a mature distribution network, and is
>ubiquitous in stores like 7-Eleven, Target and Wal-Mart. They
>successfully attract the lowest common denominator of the wireless
>market: teenagers and those adults with no or absolutely abominable
>credit who cannot get or cannot deal with postpaid service.

TracFone attracts more than just teenyboppers and credit-risk adults.
I know adults that have impeccible credit who use TracFone. They are
only occasional cell phone users and they have determined that their
cellphone usage doesn't justify even the cheapest monthly plans that
are required to get service from the big players. They don't really
care what others might think of them for using TracFone. All they
want a cell phone for is voice.

I heard an "industry analayst" on NPR a few weeks ago make a
statement along the lines that the big players like Cingular, Verizon,
and Sprint only want customers who spend $50-$60+ per month, and they
really don't worry too much when the lose a customer who spends less
than that. I would venture to guess that there is quite a market of
folks who would like cell service but can't justify that kind of
money.
Joe Huber
huber.joseph@comcast.net

danny burstein

2006-08-17, 10:33 pm

In < nd0ae2dc9e9ndm4mt099
lus59qdc1br55e@4ax.com> Joseph Huber <huber.joseph@comcast.net> writes:

>I heard an "industry analayst" on NPR a few weeks ago make a
>statement along the lines that the big players like Cingular, Verizon,
>and Sprint only want customers who spend $50-$60+ per month, and they
>really don't worry too much when the lose a customer who spends less
>than that.

It's even trickier than that. when a cellular customer
calls a wired phone, the originating company has
to pay a "termination" or completion fee to the
final destination company.

If that second person is using a cell phone in the
same network, there's no such expense. Similarly, if
the phone is in an MVNO with an affiliation contract
to the first compaany, the costs are less. (And there
are some cross-cell-company agreements as well).

So... it's in the cellular ocmpanies interests to
get those cheaper phones out there, even if the
user isn't a primary customer of theirs.

--
____________________
____________________
_____________
Knowledge may be power, but communications is the key
dannyb@panix.com
[to foil spammers, my address has been double rot-13 encoded]

reemusk

2006-08-19, 4:33 am

or, an open area to test Sprint's family locator features....i.e. Disney
Mobile
"Isaiah Beard" < sacredpoet@sacredpoe
t.com> wrote in message
news:12e74c3o9fgk060
@corp.supernews.com...
> John Navas wrote:
>
>
> Virgin and Boost have thrived because their "host" networks don't offer
> a prepaid service of their own. If you want prepaid Sprint service, you
> MUST get Virgin. If you want a prepaid iDEN handset with PTT, you MUST
> get Boost.
>
> And TracFone has survived because it pioneered the prepaid concept, and
> thrives now because it has a mature distribution network, and is
> ubiquitous in stores like 7-Eleven, Target and Wal-Mart. They
> successfully attract the lowest common denominator of the wireless
> market: teenagers and those adults with no or absolutely abominable
> credit who cannot get or cannot deal with postpaid service. Yet the
> risk is virtually zero because those customers must pay up front.
>
> It probably also helped that TracFone clung to TDMA to the bitter end
> before finally offering a GSM handset lineup. For a good while they
> were selling refurbs and manufacturer discards of old TDMA models that
> they received for practically nothing and sold for a tidy profit.
>
>
>
> I didn't see a point in these MVNOs, because at their base they are
> merely re-treads of the host carriers. Even the handsets are the same,
> albeit with different color schemes and sometimes a re-done user
interface.
>
>
>
>
> --
> E-mail fudged to thwart spammers.
> Transpose the c's and a's in my e-mail address to reply.

Isaiah Beard

2006-08-21, 3:33 pm

Joseph Huber wrote:

> TracFone attracts more than just teenyboppers and credit-risk adults.
> I know adults that have impeccible credit who use TracFone. They are
> only occasional cell phone users and they have determined that their
> cellphone usage doesn't justify even the cheapest monthly plans that
> are required to get service from the big players. They don't really
> care what others might think of them for using TracFone. All they
> want a cell phone for is voice.

While I agree with that statement, this market demographic is NOT how
TracFone makes the majority of their profit. It is nice holding onto to
someone's prepaid money for a while, but the revenue only really pours
in from those who are moderate to heavy users of cell service, but have
no other choice than to go prepaid and thus pay TracFone significantly
more than the person who only uses their phone once a month or less.

>
> I heard an "industry analayst" on NPR a few weeks ago make a
> statement along the lines that the big players like Cingular, Verizon,
> and Sprint only want customers who spend $50-$60+ per month, and they
> really don't worry too much when the lose a customer who spends less
> than that.

That's largely correct. $50-60 a month is the "sweet spot" where a
postpaid cell carrier begins to recoup their investment. Below that, it
becomes hard to justify giving someone a free or discounted phone, and
then continuing service. And while they may not actively kick you off
their service (well, except for Cingular), they won't necessarily go out
of their way to keep you, either.

> I would venture to guess that there is quite a market of
> folks who would like cell service but can't justify that kind of
> money.

I would say that Virgin Mobile, Boost and TracFone give one the ILLUSION
of saving money, but often times their per minute rates are slightly
higher than what you would get in postpaid service. Additionally, they
do force a minimum purchase as well; if you don't use your prepaid
minutes in time, or at least pour in more money and "top up" your
account, the minutes expire and you lose what you paid for. If you've
only used five minutes out of a $10 prepaid card and allow the rest to
expire, then you've effectively paid $2.00 a minute for the privilege of
using prepaid.

--
E-mail fudged to thwart spammers.
Transpose the c's and a's in my e-mail address to reply.

jgrove24@hotmail.com

2006-08-22, 10:33 pm

Isaiah Beard wrote:
> Joseph Huber wrote:
>
>
> While I agree with that statement, this market demographic is NOT how
> TracFone makes the majority of their profit. It is nice holding onto to
> someone's prepaid money for a while, but the revenue only really pours
> in from those who are moderate to heavy users of cell service, but have
> no other choice than to go prepaid and thus pay TracFone significantly
> more than the person who only uses their phone once a month or less.
>
>
> That's largely correct. $50-60 a month is the "sweet spot" where a
> postpaid cell carrier begins to recoup their investment. Below that, it
> becomes hard to justify giving someone a free or discounted phone, and
> then continuing service. And while they may not actively kick you off
> their service (well, except for Cingular), they won't necessarily go out
> of their way to keep you, either.
>
>
>
> I would say that Virgin Mobile, Boost and TracFone give one the ILLUSION
> of saving money, but often times their per minute rates are slightly
> higher than what you would get in postpaid service. Additionally, they
> do force a minimum purchase as well; if you don't use your prepaid
> minutes in time, or at least pour in more money and "top up" your
> account, the minutes expire and you lose what you paid for. If you've
> only used five minutes out of a $10 prepaid card and allow the rest to
> expire, then you've effectively paid $2.00 a minute for the privilege of
> using prepaid.

VM accounts don't expire as long as you top up, and one can save up
for heavier internet usage or photo xfers. $80/year beats standard
contract commitments anytime.

>
>
> --
> E-mail fudged to thwart spammers.
> Transpose the c's and a's in my e-mail address to reply.

John Richards

2006-08-22, 10:33 pm

"Isaiah Beard" < sacredpoet@sacredpoe
t.com> wrote in message news:12ek22s5vhs2k03
@corp.supernews.com...
> I would say that Virgin Mobile, Boost and TracFone give one the ILLUSION
> of saving money, but often times their per minute rates are slightly
> higher than what you would get in postpaid service. Additionally, they
> do force a minimum purchase as well; if you don't use your prepaid
> minutes in time, or at least pour in more money and "top up" your
> account, the minutes expire and you lose what you paid for. If you've
> only used five minutes out of a $10 prepaid card and allow the rest to
> expire, then you've effectively paid $2.00 a minute for the privilege of
> using prepaid.

How much it costs per minute is not pertinent, except perhaps
as an academic exercise. ;-)
The significant thing is that you can find prepaid plans for as low
as $6.75 per month. None of the postpaid providers will come
even close to that monthly cost.

--
John Richards

Jim Burks

2006-08-22, 10:33 pm

"Joseph Huber" <huber.joseph@comcast.net> wrote in message
news:nd0ae2dc9e9ndm4
mt099lus59qdc1br55e@
4ax.com...
> On Wed, 16 Aug 2006 17:43:30 -0400, Isaiah Beard wrote:
> TracFone attracts more than just teenyboppers and credit-risk adults.
> I know adults that have impeccible credit who use TracFone. They are
> only occasional cell phone users and they have determined that their
> cellphone usage doesn't justify even the cheapest monthly plans that
> are required to get service from the big players. They don't really
> care what others might think of them for using TracFone. All they
> want a cell phone for is voice.
>
> I heard an "industry analayst" on NPR a few weeks ago make a
> statement along the lines that the big players like Cingular, Verizon,
> and Sprint only want customers who spend $50-$60+ per month, and they
> really don't worry too much when the lose a customer who spends less
> than that. I would venture to guess that there is quite a market of
> folks who would like cell service but can't justify that kind of
> money.
> Joe Huber

I am one of these. I could afford any phone service I choose, but my wife
wants a phone for emergencies - about 3-6 1min calls per week. Virgin Mobile
with auto top-up is 25c/min with a minimum of one $15 top-up per quarter.
That means we can have a working CDMA phone and number for $60/year. And the
best part is, the Nokia phone was $19.99 last Christmas. If I needed a Nokia
battery, I'd buy a ppd phone, get the battery out, and throw the phone away.

Jim Burks

Isaiah Beard

2006-08-23, 10:33 am

jgrove24@hotmail.com wrote:

>
> VM accounts don't expire as long as you top up, and one can save up
> for heavier internet usage or photo xfers.

Perhaps, but that still doesn't help the demographic that rarely uses
their phone and only wants it for emergencies. If you're continually
topping up the phone and not using all of that built up usage, you're
goving the MVNO free money.

> $80/year beats standard
> contract commitments anytime.

Perhaps. But it's still money thrown away. You would think that if
someone's usage is low enough, they might just be better off "bumming" a
phone off someone else in the rare instance they need to make a call.

--
E-mail fudged to thwart spammers.
Transpose the c's and a's in my e-mail address to reply.

Paul Miner

2006-08-23, 10:33 pm

On Wed, 23 Aug 2006 11:21:39 -0400, Isaiah Beard
< sacredpoet@sacredpoe
t.com> wrote:

>jgrove24@hotmail.com wrote:
>
>
>Perhaps, but that still doesn't help the demographic that rarely uses
>their phone and only wants it for emergencies. If you're continually
>topping up the phone and not using all of that built up usage, you're
>goving the MVNO free money.

In my wife's case, she wants the security of a phone but typically
uses it less than 30 minutes a month. She would much rather give the
MVNO (Virgin, in her case) a small amount of free money than give a
carrier a large amount of free money. The cost per minute is
irrelevant; when the usage is this light only the total cost matters.

When she was with Sprint, she was spending about $31 a month. With
Virgin, she spends $16 every 3 months. It's a no brainer, made even
easier because the cost per minute never even enters into it.

--
Paul Miner

Todd Allcock

2006-08-24, 12:33 pm

At 23 Aug 2006 11:21:39 -0400 Isaiah Beard wrote:
> jgrove24@hotmail.com wrote:
>
>
> Perhaps, but that still doesn't help the demographic that rarely uses
their phone and only wants it for emergencies. If you're continually
topping up the phone and not using all of that built up usage, you're
goving the MVNO free money.

Not really- that MNVO does have costs involved maintaining the account.

>
> Perhaps. But it's still money thrown away. You would think that if
someone's usage is low enough, they might just be better off "bumming" a
phone off someone else in the rare instance they need to make a call.
>
Many low volume users maintain prepaid phones for glove box "emergency"
use. If you knew in advance when you were going to have an emergency,
you wouldn't need a cellphone- you could just stay home! ;-)>

$80/year is cheap "just-in-case" insurance, though I suspect you could
find cheaper (i.e. T-Mobile PPD is $100 the first year, then $10/year
thereafter.)

--
Posted via a free Usenet account from http://www.teranews.com

John Navas

2006-08-24, 12:33 pm

On Wed, 23 Aug 2006 21:39:47 -0600, Todd Allcock
< elecconnec@AmericaOn
Line.com> wrote in
< 44edcac1$0$8850$8826
0bb3@free.teranews.com>:

>Many low volume users maintain prepaid phones for glove box "emergency"
>use. If you knew in advance when you were going to have an emergency,
>you wouldn't need a cellphone- you could just stay home! ;-)>
>
>$80/year is cheap "just-in-case" insurance, though I suspect you could
>find cheaper (i.e. T-Mobile PPD is $100 the first year, then $10/year
>thereafter.)

For true emergencies all you need is an inactive phone, since the FCC
mandates that 911 calls always be served.

--
Best regards, FAQ FOR CINGULAR WIRELESS:
John Navas <http://en.wikibooks.org/wiki/ Cingu...less_FA
Q>

Todd Allcock

2006-08-25, 4:33 am

At 24 Aug 2006 16:52:07 +0000 John Navas wrote:
>
> For true emergencies all you need is an inactive phone, since the FCC
> mandates that 911 calls always be served.
>
Sure, but there are emergencies and there are "emergencies"... Calling a
tow truck or a taxi for a car that won't start isn't a 911 emergency but
it's a nice time to have a phone.

--
Posted via a free Usenet account from http://www.teranews.com

John Richards

2006-08-29, 4:33 am

"Isaiah Beard" < sacredpoet@sacredpoe
t.com> wrote in message news:12eosk4picnr159
@corp.supernews.com...
> jgrove24@hotmail.com wrote:
>
>
> Perhaps. But it's still money thrown away.

Think of it as fire insurance. If your house never burns down,
would you consider the money spent on insurance premiums to
be thrown away?

> You would think that if
> someone's usage is low enough, they might just be better off "bumming" a
> phone off someone else in the rare instance they need to make a call.

How are you going to do that if your car breaks down unexpectedly
in some remote area?

--
John Richards

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