While mobile virtual network operators may appear to be back in fashion, none of them are significant players among US wireless carriers. The largest of what are commonly—but incorrectly—called MVNOs, including Boost and Metro in the US, have long since ceased to be MVNOs, or never were. These are, instead, flanker brands for the major mobile network operators that own and operate them, including Sprint and T-Mobile, respectively, for the abovementioned.
The market segment of “true” MVNOs, that is, those that are owned and run independently of their MNO hosts, is small and highly fragmented. In the US, there are a hundred or so different branded offerings, which account for only around 11 percent of total US consumer mobile connections in recent years. No MVNO brand accounts for more than a few percent. These offerings are primarily pre-paid.
New “hybrid” wireless carriers—sharing some characteristics of both MVNOs and MNOs—face a tough and risky path. They intend to operate like MVNOs, while at the same time rolling out their own network infrastructure and services. On the MNO side, they must make large up-front capital investments in radio spectrum and network equipment while building up sufficiently large subscriber bases to make this business financially viable. On both the MNO and MVNO sides, they are dwarfed by the much larger and more firmly-established MNOs, including their network hosts, with whom they must compete for retail customers. They will be beholden to their MNO hosts for many years—or indefinitely.
Multiple niches still only make a small market segment
MVNOs have been around for a couple of decades in the US. Among traditional MVNOs, Tracfone has led for many years with its largely pay-as-you-go offerings. These prepaid calling plans have predominated worldwide for more than 20 years, including in Mexico and the Latin American region where Tracfone’s parent América Móvil is based and mostly operates, but such plans have only ever accounted for a small proportion of US subscriber connections. With pay-as-you-go calling plans, prepaid credit is valid for a maximum period (typically less than one year in the US) and is used up at the sticker price of cents per minute of calling. When credit runs out service is suspended until credit is replenished. Nowadays, US MVNO offerings typically include prepaid recurring services with unlimited calling for a flat rate, originally pioneered more than 15 years ago by then-independent MNOs Cricket Wireless, which was acquired by AT&T, and Metro PCS. US MVNOs also now commonly offer postpaid and data-centric plans.
Tracfone remains the US MVNO leader and accounts for more than half of MVNO connections, but its subscriber numbers have fallen by 17 percent over the last few years to 21.7 million in 2018. The total includes subscribers across Tracfone’s many brands including Clearway, GoSmart Wireless, Net10 Wireless, PagePlus Cellular, SafeLink Wireless, SIMPLE Mobile, Straight Talk, Telecel América, Total Wireless and Walmart Family Mobile.
The size and fortunes of the MVNO market segment have ebbed and flowed somewhat as MVNOs have been bought out by their MNO hosts or have failed to establish a viable business. Some of the more notable failures were:
- Amp’d Mobile (2005-2007) with the backing of MTV and Universal Music Group.
- Disney Mobile (2006-2007) with $150 million invested (also including the Mobile ESPN investment) targeting families.
- Helio (2006-2008) with more than $560 million invested.
- Mobile ESPN (2005-2006) with $150 million invested (also including the Disney Mobile investment).
- Qwest (2004-2009). It sold its regional MNO network, operating with 10 MHz across 14 states and converted, along with its customers, to operating as an MVNO on the Sprint network. It subsequently switched to Verizon as its network host. It closed a year later.
- Best Buy Connect (until 2010). Its commitment to WiMAX technology and to LightSquared in this venture is likely to have contributed to its demise.
When is an MVNO not really an MVNO?
Sprint, which encourages MVNOs in its “wholesale solutions” marketing collateral, has adopted a conventional definition of MVNOs there:
“A Mobile Virtual Network Operator is a wireless communications services provider that does not own the wireless network infrastructure over which the MVNO provides services to its customers. An MVNO enters into a business agreement with a carrier to obtain access to network services. The MVNO is responsible for its own retail pricing, customer service, billing support systems, marketing and sales personnel. It could also employ the services of a mobile virtual network enabler (MVNE) to manage some of the back office functions” (emphasis added).
Around 2002, Sprint was the network host for joint ventures it entered to establish Boost and Virgin Mobile. While these new carriers were initially semi-independent of their parent and MNO host, within a couple of years Boost, and by 2009 Virgin also, became wholly owned by Sprint, which bought out the other shareholdings. Consequently, Boost and Virgin have not qualified as true MVNOs since then, even though they are commonly referred to as such. For example, both are included in GSMA Intelligence’s listings for “live” MVNOs.
Metro and Cricket are also listed by GSMA Intelligence as live MVNOs. But these were, from inception, always fully owned and operated MNOs with their own networks. Following acquisition by T-Mobile and AT&T in 2013 and 2014, respectively, their services were transitioned to their new parents’ networks. They became flanker brands for their parents, not MVNOs, because they became wholly owned and controlled by their new parents.
Does the distinction matter and to whom?
While it may be convenient for reporters who are writing for consumers to lump flanker brands together with true MVNOs in their demand-side analysis, differences are crucial and strategic on the supply side in the struggle for survival and success among MNOs and MVNOs. A driving reason for MNOs to have flanker brands as well as core brands is so that MNOs can, under their control, share costs with increased scale across both and coordinate marketing, distribution and pricing in pursuit of their sales and profit objectives, while minimizing cannibalization of their core brands. When an MNO acquires MVNOs and other MNOs it increases scale and control. It is, therefore, inaccurate and misleading to label flanker brands as MVNOs because the term implies independence that the brands no longer have, or never had, from the networks on which they run.
More than just an MVNO
A hybrid wireless carrier among MNOs and MVNOs uses an MNO host’s RAN, or part of it, for a while or indefinitely, but not necessarily its core network.
In France since 2012, MVNO Free Mobile has used 2G and 3G roaming on Orange’s 2G and 3G networks to provide national services and build its customer base while rolling out its own 3G and 4G networks, including its own spectrum licenses.
Consistent with the MVNO definition I adopted from Sprint, above, some make further distinctions among MVNOs. For example, Altice puts them in three broad categories with increasing levels of ownership and control of facilities: “white label” MVNOs, “light” MVNOs, and “infrastructure-based” MVNOs. Also called iMVNOs or full MVNOs, these use only portions of a host MNO’s network. For example, an iMVNO may rely only on the MNO’s RAN and route all its subscriber traffic over its own core network. Its “core control” enables it to control more aspects of mobile wireless service than a conventional MVNO, such as: SIM cards, roaming and network partners, data and Internet routing, as well as rate charging, customer care, billing, and voice messaging. Altice Mobile launched in September 2019, targeting Altice’s Optimum and Suddenlink cable customers. This iMVNO is hosted on Sprint’s network and has a roaming agreement with AT&T. Altice is also providing site locations for 19,000 of Sprint’s small cells in agreements between the two.
DISH is also a prospective hybrid wireless carrier. It plans to offer consumer mobile wireless services using the new T-Mobile as its MNO host if the proposed merger between T-Mobile and Sprint is completed. It intends to become an infrastructure based MVNO and also plans to build a mobile wireless network, using its substantial spectrum holdings, that will blend its own network services with those provided to it by the new T-Mobile. DISH faces onerous start-up barriers – particularly as a would-be national MNO – in building from scratch its radio network as well as core network, retail distribution and brand as a wireless carrier.
T-Mobile’s CEO, John Legere, has been damning about prospects for cable TV companies as MVNOs and has indicated unwillingness to host them on T-Mobile’s network. Similarities between cable TV and satellite TV companies suggest he was likely to feel the same way about satellite TV companies. It is a least a risk those sentiments will continue to hold some sway if the merger goes ahead.
MVNOs as on-ramps along the way to becoming MNOs
While operating as an MVNO is prerequisite to becoming a viable new MNO these days, having existing MNOs as the tollgatekeepers on that route is a precarious position for those newcomers. Consumers seek low prices and differentiated offerings, but they also want to be able to use their mobile devices wherever they go. Expectations have risen ever higher over the years as established MNOs have built out and improved their networks to provide coverage virtually everywhere—coast-to-coast, outdoors and indoors. In the many years it would take for a newcomer to come close to replicating that, even if it would ever make economic sense to do so, as an MVNO it remains beholden to its MNO host for much of its most significant input and associated costs.
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