Mobile Virtual Network Hang Ups

After not following the MVNO (“Mobile Virtual Network Operator”) space very attentively for a number of months, I was stunned to learn that Disney’s much celebrated Disney Mobile service is being terminated as a money-loser.

(MVNOs are companies that offer another company’s wireless service under their own brand — for example, people who had Disney Mobile service were actually using the Sprint network, but didn’t necessarily know it.)

Last year the MVNOs were supposed to crowd out the branding and marketing presence of MNOs (Mobile Network Operators, like Sprint, T-Mobile, Verizon, and AT&T Mobility) because the MVNOs (like Disney) “get” marketing, while the MNOs don’t. And I, like many others, found this intuitively made sense — I was just talking to another friend this morning who has a horrendous “customer experience” with his mobile carrier (I didn’t even bother to ask which).

But the truth is, MVNOs have been really stinking up the place. As reported by Cassimir Medford at, besides the demise of Disney Mobile, there was another Disney-owned MVNO that shut down recently — ESPN mobile. And besides the inglorious end of somewhat lower profile Amp’d Mobile, the really telling revelation was that Virgin Mobile USA announced, on the occasion of it’s IPO, that it had accumulated well over a half-billion dollars of debt over five years time. Since the Disney marketing juggernaut and Sir Richard “Marketing-Meister” Branson have are both taking this bath, I’m emboldened to say that the common wisdom about this marketplace is way off the mark. What happened to the walled garden, where a veritable monsoon of ringtone downloads and SMS overcharges reigns supreme, where the spoils belong to whoever can herd the most sheep in the gate?

Meanwhile, hardware manufacturer and yes, quasi-MVNO Apple Computer has put together an uber-MVNO business model based on a wi-fi enabled (albeit not open platform) device. As Ari Greengart deftly points out in his 10/1/07 RCR Wireless News article, Apple receives:

  • a hefty, non-disounted hardware margin on the iPhone (Apple offers no rebates or other incentives),
  • a share of airtime (voice and data) charges,
  • the ability to drive traffic directly to their lucrative iTunes service without first passing through their MVO partner (in the U.S., AT&T; in Europe, O2, T-Mobile, and Orange),
  • a share of music, movies and ringtones downloads revenue,
  • freedom from the responsibility their MVO partners must bear to acquire and maintain network capacity, and handle customer billing,
  • shelf space in their partners’ sizeable networks of stores.

As Ari says: “Wow.”


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Filed under mobility, Tech Business

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