FCC Chairman convinced by T-Mobile/Sprint concessions

FCC Chairman Ajit Pai has publicly stated he believes the concessions made by T-Mobile US and Sprint are enough to ensure the merger would be in the public interest.

Over the course of the weekend, rumours emerged over concessions the pair would have to make to get the support of the FCC, though rarely are sources so spot on. The merged business will now have to commit to a nationwide 5G deployment within three years, sell Sprint’s prepaid brand and promise not to raise prices during the rollout years, if it wants the greenlight of the FCC.

What is worth noting is this is not a greenlight just yet. Pai has said yes, though he will need a majority vote from the Commissioners. Commissioner Brendan Carr has already pledged his support, and we suspect Michael O’Reilly will in the immediate future also. The Democrats might want to throw a spanner in the works, but this would be largely irrelevant with O’Reilly’s support.

“In light of the significant commitments made by T-Mobile and Sprint as well as the facts in the record to date, I believe that this transaction is in the public interest and intend to recommend to my colleagues that the FCC approve it,” Pai said in a statement.

“This is a unique opportunity to speed up the deployment of 5G throughout the United States and bring much faster mobile broadband to rural Americans. We should seize this opportunity.”

As you can imagine, T-Mobile US CEO John Legere certainly has something to say on the matter.

“Let me be clear,” Legere stated in a blog entry. “These aren’t just words, they’re verifiable, enforceable and specific commitments that bring to life how the New T-Mobile will deliver a world-leading nationwide 5G network – truly 5G for all, create more competition in broadband, and continue to give customers more choices, better value and better service.”

The first commitment made by T-Mobile US and Sprint is a nationwide 5G network. Considering Legere has been claiming his team would be the first to rollout a genuine 5G network for some time, it comes as little surprise the FCC will want to hold him accountable.

Over a three-year period, presumably starting when the greenlight is shown, the new 5G network will cover 97% of the population. 75% of the population will be covered with mid-band spectrum, while the full 97% will have low-band. This is a very traditional approach to rolling out a network, as it meets the demands of capacity and efficiency, though there is a sacrifice on speed.

Perhaps more importantly for the FCC, the plan also covers objectives to bridge the digital divide. 85% of the rural population will be connected during this period, increasing to 90% after six years. This is not to say all the farmers fields will be blanketed in 5G, though it does help provide an alternative for the complicated fixed broadband equation in the rural communities.

Moving onto the divestment, selling Sprint’s Boost prepaid brand seems to be enough to satisfy the competition cravings of Pai. What is worth noting is this will not be a complete break-away from the business as it will have to run on the T-Mobile US network. Unfortunately, MVNOs in the US are not as free to operate as those in Europe, as switching the supporting network would mean have to change out all the SIM cards.

This becomes complicated as you do not necessarily know who your customers are in a prepaid business model. The situation certainly encourages more competition, it will after all not be part of the T-Mobile US/Sprint family anymore, but it is far from a perfect scenario.

Finally, Legere has promised tariffs will not become more expensive during the deployment period, another worry for the FCC should the duo want to meet the ambitious objectives to compete with AT&T and Verizon. However, it does appear Legere is promising 5G tariffs will not include a premium either.

And now onto the other side of the aisle. Commissioner Jessica Rosenworcel has tweeted her opinions on the concessions and it appears she is not convinced.

“We’ve seen this kind of consolidation in airlines and with drug companies. It hasn’t worked out well for consumers. But now the @FCC wants to bless the same kind of consolidation for wireless carriers. I have serious doubts.”

Rosenworcel has also suggested the decision should be put out for public consultation. We suspect Pai will want to avoid this scenario, as it would be incredibly time-demanding; the Chairman will want the merger distraction off his desk as soon as possible.

Commissioner Geoffrey Starks is yet to make a comment, but DO NOT, I repeat, DO NOT go on his Twitter page if you haven’t watched the latest Game of Thrones episode.

We understand the Democrat and Republican Commissioners are going to be at each other’s throats over pretty much every decision, however trolling any innocent individual with a GoT spoiler is a low blow.

Starks and your correspondent are going to have some issues.

Are the days of the full MVNO numbered?

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece, Darren King, Head of Business Development for Three’s wholesale division, assesses the future for MVNOs.

For as long as there have been MVNOs there has always been the received wisdom that a full MVNO was the best strategy to adopt. Having full control of your brand, the marketing and the technology is of great comfort when you are launching a new operator to market.

There are numerous examples that have stood the test of time. There are also the brands that have stretched out into countries all over the world, think Lycamobile for example.

One of the biggest reasons for going full MVNO has been the ability to switch wholesale partner easily to chase better commercials. However, the rate of change in our industry, particularly technological change, is bringing the tried and tested concepts into review.

That’s because to keep meeting customer expectations, you have to invest in the core network. It’s an expensive business, and it’s becoming even more expensive as the time between cycles of improvements shorten. There is no way of competing with the incumbents without a technology roadmap that keeps relative parity. It’s catch 22. If you want to keep growing your customer numbers and reduce churn you have to keep up the investment.

And that’s before we mention the challenges of managing, maintaining and improving UX.  One of the biggest challenges is getting the right settings onto handsets as the model has changed so much over the years. Traditionally all the settings needed to use a mobile service were stored in the SIM.  This is no longer the case, and there’s increasing reliance on settings being pre-populated in direct and market sourced devices across the board. This means that services like VoLTE, which make propositions stand out, can be difficult to deliver to customers.

There’s also something we refer to as the ‘blacklog’ conundrum.  As more consumers opt for SIMO and bring your own device, it becomes more complicated to get them access to newer services unless the MVNO can get retrospective updates. There are a heck of a lot of handsets out there so it’s no mean feat to pull it off!

Added to this, there’s the expectation to have a roaming proposition. This too is hurting MVNOs as they seek out roaming agreements and strike deals on interconnect charges. It requires full-time management and very often some form of partner hub to give you the scale that will sway customers to your brand and give commercially viable pricing.

There is no escaping the investment required. It’s brought into focus when you read the analyst firm Enders’ opinion on the Sky Full MVNO, which states the broadcaster will need around 3 million subscribers to break even in today’s climate.

It’s very easy to see why MVNOs and high street brands considering becoming an MVNO are saying ‘there has to be another way’.

And there is. We are now seeing MVNOs launch without these overheads and operational commitments. Instead, in our case, they are using a telecoms as a service model whereby the core network, billing and customer management tools, fraud detection, web front ends, existing roaming agreements, and the technology for proposition design and development of the operator are used lock stock, and the brand adds its sales and marketing expertise over the top.

In the case of our model, even the hardware challenges are reduced as the MVNO benefits from pre-populated settings that support MVNOs using a Three network profile. This means customers can use the devices straight away with no fuss.

It’s simplifying the MVNO model beyond recognition. In fact, in some ways you could argue it’s really bringing the word virtual to life in the phrase MVNO.

This radical partnership approach to MVNOs is shaking things up and allowing brands that have previously dismissed an MVNO to have a go with far more confidence than they otherwise would have. Superdrug is a perfect example. It’s used its loyalty card and understanding of its customers to develop a proposition that customers want and launched Superdrug Mobile at significantly lower risk and with extraordinary results.

It’s this success that leads me to predict that we’ll see and hear a lot more of the telecoms as a service model in the coming year, and in particular at MVNO World Congress. I’m certain it will be the early adopters of this model that will not only succeed in their launch market but outperform past records. For any brand considering how it will survive tough trading conditions, this has to be a very attractive way ahead.

Darren KingDarren King, Head of Business Development for Three’s wholesale division. Darren is responsible for new Mobile Virtual Network Operator (MVNO), wholesale, and Internet of Things (IOT) commercial partnerships. Experienced at seeking new partnerships, whether through traditional MVNO’s or through White Label partnerships with the overall aim of doubling Three Wholesale’s customer base and revenue year on year to 2021.

Google’s MVNO is here to stay

After launching the MVNO service in 2015, Project Fi has trundled along without any real fanfare, but a rebrand of the service suggests it might get a bit more attention over the coming months.

It has become somewhat of a rite of passage for Google, but dropping the ‘Project’ part of the name is a sign the service or product has graduated out of the labs. Loon had the ‘Project’ label dropped a couple of months back, and now it’s starting to look like a genuine business, so perhaps this snippet of news is something we should pay attention to. The MVNO is perhaps being given more official status on the Google family tree. Project Fi has been rebranded to Google Fi.

“Starting today, Project Fi is available on more phones: our plan now works with the majority of Android devices and iPhones,” said Simon Arscott, Director of Project Fi at Google. “And since we’re officially expanding our device support, we’re making our name more official, too: we’re now Google Fi.”

We doubt this service will be able to offer any material competition to the MNOs of the US, though it will certainly be a nuisance. Google’s previous ventures into the world of connectivity have not been fruitful, Google Fiber was hardly a roaring success, though this is a company which likes to back ideas with potential. And it certainly isn’t scared about pumping cash into concepts some would easily dismiss. Just looks at Maps or Loon, how many companies would have stuck with these ideas for so long as they swallow millions. Maps has now developed into a money making machine, while we love the potential of Loon.

In Google Fi, the team has the opportunity to do something brilliant again.

The interesting aspect of Google Fi is its affordability, simplicity and the fact it genuinely seems user centric. In researching this article, your correspondent went on the FAQs, played around with the various products and talked to a customer service agent in the instant chat function. The website is simple and easy to use. It seems genuinely user centric, much in the same way GiffGaff is in the UK. On the product side, these are tariffs which are designed to be simple.

In the UK, GiffGaff allows you to choose a data bundle, which can be altered at the end of every month dependent on your usage. Even when you use all your data, there are no penalty fees which some will dread, you are just prompted to renew your bundle a couple of days early. With Google Fi, the process is slightly different, but just as simple. You pay $20 for unlimited SMS and voice, and then $10 for every GB of data you use, with the bill capped at $60. Yes, it could be cheaper, but don’t forget this is the US where tariffs are incredibly expensive, however like GiffGaff it is simple and flexible, just what today’s consumer is demanding.

Today’s announcement not only rebrands the service to make it official and here to stay, but also expands the number of devices which it is compatible on. The service is now available on ‘most Android devices’, not just the ones which Google sells, but also the iPhone.

MVNOs are never going to take over the US, that is not the way the industry is structured, but with a well-known (and mostly liked) brand and adventurous markets with big budgets, it could certainly make an interesting business.

White label, sub brands and MVNO, what is the right model?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Lynda Burton, Director of Wholesale at Three UK, discusses white labeling, operator’s MVNO and diversification strategy.

There will be many interesting debates happening at MVNOs Europe this November. One of the most fascinating will be on the future of sub brands and the value they will bring to an operator’s MVNO strategy over the next three to five years.

We’ve seen two significant launches this year: SMARTY by Three and Vodafone’s Voxi. It’s evidence that operators still need ways to diversify through multiple brands if they are to appeal to customers they wouldn’t otherwise attract. It’s an extension of the widely held belief that MVNOs are crucial for stretching a network’s assets. Of course, the case for sub brands remains simple and compelling – create a brand you control as an operator, and target specific customer segments. It limits the risk of cannibalisation and provides economies of scale as the sub-brand operates within the operator.

All of the best practice, systems and commercial relationships can be easily harnessed and exploited. SMARTY exists for this very reason and has been a commercial success as a result. But success is always hard fought. Launching a new brand requires precision marketing, and well-negotiated channels to market. These are overheads that don’t come cheaply and can potentially undermine the savings and aspects of control that such a ‘parental’ arrangement has.

It’s why traditional MVNOs still have their place in our market. Granted the argument that revenues are naturally lower does exist, but people often overlook the fact that the marketing costs are lower too.

iD by Carphone Warehouse is an example of an MVNO getting the balancing act of investment in infrastructure and marketing spend right. Its customer numbers show that there is room for MVNOs in the market, announcing 800,000 customers with plans well underway to hit 1 million. All healthy incremental customer numbers for Three.

CPW knows what its customers need inside out and has built a service that is differentiated and targeted. It’s taken full advantage of its existing distribution strength and combined it with Three’s award winning network, and ability to deliver innovative MVNO services such as VoLTE and voice and text over wifi.

But the setup and ongoing investment in the infrastructure to support an MVNO can be high, and Three has seen that there is a better way…

What is it? White labeling.

The best example is Superdrug, which launched 3 months ago and  is leading the way on the win/ win of a a white label platform.  In this new white label model, the systems and technical relationships are managed by the operator. It takes the heat out of the expense of set up, and frees up the cash to get the proposition and marketing just right. In short, the risk diminishes.

As such, Superdrug was in a strong position to take full advantage of our experience of taking new brands to market and combine it with its very powerful customer loyalty programme and distribution network.

Superdrug understood what its customers wanted from its wealth of customer insight and developed a service it knew people would buy, and rewarded them when they did. And in turn, it gave the board assurances that the business case could and would work.

Is there a retail board that would turn down the chance to extend its well-loved brand in such an economical way? White label MVNOs are a very interesting and exciting way to compete in the current tough trading circumstances.
It’s these pressures brands face to improve revenue and keep customers loyal that will drive the MVNO market over the coming year. In particular, we’ll see brands realise that they can achieve their goals via a white label partnership. Brands, which have all the kudos but struggled to make the MVNO numbers work before now, will see there is a viable way to make their brand work harder.

We’ll see the existing MVNO brands re-evaluate their approach to running a network and switch their models to white label services to cut costs.That’s where the real debate will be and it’s the operators who are most in tune with these evolving dynamics that will win out.

 

A headshot of Lynda Burton, Director of Wholesale at Three Mobile UK and speaker at MVNOs Europe 2018Lynda Burton is Director of Wholesale for Three UK, she owns MVNO, white-label partnerships, bulk messaging, carrier services and international roaming functions. Lynda has led Three’s rapid growth strategy in wholesale which has included delivering the UK’s fastest growing postpaid MVNO, iD Mobile, winning B2B MVNO Gamma Mobile and providing the connectivity solution in the UK for Google’s Project Fi MVNO. She has also driven the delivery of innovative new services including OTT virtual numbers that allow appVNOs, high bandwidth IOT solutions and supporting Three’s Feel at Home roaming proposition with unrivalled cost economics.In June 2018 Lynda announced a new white label partnerships model that allows brands to launch MVNOs simply and with limited investment in technology, the first brand to launch was Superdrug Mobile.Prior to heading up the Wholesale division, Lynda was Director of Programme and Operations. She has extensive experience in the telecommunications market across both the UK and Australasia.

Hear from Lynda at the MVNOs Europe 2018, taking place in London, 6 – 7 November 2018. Book your tickets now.

Q&A with Lynda Burton, Director of Wholesale at Three

With less than ten days until the MVNOs Europe 2018, the MVNOs Series spoke with Lynda Burton. Director of Wholesale at Three, Lynda owns MVNO, white-label partnerships, bulk messaging, carrier services and international roaming functions. In this interview, Lynda shares her predictions for 5G, its benefits to customers and partners, and the most exciting use cases. 

What are your predictions for 5G and what benefits will it bring to operators’ customers and partners?

We see the launch of 5G as a significant impact upon the market and one from which Three intend to get maximum advantage. We have more 5G spectrum than any other operator and with our plans for a fully virtualised network well advanced, we will be able to leverage all the benefits of 5G. Thanks to the rollout of 5G, our spectrum and new technologies like Massive MIMO, our network will be able to support almost thirty times the data that it does today – that means we can bring on more customers fully exploiting our wholesale business opportunities. It is really exciting for our team.  It also opens up new connected customer verticals, connecting people to people, people to things, and things to things in both business and consumer segments.

Can you also tell us a bit more regarding 5G use cases? Why MVNOs should be excited about it?

In the short term 5G is going to allow customers to do more of what they are doing now but much faster. In the consumer space this could mean a far superior low latency gaming experience and removing the need for fixed broadband – so few millennial customers value their fixed line, it is the natural progression for them to become a fully mobile connected household.
Longer term we see a significant opportunity in connectivity for business applications, whether that is connected health, car or other industries that need high bandwidth, low latency services, or the IOT applications where there are many millions of devices utilising the network.

Finally, our fully virtualised 5G network will allow “network slicing” effectively allocating portions of the network to a particular organisation or vertical. This is cutting edge stuff and the use cases are not fully defined yet, but because of the investments we have made in 5G we have the capability and can work internally and externally on how we bring it to market.

How are networks getting ready for 5G and how that includes MVNOs? i.e. Will operators ensure MVNOs have access to their wholesale 5G networks?

Operators across Europe are working on their 5G plans. At Three UK we have been planning meticulously for 5G for a long time. Our network and IT transformation, moving us to a completely new and fully virtualised core network, increasing the number of data centres, adding new mobile backhaul with SSE and redeveloping our IT systems, is progressing very well. When completed the core network we are building in partnership with Nokia will be a world first. Without this you cannot fully leverage all the capabilities of 5G. We have already secured more 5G spectrum than any other operator and this opens up a significant opportunity for us.

With regards to our MVNO partners, they are already briefed on our 5G strategy and we are continuing to update them. Historically Three UK has always offered our MVNOs network parity with Three Retail and this means that in the future MVNOs will be able to access 5G. We had the same approach to 4G access.  This was quite different to the approach of other operators who sought to retain premium services for their own retail customers, giving MVNO customers a more basic service – some of the larger MVNOs only gained access in the past two years. We don’t believe that holding new technologies back from our partners is a model that works. If we help them to grow, we’ll grow and that’s the model we will bring to 5G.

How can operators help their MVNOs to face the changing ecosystem? i.e. Are operators willing to reduce their wholesale rates if RLAH has a profound impact on their MVNOs’ businesses? Will operators be more flexible and work with MVNOs to negotiate their roaming deals?

That’s a lot of questions! Certainly at Three UK we have always had a flexible approach to working with our MVNOs, whether that is technical or commercial models. We believe that our success is driven from our MVNO’s success, so we are always open to having a dialogue if an MVNO needs our support, and that is on anything not just RLAH. We like to work out challenges together, we really do see our MVNO relationships as partnerships.

With regards to whether we would negotiate roaming deals on an MVNO’s behalf, we already offer a managed service on roaming for our MVNO lite customers, leveraging our roaming relationships with over 190 networks globally.

How do operators tackle the increased data demand from their customers?

Three’s own retail customers use more than 3x the average data consumption each month and our customers have recently voted us the best network for data. Delivering high speed and high bandwidth is our heritage – our network was designed for data.  All the projections have data demand growing exponentially over the next 5-10 years and 5G will help us manage that capacity in a cost-effective way.

What are your views on delivering a fully digital MVNOs? What do you consider the pros and cons of this model?

There a couple of ways that an MVNO could be considered fully digital, it could be that the MVNO can only be accessed via digital channels. So, customers buy online, access their account online and are served through online channels such as webchat. I definitely believe that for the right customer segments this is a model that really works. We only need to look at many of the other digital services like Netflix and Spotify to see that consumers are comfortable in buying service in a 100% digital channel, and I think it’s an area where we will continue to see growth. Obviously, there will be some segments of customers who prefer a face-to-face service, or the ability to call a call centre for help. In the short terms these customers are unlikely to want to migrate to a fully digital experience. But this is at the core of the MVNO ecosystem. MVNOs target different customers segments and offer them an experience which is differentiated from the mass market and serves that customer segment’s needs.

The second way an MVNO could be considered fully digital is if all the calls are handled through digital channels, in app calling, sometimes referred to as AppVNOs. Three offer a product that supports this model, our OTT virtual numbers. This allows organisations to set up a mobile calling experience within an App, for example if you wanted to have a mobile number in a dating app. It’s relatively early days for the product but we are seeing some interesting use cases and as always we are keen to exploit new technologies and ideas for our wholesale customers.

What are the best strategies when approaching customers via new channels? How can MNOs and MVNOs develop and implement their digital strategies better?

Accessing new customers through new and different channels is critical to the success of an MVNO partnership. Our recent partnership with Superdrug is a great example of this. The relationship enables Superdrug to add new benefits to customers within their loyalty scheme giving them a fantastic mobile offer and double loyalty points on all their spend in Superdrug.  For Three, we get to bring new and extremely loyal customers to our network through an entirely new channel.

In the Superdrug example we are using both retail and digital channels, all the joining journeys can be undertaken online, including setting up your SIM after buying it in a Superdrug store. The online account web pages and web help allows customers to service their account and get help through flexible and lower cost digital channels. Much of the infrastructure that supports this has been developed by Three as part of our white label platform, while Superdrug bring their outstanding understanding of their customers and how best to target and sell to them through stores and digital loyalty media. It’s an exciting proposition and opens up more opportunities for brands who may not have considered their loyalty scheme as a channel for telecoms services.

What are your views on network virtualization and its impact on operators?

I have already mentioned that virtualisation is crucial to fully leveraging the benefits of 5G but there are other enormous benefits that it will bring. It will allow us to be far more agile, delivering change in the network faster and ultimately allowing us to develop new products and services far faster than the competition, reacting to the ever-changing demands of our retail and wholesale customers. In short it will give us and our partners a significant competitive edge.

Automation is a key part of our network virtualisation story that will enable many activities that are manual today to be automated in the future, as well as providing instant self-healing capabilities improving network availability and reliability.

Hear from Lynda Burton at the MVNOs Europe 2018, taking place in London, 6 – 7 November 2018. Lynda will deliver a presentation on ‘Preparing for 5G – setting your MVNO up for 5G success’. Book your tickets now.

Standard Bank confirms South African MVNO launch

Following rumours earlier this year that Standard Bank had plans to launch an MVNO, the South African bank has finally confirmed the not so secret news.

In a conversation with both MyBroadband, Standard Bank confirmed the imminent launch of a South African MVNO, but didn’t have much more to add..Standard Bank, which has around 12 million retail customers for its financial services in South Africa, will join more than 10 MVNOs already operating in the market, as well as MNOs Vodacom, MTN, Cell C and Telkom.

After the launch, Standard Bank will become the second major bank in South Africa to launch a mobile virtual network operator following the steps of FNB, which launched an MVNO way back in 2015. Earlier this year, Stephen Bailey, former Virgin Mobile South CEO and now MVNO CEO at Standard Bank Group, attended the MVNOs World Congress where he took part in an onsite interview.

“MVNOs currently hold only about 1% of the South African markets,” said when asked about the local market. “The number of MVNOs coming to market has accelerated greatly in the last 12 to 18 months. We’ve seen financial services businesses come into the market. Two banks in South Africa are launching an MVNO. One has launched, and one is about to launch. That’s some interesting developments. I think that like in many other markets the MVNO market will probably take about 10% subscribers in the market.

“I’m very bullish about growth prospects in South Africa for MVNOs. It’s a relatively untouched model in our markets. I think, what’s interesting for us as South Africans is our close proximity to Sub-Saharan Africa. And in Sub-Saharan Africa there’s only, that I know of, two MVNOs in Kenya. There’s no MVNOs in West Africa and only two, as I said, in East Africa.

“Looking into the crystal ball is not so easy. In terms of what excites me most about what the opportunities coming up is I think the rollout of eSIM [which] is very exciting for MVNOs. As MVNOs we offer new niche offerings to our customers. I think eSIM just makes it much easier and less expensive to acquire those customers because there’s no need now to distribute a physical SIM to those customers. I think it offers a whole lot of opportunities in digital channels, direct customer and marketing opportunities. So that’s one of the things that I’m particularly excited about in the coming five years.”

You can see the full interview below.

 

What defines the European MVNO market?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece the MVNOs Series team investigates the latest trends and challenges facing the virtual network operator market in Europe. What are the lessons to be learnt from them?

The European MVNO market is the world’s oldest, largest and most mature. Boasting more virtual network operators and more user subscriptions than any other region, MVNOs in some European countries command as much as 15 to 20% of the total mobile market.

By 2020, some estimates put the total number of MVNO subscribers on the continent at upwards of 110 million – not far off four times the total number in the USA.

With market liberalisation occuring in some European countries as early as 1995, and the world’s first recognisable MVNO – Virgin Mobile – launched in the UK in 1999, the region’s virtual networks have had close to two decades to emerge, grow and evolve. Operating in a market where 84% of the population owns a mobile phone and the mobile industry contributes nearly €600 billion to GDP, the incentives for European MVNOs have arguably been greater than anywhere else on the planet.

And in the EU, representing a significant proportion of the continent’s domestic markets, including some of the biggest in the likes of Germany, UK, France and Spain, MVNOs have also found a highly supportive regulatory framework.

Yet success brings its own pressures, the European MVNO sector, and the mobile market in general, is intensely competitive. With mobile ownership having sat close to saturation point for a decade or more, vertical growth has become harder and harder, sparking fierce price wars and waves of consolidation. ARPUs first from voice and then from data have tumbled, the product of regulatory intervention and much as competition.

As the market stands on the brink of its 20th anniversary, forces such as Roam-Like-At-Home take part in shaping the European MVNO industry heading into a third decade. The EU’s decision to ban roaming charges within its borders is a question yet to be answered. As we shall find out in the upcoming months, RLAH could deal a significant blow to the industry or, alternatively, present a much-needed opportunity.

Snapshot: The European MVNO Market 2018

Comprising around two thirds of the continent’s nation states and population, it is no surprise that much of  Europe’s MVNO activity is concentrated within The European Union (EU). Around two thirds of all the continent’s MVNOs are found in just five EU member states – Germany, the UK, France, Netherlands and Spain.

Germany boasts one of the world’s largest domestic MVNO markets, with around 48 million subscribers and revenues of US $11 billion. This huge sector enjoyed rapid growth following a wave of operator consolidation in 2014, when the regulators sought to mitigate against price inflation by handing 30% of network capabilities to MVNOs.

The UK, meanwhile, has been described as one of the world’s most crowded MVNO markets, with 13.5 million customers shared out between upwards of 100 virtual operators. However, 86% of these customers are shared out between a dominant ‘Big 6’ group of large MVNOs – Tesco Mobile, Virgin Mobile, GiffGaff, Lycamobile, Lebara and TalkMobile.

With Sky another sizeable player in the UK market, it is noticeable how big name brands from outside the traditional mobile sphere have used the MVNO model as a way into the UK market. Overall, one in seven UK mobiles are connected via a virtual operator and the sector is worth more than £2 billion.

As in most areas of industry and commerce, no one is quite sure how the UK’s looming departure from the EU will impact on the MVNO sector, both domestically and on the continent. Outstanding issues to be resolved include whether the EU’s Roam Like At Home (RLAH) rules will still relate to UK subscribers travelling in the EU, and how carriers which operate networks both on the continent and in the UK (including Vodafone, Orange, Deutsche Telekom and Telefonica) will handle wholesale arrangements in the newly separated markets.

Outside the EU, the biggest single domestic MVNO market in Europe is Russia. Although conditions for virtual operators in Russia have long been viewed as challenging due to the dominance of the country’s big 3 carriers and little sign of regulatory intervention to liberalise the market, MVNOs are now estimated to control 2.6% of the country’s mobile subscribers. Some analysts confidently predict that this will grow to 14 to 15% by 2022.

Carrier Tele2 Russia certainly appears to be taking active steps to increase its MVNO footprint, reporting 831,000 virtual subscribers on its network at the end of 2017. Its model seems to be using MVNO agreements to attract large non-telco players into the mobile space – Tinkoff Bank has this year announced a 1 billion rubles investment into its MVNO spin-off, Tinkoff Mobile, while Moscow-based ISP AKADO Telecom has also announced signing an agreement with Tele2.

Across Europe’s most developed MVNO markets, there are mixed views on the potential for growth. In KNect365’s global MVNO market survey carried out earlier in 2018, some respondents described growth prospects as ranging from slow to stagnant. A common theme was that traditional MVNO models are increasingly being squeezed through a combination of price competition and over-saturation in the market, although there were varied opinions on whether this made it difficult for new players to enter the market or else created new opportunities for innovative entrants with disruptive approaches.

Despite the tough trading environment, more than a quarter of respondents (28.5%) still cited Europe as the region offering the best growth opportunities for MVNOs. Some analysts argue that European consumers, already at an advanced stage of engagement with mobile services, will soon start to look beyond price for increasing levels of specialisation and personalised service. This plays into the hands of agile MVNOs which have the experience serving niche markets while network operators, already faced with dwindling retail margins, are more and more likely to turn to wholesale business models instead.

On the other hand, there is a school of thought that suggests it is becoming harder and harder for MVNOs in Europe to operate out of the shadow of their network operators with any degree of independence. Some insiders told us they see MNOs aggressively targeting traditional MVNO territory in a bid to bolster their own dwindling margins.

As Henrik Liungman, Vice President of Services at ACN Europe, commented: “The trend is clearly towards larger data plans. The MVNO’s are struggling to compete with the MNO’s unlimited data offers on the retail side. 100G plans or unlimited data with caveats are not something MVNO’s can offer with the current cost structures.”

Europe’s MVNOs are looking to brand new markets and brand-new business models away from the consumer sector in business services. In the UK, for example, more than 20% for the MVNO market is now focused on business. In Germany, the connected car market is the most advanced in the world, creating brand new opportunities for agile, specialist operators at the intersection of IoT and eSIM technologies. Yet another significant trend is digitalisation, with the adoption of cloud-based ‘as-a-service’ business models by virtual operators positioning them ideally to make the transition into B2B, and to take a step up the value chain to offer mobile enabling services to emerging IoT markets.

The research-based report Shaping the European MVNO Market looks closely at the impact of consolidation on the market and ask whether carriers and virtual operators alike might not benefit from more collaborative rather than competitive relationships.

With pricing on voice and data having practically become a zero-sum game, it looks at ways MVNOs are diversifying services to seek new value streams and assess the impact of OTT entrants.

The report also explores the impact of new technology, specifically how digitalisation is changing business models and the size of the IoT opportunity, and ask whether over the next decade Europe’s MVNO sector might see a significant shift away from consumer to B2B markets. Download the report!

Maximizing Value from Digitalization and Virtualization

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece the MVNOs Series team explores two of the key terms used to describe the next phase of the digital journey: digitalization and virtualization.

We are living through an age of digital transformation. Since the development of the first digital computers in the middle of last century, the march of the byte – the basic unit of digital information – has been unstoppable, infiltrating virtually every aspect of human activity.

It is tempting to look around and see our lives as fully digitized, what with the prevalence of computers and laptops at work and in the home, smartphones and other mobile devices, the internet and the Cloud, and the perceptible shift of activities that once took place exclusively in the physical world into the virtual.

But all the signs are that we have perhaps only just reached the end of the beginning of the digital journey. The potential transformational impact of emerging technologies – the Internet of Things (IoT), artificial intelligence (AI), Big Data analytics, virtualized networks – could dwarf anything that has gone before. And the mobile industry has a central stake in all of them.

According to joint analysis from the World Economic Forum and Accenture, if the right opportunities are grasped in the right ways, the combined value-add of digital transformation to industry and society over the next 10 years stands at $100 trillion. Such is its critical importance as enabler and carrier of digital progress, providing the “access, interconnectivity and applications” on which it is built, telecoms stands to benefit to the tune of $2 trillion in additional value.

Put simply, connectivity is a vital ingredient in the joined-up digital world we are emerging into. Thanks to its ubiquity and scale, no technology is better placed to deliver than mobile.

Understanding Digitalization: Transforming Operations and Business Models

Defining the meaning of the term digitalization attracts some debate, a reflection of the fact that it is a relatively new concept where consensus and shared understanding is still emerging. Some of this controversy centres on whether the term should describe the use of digital technology to change/upgrade specific business operations or the creation of entirely new business models, and how it therefore relates to the concept of digital transformation.

Behind all the semantic wrangling, it is important to acknowledge that digital technology is having a significant impact on the mobile industry at both an operational and strategic level. Under pressure to keep up with consumer demand, to not be left behind in the digital arms race and to arrest the slide in declining revenues from traditional voice services, operators view digitalization as both a means of protecting margins by cutting costs and of creating new revenue streams with innovative services geared for new markets.

As well as these competitive pressures towards internal transformation, the mobile industry also has a special relationship with digitalization in the wider economy. As connectivity is widely accepted as an essential ingredient in delivering smart, integrated, hyper-networked digital systems, mobile has been described as the glue which can hold digitalized operations and services across all sectors together. The mobile industry therefore controls a resource that is critical to the entire concept of digitalization – a key part of the digitalization experience for mobile operators is therefore how they can cash in on that value.

Digitalization of mobile

Another factor which muddies the waters when it comes to getting to grips with what digitalization means for mobile is the fact that, across many industries, digital transformation is often viewed as synonymous with cloud migration. If that were the case, then large swathes of the mobile industry, particularly MVNOs that operate as online-only, cloud-based businesses, meet the criteria for having already undergone digital transformation.

The Cloud is undoubtedly an important part of digitalization. Online-only MVNOs gain certain benefits from being based in the Cloud, such as lower overheads from having neither network infrastructure nor physical stores to burden them, plus the agility to get close to niche markets and respond rapidly to shifting demands. But should we define an online MVNO which is simply selling voice and data packages from a digital store – in other words, operating the same business model but via a different channel – as fully digitalized? Does that model maximise the full potential digitalization offers to mobile operators in terms of value?

When asking what digitalization can achieve for mobile, industry insiders frequently refer to companies like AirBnB, Uber and Netflix to provide a yardstick. More than just adopting a cloud-based operational model, these are companies which have used digitalization as a defining strategic principle and have been so successful they have transformed entire sectors.

From MVNOs’ perspective, the lesson that these digital start-ups have managed to shake enterprise-sized incumbents out of their positions in the market should also no be lost.

For mobile operators, then, the Cloud represents an important first step on their digital journey, providing a platform for further change in terms of cost reduction, flexibility, technology adoption and service innovation. But if we were to write a recipe for ‘full’ digitalization for a mobile operator, a process strategically geared towards maximising the benefits, there would be plenty of other ingredients to add to the mix. Here are the staples:

Strategies built around consumer demand

The reason why Cloud migration alone – old models in a new channel – does not amount to ‘full’ digital transformation is that the Cloud offers the freedom and the technology to do so much more. Mobile operators are now able to reshape services and customer experiences to deliver exactly what the customer wants, which logically should therefore be the centrepiece of strategy. In an industry where both customer acquisition costs and churn are high, giving a reason for loyalty through improved customer experiences carries a high value.

Gary Bunney, CEO of BSS and analytics service specialist MDS Global, says that the modern digital consumer, given so much choice and power in all other areas of retail and commerce, is no longer so inclined to accept fixed, off-the-shelf mobile packages. “We believe customers are demanding more control to create the plans they need,” he said. “And they want this control across a range of different networks, services and applications. With this control comes the ability to action. To change, amend, add or terminate without contractual restriction.”

Applications and platforms

The key to delivering on customer demand is software. Bunney talks about enabling customer control via a “self-service application”. Amol Phadke, Accenture’s MD of Global Network Strategy and Consulting, likewise describes the most innovative, disruptive digital MVNOs adopting a ‘software-driven operating model’ that is “dependent on automation, analytics and AI.

Software plays a key role in driving flexibility and value in mobile services by decoupling services from physical infrastructure. Moreover, as the sophistication of software increases, the cost of both development and delivery through the Cloud decreases, offering businesses and consumers alike more for less.

Data

Of the three specific technologies Phadke names, automation and AI speak of the customer empowerment and ‘self-service’ control Bunney recommends, but also of efficient, fast convenient services. Analytics, meanwhile, gives digitalized MVNOs the opportunity to fully personalize service based on all the data that becomes available via applications and platforms. Jaco Fourie, Head of Product Management at BSS specialist Qvantel, says: “Digital solutions allow for more rapid shifting of data gathering tools. This enables more data to be collected and analysed … and used to personalize the customer journeys in digital touchpoints automatically for superior customer experiences.”

Bespoke services

Fourie goes on to argue that analytics “paves the way for rapid and real-time offers and deals that can be tailored and modulated to match the trends and data that is being gathered on them.” The marriage of software and data in a Cloud environment allows mobile operators to create dynamic customer experiences that adapt to changing demands. It also allows them to throw off the shackles of voice and pure data packages and innovate with new potential revenue streams from new services.

Federico Homberg, Head of Mobile Wholesale Business Development at Deutsche Telekom Germany, told us that he sees an increasing trend in virtual operators moving away from “branded reselling” to a “full MVNO” model. “With a full MVNO you have no constraints when it comes to building your own products,” he said. This alludes to another significant trend in digital transformation for mobile players, the move towards DevOps operations, where programming and development skills are highly sought after to enable operators to build their own bespoke software and platforms.

As well as looking at the impact on the mobile industry, the report Maximizing Value from Digitalisation and Virtualization opens the discussion up to look at the broader role of mobile as digitalization continues apace across industries and in consumer lifestyles. It assesses what kind of services mobile players, and MVNOs in particular, are able to offer to support the increasingly digitised demands of both B2B and B2C markets, looking at areas such as IoT provision and Over-the-Top (OTT) value-added services as routes into brand new revenue streams.

Its analysis also focuses on the potential for mobile companies to transform service levels as well as service types, redefining customer and end-user experiences in innovative, dynamic ways which tie in with the expectations of increasingly digitised audiences. Finally, the research evaluates the risks and rewards of all of this, the challenges MVNOs face in embracing what amounts to significant technological, operational and cultural change, and what they can do to maximise the benefit.

This in-depth report also offers analysis on mobile as digital enabler, the new horizons in customer experience and service personalization & differentiation. Download the full report and discover how you can make the most of this opportunity.

Connecting devices: Could iSIM be the key to opening up the IoT?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Freelance Technology Journalist Kate O’Flaherty offers an in-depth analysis on iSIM, launched by ARM earlier this year. What is it, how does it differ from eSIM, and how will it impact the market?

This year’s saw ARM take aim at the internet of things (IoT) with the launch of iSIM technology – an integrated component built into the same chip as the processor. In many ways it’s similar to eSIM, but because it takes up less space iSIM is ideal for tiny IoT devices.

Among the advantages, iSIM lowers costs for multiple players in the IoT supply chain. It is cheaper than eSIM, because there is no need for an extra chip. In addition, there aren’t any assembly steps, and it results in fewer devices in the supply chain, reducing hardware manufacturing costs as a result.

Ease of integration is another factor that makes iSIM stand out: It reduces complexity because the modem and Sim card are “under one roof”, so there’s nothing for the device maker to integrate, Eden Cohen, senior product manager at Qualcomm, says.

ISIM technology offers multiple benefits for all players within the IoT space, according to Alex Gledhill technical specialist at Intel: “ISIM provides flexibility in business and deployment models, enables more services, simplifies OEM logistics, eliminates sku proliferation –  and there is a lower bill of materials cost, in particular for low power technologies like narrow band IoT (NBIoT) and Category M (Cat-M).”

This is because iSIM is more power efficient. Indeed, the lower price and ease of use associated with iSIM could easily be applied to smart meters or connected cars “where we need high security and low cost”, says Vincent Korstanje, vice president and general manager of the Secure Identity line of business at ARM. “A smart meter needs software updates, but this doesn’t need to be fast,” he points out – which makes it an ideal use case for iSIM.

ARM is predicting that 15% of all IoT devices will have cellular connectivity by 2025. The technology therefore opens up multiple opportunities for operators, because they will potentially see more IoT devices connected to their networks as a result.

Taking this into account, iSIM will also offer interesting use cases in the consumer IoT space, says Korstanje’s colleague, product marketing director Loic Bonvarlet. “This area is really a premium and iSIM might bring new interesting use cases from saved power and space – such as wearables and things integrated into clothing.”

Asset tracking and connected spaces offer more possible use cases for iSIM. “These use cases require a small module that is low cost,” says Korstanje. “When firms are able to track pallets around the world, they can keep a good eye on where things are and therefore improve efficiency.”

At the same time, iSIM can also be used in high end devices, says Gledhill: “For high end devices, iSIM can enable vertical applications such as payment, identity and digital rights management.”

Challenges

It is clear iSIM offers great potential to help drive the growth of IoT, but there are obstacles to be overcome. Guido Abate, STMicroelectronics international standards manager and the GSM Association’s RSPTEST Chair, points out that eSIM is “much more mature than iSIM”.

Gledhill agrees, saying iSIM is “in its infancy” and needs mass market adoption. “To achieve this, it requires system on a chip (SoC) integration, certification process enhancement and an ecosystem that provides the same level or better security than the traditional Sim.”

Remy Cricco, chairman of the board at the SIMalliance says the group’s members are observing “strong technological and business trends” supporting the continued growth of the ecosystem.

However, he adds: “As long as there is demand for strong device and service security – which SIMalliance sees as gaining even more relevance with society becoming increasingly connected – the provision of secure OS and subscription and data management services, remote provisioning capabilities and a comprehensive understanding of mobile operator requirements will be essential.”

Indeed, the standards for eSIM are already underway, with several devices already incorporating the technology. But to a large extent, iSIM can use the existing eSIM ecosystem and back-end infrastructure, says Gledhill.
At the same time, he says, security and certification challenges need to be addressed to satisfy MVNOs’ and mobile operator’s requirements.

But ARM points out that iSIM is in itself very secure. ARM’s iSIM offers its own low footprint OS, called Kigen, which runs on a CryptoIsland secure enclave. This means the Sim identity, a microcontroller and a radio modem can be embedded on the IoT SoC.

This is fully partitioned from the rest of the SoC, with self-contained processing and encryption elements running a secure operating system.

But despite this, Korstanje agrees there is more to be done. “We need to work hard on the standards side, but it’s not massively different: The software stack is the same,” he says.

The future

It’s early days for iSIM, but its future is looking very bright, with devices appearing as soon as next year. According to ARM, iSIM will appear from early 2019, with more announcements due in the first quarter of the year, ramping up for full adoption in 2020.

Meanwhile, Qualcomm says it is planning to offer iSIM within connected PCs running on its Qualcomm snapdragon processors set to launch in 2019.

Other technologies will also help fuel the use of both iSIM and eSIM in devices. For example, Gledhill thinks 5G will be an accelerator for the embedded Sim market. Gledhill explains: “Simply put, 5G will connect more devices – including low power IoT devices, cars, and PCs and tablets – to operator networks.

“This means more deployment and enablement of Sims on various existing and new technologies. It will drive new models and the user or enterprise has the ability to move between networks without physically changing the Sim card. This is particularly useful when applied to IoT devices in the field.”

As the ecosystem matures, there will be many more opportunities for both MVNOs and mobile operators that wish to play in the IoT space. But this will also put pressure on carriers to ensure their networks are up to scratch and able to handle potentially billions of additional devices over the next few years.

Meet with ARM, SIMalliance, G+D and many other eSIM innovators at the e-SIM Connect 2018, taking place at the ILEC Conference Centre in London – 6 – 7 November.

Q&A with David Glickman, CEO of Ultra Mobile, & Sarah Neill, VP / GM at Ultra IoT Connected Lab

As previously reported by the MVNOs Series, it’s been an exciting year for MVNOs in North America. One of the most mature and developed MVNO markets in the world, the region does justice for its reputation of being intensely competitive yet still filled with opportunity. If we look at the US market for example – one of the most diverse, complex and competitive MVNO markets within the region – it has been the home to some of the biggest stories around the North American mobile industry in 2018: the big four carriers’ merger and acquisition announcements.

With only a few weeks until the MVNOs Series takes over Miami with the MVNOs North America 2018, they caught up with David Glickman, CEO of Ultra Mobile, and Sarah Neill, VP and General Manager at Ultra IoT Connected Lab, on the latest developments in the region.

What are your views on the T-Mobile and Sprint merger? Is it a really merger or an acquisition, and will their MVNOs merge too? What the greater market consolidation means for MVNOs in North America?

[David Glickman] It’s technically a merger, but it looks and feels a lot like an acquisition. MVNO’s won’t merge in a direct sense, but the New MNO may decide not to maintain so many relationships, and if they end some contracts, those MVNO’s will need to partner with AT&T or Verizon which is tough, or their customers are going to have to find a new home, which is likely one of the existing MVNO’s. It’s an important year for MVNO’s to show their value and earn their place at the new table.

What are your thoughts on the Lifeline programme? Should MVNOs be responsible for this kind of service instead?

[DG] Lifeline requires a carrier to provide an adequate service to a less profitable segment of the market. To be able to do this, it goes beyond government subsidy and also relies on an affordable business model and aligned resources and priorities. This is always harder for MNO’s who are motivated to look first at the most profitable customers, and this has historically been one of the opportunities that MVNO’s have seized. So, in this same way I think it makes a lot of sense for MVNO’s who can operate on lower overheads and hold a niche strategy and therefore aligned prioritizations to take the lead on this market.

As we look at the North American price discrepancies – more for more or more for less? What works best? How should MVNOs approach this kind of strategy?

[DG] If MVNOs focus on more for more, they start to compete directly with the “hand that feeds them”. An MVNO is rarely going to beat an MNO that is motivated to compete directly. So, I don’t believe an MVNO would ever want to go head to head with an MVNO. The more for more strategy only works for the top of the market that are willing to pay more for more. In this competitive market, there’s an oversupply of service, and a growing base of customers that are willing to get less for less, which initially drove the growing acceptance and popularity of MVNO’s, but now as the MVNO’s continue to improve their own services, off their initial lower base, these customers are getting more for less. It’s still targeting the lower end of the market, which still carves out a divide between the target between MNO’s and MVNO’.

How can MVNOs in North America differentiate themselves? What makes MVNOs different in a sea of voice, SMS and data offerings?

[DG] Domestic voice and text has to be unlimited. It’s so commoditized that it’s no longer just a part of the product mix, it is the base. That leaves the differentiators to be:

  1. data
  2. to a diminishing extend, international voice,
  3. increasingly value-added services like streaming services, free or exclusive content, and
  4. bundling.

MVNOs have started to look at the opportunities in IoT, video distribution, hospitality, education etc. Can you please share what do you consider the opportunities for MVNOs in these sectors? Most importantly, how should MVNOs approach these opportunities? For IoT, for example, should they specialise in one vertical?

[Sarah Neill] 10% of IoT devices will use cellular connectivity, so this is big volume. And with the roll out of 5G, demands on IoT support and connectivity will propel. We are focused on becoming the Ultra-fast implementer for innovative IoT companies. We want to work with companies that are committed to moving from contact to implementation in 30 days. We believe scale, speed, and ease are going to be critical to be a valuable MVNO in the IoT space. And it’s our huge advantage over MNO’s, we don’t need volume commitments, or business plans, we just want companies that are looking to launch quickly. At Ultra Mobile one of our key strengths is agility, execution and speed to market, so we want to take what we do ourselves to partners and open up this B2B pipeline for likeminded business operators.

Meet with with David Glickman and Sarah Neill at the MVNOs North America 2018, taking place at the Downtown Hilton, Miami, 16 – 17 October.