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.

What’s driving growth in the North American MVNO market?

In the commissioned report ‘Shaping the North American MVNO Market’, the MVNOs Series team explores how the winds of change have been blowing through North America’s mobile markets over the past 12 months and the impact that is having on MVNOs.

The North American MVNO market is one of the most mature and developed in the world. It is also one of the most diverse, complex and competitive, with three major markets in three huge countries demonstrating very different characteristics and very different opportunities for MVNOs.

In terms of total number of MVNOs, North America sits third out of all global regions behind Europe and Asia, but in terms of MVNO subscriptions, it is second only to Europe. The region accounts for a significant proportion of new MVNO entrants globally, cementing its reputation for being intensely competitive yet still filled with opportunity.

A closer look at USA, Canada and Mexico

Perhaps it is a matter of perception. The three big North American mobile markets – USA, Canada and Mexico – all pose different challenges to MVNOs. In the US, it is intense competition, in Canada a lack of regulatory support, in Mexico exceptionally low ARPUs and carrier dominance. But that is not to say opportunities do not exist across the region.

In fact, growth prospects for MVNOs in North America are better than average. According to Research & Markets, the North American market will grow at a CAGR of 8.1% to 2022, above the global forecast of 7.4%.

In the US, the world’s biggest consumer of mobile data and by far and away the region’s biggest mobile market, consolidation in the carrier sector is changing the wholesale landscape.

Without a doubt the biggest stories of 2018 in the US mobile industry have been those concerning the Big Four carriers on the merger and acquisition trail. The yet-to-be-ratified merger of T-Mobile and Sprint, the third and fourth biggest operators in the US, represent what many analysts see as a necessary piece of consolidation in an increasingly cramped and crowded market.

AT&T, meanwhile, has already had its $85bn takeover of giant media conglomerate Time-Warner approved. The acquisition puts AT&T in pole position to control the burgeoning market for ‘added extra’ OTT media services such as TV subscriptions, live sports streaming and even movie access being bundled in with mobile contracts, especially as it already owns online TV subscription service DirecTV.

Gregory Gundelfinger, co-founder and CEO of MVNA Telna, shared his insights. “In Canada, the MVNO market is still heavily regulated and controlled by the incumbent carriers,” he said. “The MVNOs are sub-brands of the carriers that offer cheap or no-frills pricing. Virgin Mobile is owned by Bell, Fido is owned by Rogers, Koodo is owned by Telus. The regional carriers have MVNO characteristics such as disruptive pricing, these include networks such as such as Freedom Mobile, Eastlink and Videotron. There are limited growth and disruption opportunities for MVNOs and regional carriers in Canada.

“The US MVNO market has faced unparalleled challenges including uncertainty around government subsidies for the Lifeline program as well significant competition from the MNOs. T-Mobile’s “uncarrier” value propositions and aggressive pricing have caused Sprint, AT&T and Verizon to respond, thereby making it less compelling for customers to utilize MVNOs.

“ARPUs in Mexico are among the lowest in the world, with many MVNOs requiring massive scale to be sustainable. Altan Redes, one of the first mobile operators to launch exclusively as a wholesale network or MVNE, means that barriers for becoming an MVNO have been lowered. This presents new opportunities for entrants into the market,” he concludes.

The Road Ahead

Competition on pricing continues to be a dominant theme in the US MVNO market. This is viewed as both inevitable and a little surprising, depending on who you ask. On the one hand, it is a basic principle of market economics that a crowded supply side will push prices down. On the other, such is the maturity of the US MVNO sector that you might expect intense competition on pricing to have given way to service differentiation a little more than it has so far.

The triple threat of intense pricing competition and the continued incursions of big carriers and big cables into traditional MVNO markets is certainly putting pressure on virtual operators in the US. But how concerned should the sector really be?

We asked Boost’s Peter Adderton to talk us through the challenges and opportunities that lie ahead.

On the entrance of big cable into the mobile market, Peter said: “What it means for the MVNO space is another deep pocketed company looking to grow in a highly saturated wireless market, making it even harder for smaller MVNO’s to compete.”

However, he also warned against pressing the panic button too early, stating that so far it “means very little.”

The bigger picture, however, is that the top of the US mobile ecosystem is seeing a lot of consolidation around the big players, both incumbent carriers and new entrants. Consolidation comes as growth slows and enterprises seek to find new revenue streams. As that trend continues, it is likely that operators and big digital companies entering the market will increasingly target traditional MVNO territory.

Peter argues that the competitive pressure will reach a critical point where MVNO numbers simply have to fall, whether through natural wastage or through their own cycle of consolidation. “My concern is and has always been that MVNOs have never truly been able to operate independently of the host carrier unless they have large enough scale – think Tracfone, and that’s it,” he adds.

For all its complexity and high levels of competition, North America remains a land of opportunity for MVNOs. While a market as mature as the US does not offer the same scope for attention-grabbing levels of growth as some emerging MVNO markets elsewhere in the world, it remains a great place for MVNOs to set up and do business. A well-established wholesale market, regulatory support and a market of 300 million-plus smartphone owners sees to that.

In the full version of the report, you’ll find an in-depth analysis of the North American MVNO market performance – particularly in the US and Mexico. Discover what the opportunities and challenges are, as we look up close at the significant growth in IoT connections, the role technology is playing across the region and the changes in the wholesale and regulatory landscape. The report also examines the potential impact of the US government plans to significantly reduce the Lifeline programme.

 

Download the report ‘Shaping the North American MVNO Market’ and discover why automation and self-serve are tied to MVNOs’ financial growth.

SpaceX hits the skies with the launch of another comms satellite

Elon Musk’s SpaceX completed another successful launch this weekend, delivering the 7,000 kg Telstar 19 Vantage satellite from Cape Canaveral to offer connectivity across the Americas.

The launch, which was partially under threat due to adverse weather conditions, took place on Sunday morning with the satellite deployed 32 minutes after lift-off. Following the separation, the Falcon 9 launch vehicle was successfully landed on the ‘Of Course I Still Love You’ drone ship, an autonomous vessel to allow for recovery of rocket assets, which is stationed in the Atlantic Ocean. The satellite will be owned and operated by Canadian satellite communications company Telesat.

Operating from Telesat’s prime orbital location of 63 degrees West, 22,250 miles above the earth, the Telstar 19 Vantage satellite has two high throughput payloads, one in Ku-band and the other in Ka-band, serving the South, Central and North American regions. In South America, Telesat’s customer Hughes Network Systems has invested to make use of the Ka-band capacity, while the Ka-band capacity over Northern Canada, the Caribbean and the North Atlantic Ocean will be utilised by several different customers including Bell Canada subsidiary Northwestel. In-orbit testing will now commence before services kick-off in the summer, with a 15-year design life.

While the satellite communications segment is certainly a more niche aspect of the overall sector, SpaceX is creating somewhat of a strangle hold on the launch industry with estimates putting Musk’s market share at more than 50%. The trick here seems to be SpaceX’s cash conscious attitude and drive to recycle as much of the assets as possible. While this is the first time this Falcon 9 asset hit the skies, SpaceX has recycled reusable rocket boosters on more than 20 occasions, with the team hoping recovered assets can each be used between 10 and 100 times.

SpaceX has a busy schedule over the next couple of months, with the next launches taking place on July 25 and August 2 for Iridium and Telkom Indonesia respectively.

Telstar 19 Vantage Launch

Example of Falcon 9 landing on recovery vessel

Coverage of Telstar 19 Vantage

Satellite Coverage

Soon there will be another cable populating the subsea superhighway

China Telecom, China Unicom, Facebook, Tata Communications, and Telstra have all teamed up to sign a turnkey contract for the deployment of the Hong Kong-Americas (HKA) submarine cable network.

The Hong Kong-Americas (HKA) consortium, as they are officially known, has signed the agreement with Alcatel Submarine Networks to deliver a submarine cable network which will span more than 13,000km. The new asset will increase connectivity between Hong Kong and the US.

“We are committed to continually investing in our capabilities to meet our customers and partners’ increasing data demands,” said Tata Communications’ CTO, Genius Wong. “Joining the HKA consortium and connecting the new next-generation subsea cable system to our global network means that we are able to offer our customers and partners enhanced speed, diversity and reliability of connectivity between the business hubs of Asia and the US.

“With our growing network – and the cloud, mobility, security and collaboration services which it underpins – as the foundation, our customers and partners are better placed than ever to transform how they operate through new disruptive digital services and expand to new markets with agility.”

“The trust placed upon us by the HKA consortium validates our position as a key player for submarine network infrastructures in the Asia-Pacific region and the reinforcement of our local presence,” said Philippe Piron, President of Alcatel Submarine Networks.

“It also provides a strong platform to further demonstrate our commitment in project management and in the development of local relationships to support operators and content providers for their network and capacity expansion strategies.”

The new cable has promised to deliver greater diversity of connections, enhanced reliability and network efficiency, as well as improving connectivity between data centres in Asia and the US. In terms of the kit being used, Alcatel Submarine Networks has promised it will be top of the line, delivering 80 Tbps transmission capacity.

While it might not be the most glamorous part of the telco space, subsea cables are a crucial one. Google is another company which is boasting about its subsea party, as it announced investment into three new cables recently, one of which will be privately owned by the internet search giant.