Thursday, July 20, 2006

Current Analysis: Mobile Business MVNOs Trickling into the EM Eco-System

Kathryn "Kitty" Weldon at Current Analysis posts an abstract of a recent report on Mobile Business MVNOs at the Mobility Water Cooler blog. She believes that "business MVNOs will eventually emerge in a significant way."

Weldon states that "while the consumer market may be a more natural fit, we have been anticipating a spate of announcements from value-added service providers in the business market. There is already some limited but interesting activity in this space, and with higher data speeds and fixed/mobile convergence ahead, new niches are waiting for innovators." She writes:

Admittedly, sexier branding opportunities abound for consumers, whereas business services tend to be a bit stodgy, appealing to more conservative users. However, enterprise offerings from the carriers themselves tend to be relatively undifferentiated, focusing on reliable, "high-speed" bandwidth, and PDA/smartphone and laptop connectivity sprinkled in with a few core integrated services such as mobile email and some business process applications such as field force and sales force automation. So there remains the potential for some innovative offerings to business customers, segmented into key niches by vertical industry, geography, company size, application type, or offering bundled (or in the future, truly converged) fixed/mobile solutions, device management, billing and security services, and business-focused content.
Weldon opines that "the most likely prospects for future MVNO services are in the areas of SMB-focused services, Fixed Mobile Convergence (FMC), (both pre-and-post IMS infrastructure upgrades), and offerings targeting key verticals such as health care management and financial services. We also expect to see more managed services offered by MVNOs for device management, security, and application management." She then points out that:
Large enterprises may be less likely to tie their fate to an unknown provider, but small businesses are more concerned with convenience and cost-savings and may be more inclined to experiment. SMBs tend to go to regional carriers, including local telcos as well as CLECs such as CBeyond who offer innovative wireline/wireless bundles and managed services. Recent spin-off Embarq, which had been the local operating division at Sprint, is now re-selling Sprint wireless services (but may branch out to other wireless operators in the future) to provide not only wireless bundles to SMBs but also an innovative PBX extension service, Smart Connect, that allows customer calls to simultaneously ring on landline, campus WiFi and mobile phones and switch back and forth without losing the connection when the mobile worker changes their location. PBX extension is an early version of an FMC service; future offerings will include dual-mode WLAN/cellular handsets and will be positioned as offering superior cost-savings (i.e. keeping on-campus calls on the inexpensive WLAN, while only using cellular when necessary), as well as optimizing the in-door performance characteristics of the WLAN. As a non-carrier does not need to be concerned with the delicate balance of how to deal with internal cannibalization of wireline revenues from wireless substitution, or how to remain profitable when cellular traffic and revenues are diverted onto a WLAN network, an MVNO might be a more natural provider of converged fixed/mobile, voice/data/video telecommunications services.

It stands to reason that a company which specializes in a particular vertical industry might succeed as an MVNO, especially if it was also providing targeted content. Reuters, for example, was rumored to be considering such a venture last fall for the financial services industry. As financial companies need access to specialized applications and databases, have particularly sensitive customer information that require added security provisions, must adhere to regulatory policies such as Sarbanes Oxley for protecting sensitive data, often have large populations of mobile workers, and regularly access external content on companies, financial news, etc. they would be a likely target segment for a specialty MVNO. This might equally be said of an MVNO specialist in health care or utility management. In fact there are some early examples of this in the health care arena; Cardionet is a company that offers remote monitoring of arrhythmia patients using wireless telemetry that sends ECG data to a specialized remote handheld.
Weldon references some examples of MVNO business models overseas such as Valuefirst (U.K., India, Germany and Romania), BT Global Services, Ten (France) and JCI of Japan. She then gives some examples from the wireline world and concludes with:
While the wireless market remains fractured in terms of geographical coverage today, (with the added complexity of the CDMA/GSM technology split), and the kinds of applications that are deployed over WWANs are still emerging, it is likely that in 5 years MVNOs and aggregators will be able to deliver a much wider set of solutions to the mobile enterprise.