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IMS Magazine
April 2007 — Volume 2 / Number 2
Eye On IMS

What Can We All Learn from MVNOs?

By Grant F. Lenahan

 

IMS is the future. Consensus seems to be emerging that IMS is the basis of next-generation What do MVNOs [Mobile
Virtual Network Operators] have to do with IMS? A lot, really. IMS, while narrowly a technology architecture, must really be thought of as a service architecture — a way to deliver more, richer new services faster. After all, its name is “multimedia”.
IP-based networks, and that the MVNOs exemplify a shift that must occur in the communications industry if we are to successfully take advantage of IMS technology, generate services that consumers desire, and turn our huge capital investments into a profitable revenue stream. Unlike traditional operators, MVNOs are, at their core, marketing companies. Unlike traditional network operators, they are service providers — without a network. Their entire focus is on how to identify opportunities, attract customers and deliver services. That’s a perspective that few operators — new or old, fixed or mobile, have.

In addition to being focused on customers and services, MVNOs have an economic structure allowing them to operate at smaller scale than traditional network operators. A network operator must, first, blanket an entire country with cellular coverage. In the U.S., for example, this may require 15,000-30,000 cell sites. That takes billions of dollars in capital investment, and places a huge premium on attracting the mass market in order to fill that network and cover its costs. MVNOs, on the other hand, operate without a physical network per se. Their marginal costs (per minute, per megabyte) will be higher than those of a network operator, but they have a much lower break-even point, enabling them to concentrate on niche markets more easily. <





This brings me to a new way we must view our marketplace and the world. Over the past two decades, almost every industry has made the transition from “mass production” to “mass customization”. The mass production model produced huge numbers of products — like model T Fords or basic telephone service — that was acceptable to everyone, but ideal for very few. As the economics of manufacturing changed, most industries have been able to make a larger number of products — each targeted to a niche. Mass-produced commodities can’t compete with these specialized offerings.

The most successful MVNOs have shown the mobile industry how to capitalize on niche markets.While the first generation of MVNOs simply offered the same service at a discount, or through a wider distribution channel, the more innovative players and the newer breed have moved our industry into new markets and generated significant value.Virgin Mobile USA used marketing, content, and attractive prepaid plans to grow the teenage and young adult market.Movida opened up the Hispanic market with attractive long distance rates, Spanish language support and content that its target market wanted — but couldn’t get on mass-market cellular offerings. Disney Mobile made cellular safe for families and young children, while kajeet is making cellular “tween friendly” with a bevy of innovations — some aimed at the tweens themselves, others at concerned parents.

So what have these MVNOs accomplished? They have grown the market, they have differentiated their products, they have exploited the “long tail” and they have managed to move the field of competition to something more productive (and potentially profitable) than low price. Customers get better services; the MVNO gets better margins. A nifty trick we should all learn from.
So what does this have to do with IMS again?

IMS is a reference architecture intended to add service and control capabilities to IP networks. It enables a wide range of shared service building blocks such as security, authorization, quality of service, personalization, as well as robust VoIP and charging. And yet most IMS deployments today include very few service or pricing innovations — they usher in new technology, but don’t directly deliver niche marketed services. So they leave money and margin on the table. MVNOs — almost none of which employ IMS technology yet— demonstrate a way of doing business that could take the flexible technology of IMS and convert it to innovative services and growing revenues. They do this by concentrating on their target niche and its needs, while leaving network build-out and service platform programming to partners such as Sprint (News - Alert) (network) and Telcordia (service platform).

Furthermore, MVNOs are not blinded by the traditions and acronyms of network standards and technology evolution. Rather than wait for IMS, they have embraced existing technologies to implement parental controls, account spending limits, digital
allowances, loyalty programs, affinity programs, and personal policy/preferences using highly flexible rating, charging and policy service delivery platforms (SDP) and technologies that exist today. They have recognized that a good business begins with customers, and then works its way through attractive services, and only finishes with the enabling technology.

IMS holds the promise of supporting many more services than are feasible today. Together with broadband IP networks, IMS can usher in a world of true multimedia — video, IPTV (News - Alert) ,VoIP, various kinds of messaging that are difficult on today’s mobile or even plain broadband IP networks. And IMS could be a financial blockbuster if the industry embraces the customer and nichecentric,“services first” approach that the most creative MVNOs are implementing — even today.

Grant Lenahan is vice president and strategist, IMS Service Delivery Solutions, at Telcordia Technologies, Inc. For more information, visit www.telcordia.com.

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