Regulation and MVNOs: a Happy End?
MVNOs are becoming in some European countries a real alternative to mobile operators in overcrowded markets. Operators identified as SMP in market 15 (Rec. 2003/311/EC) or market 7 (Rec. 2007/879/EC), can be imposed as remedy to open their networks to MVNOs. In this case regulator should help MVNOs to develop their own strategic proposition.
In April 2008, Malta Communications Authority (MCA) issued guidelines to MVNOs, Enhanced Service Providers (ESP) and Service Providers (SP), following a November 2005 decision on market 15. For the first time in the small holiday island with less than 400.000 mobile users, competition in mobile services is becoming reality and alternative service providers are coming to the market. Vodafone Malta already announced several new agreements for hosting ESPs, and it is the evidence that even small markets can sustain diverse and innovative service providers.
MVNOs has been often used in mature markets by MNOs for several reasons:
- to reduce regulatory pressures or to comply with market’s review decisions;
- voluntarily to have a ready way to enter in new markets and win new customers;
- reduce spare voice capacity, mainly for small network providers;
- as pre-emptive move to reduce overall attractiveness of the market and increase barriers to entry;
- increase market power in international roaming (e.g. united-mobile).
The main reason for being anti-MVNO is the treat of cannibalization of current business and increase of competition. However, when operators realized that in saturated market achieving growth is very difficult and that their brand could not achieve all nice markets (e.g. ethnic groups) or could be active in all segments some operators realized the positive potential effect on their cash flow of MVNOs alternative business model. Some of them in very developed markets also realized that the future of their business model were less focused on low-end and prepaid customers, but on more post-paid and business customers. A similar concept is also argued by Chriss Zook in a recent article on the Harward Business Review (04/07), he emphasis on the research of the core business and to reconfigure orphan products.
Regulation should help MVNOs to develop their own strategic proposition and not just re-sell pre packaged services. It is important for MVNOs to have a clear and stable harmonized European framework where they can replicate their business model and invest in innovative Pan-European services. For example, try to access SIMYO webpage in Germany and Spain, they have a strong brand identity with tariffs that are almost identical (€9c for voice in all networks and for SMS).
However, we should not limit competition to price. Another key issue is service differentiation. Regulation should also promote differentiation in business models.
Some examples of MVNOs and their main business strategy:
Country MVNO Hosting MNO Strategy
Belgium Mobisud Belgacom Etcnic group
Belgium Aldi Base Price
Italy Tiscali Telecom Italia Bundling
Italy Postemobile Vodafone Service
Poland Aster City Cable PTK Centertel Bundling
Spain Jazztel Orange Bundling
In April 2008, Malta Communications Authority (MCA) issued guidelines to MVNOs, Enhanced Service Providers (ESP) and Service Providers (SP), following a November 2005 decision on market 15. For the first time in the small holiday island with less than 400.000 mobile users, competition in mobile services is becoming reality and alternative service providers are coming to the market. Vodafone Malta already announced several new agreements for hosting ESPs, and it is the evidence that even small markets can sustain diverse and innovative service providers.
MVNOs has been often used in mature markets by MNOs for several reasons:
- to reduce regulatory pressures or to comply with market’s review decisions;
- voluntarily to have a ready way to enter in new markets and win new customers;
- reduce spare voice capacity, mainly for small network providers;
- as pre-emptive move to reduce overall attractiveness of the market and increase barriers to entry;
- increase market power in international roaming (e.g. united-mobile).
The main reason for being anti-MVNO is the treat of cannibalization of current business and increase of competition. However, when operators realized that in saturated market achieving growth is very difficult and that their brand could not achieve all nice markets (e.g. ethnic groups) or could be active in all segments some operators realized the positive potential effect on their cash flow of MVNOs alternative business model. Some of them in very developed markets also realized that the future of their business model were less focused on low-end and prepaid customers, but on more post-paid and business customers. A similar concept is also argued by Chriss Zook in a recent article on the Harward Business Review (04/07), he emphasis on the research of the core business and to reconfigure orphan products.
Regulation should help MVNOs to develop their own strategic proposition and not just re-sell pre packaged services. It is important for MVNOs to have a clear and stable harmonized European framework where they can replicate their business model and invest in innovative Pan-European services. For example, try to access SIMYO webpage in Germany and Spain, they have a strong brand identity with tariffs that are almost identical (€9c for voice in all networks and for SMS).
However, we should not limit competition to price. Another key issue is service differentiation. Regulation should also promote differentiation in business models.
Some examples of MVNOs and their main business strategy:
Country MVNO Hosting MNO Strategy
Belgium Mobisud Belgacom Etcnic group
Belgium Aldi Base Price
Italy Tiscali Telecom Italia Bundling
Italy Postemobile Vodafone Service
Poland Aster City Cable PTK Centertel Bundling
Spain Jazztel Orange Bundling
World Lycambobile Many Etcnic group and price
World United-Mobile Many price and differentiation
There are some issues that should be discussed and analyzed from a regulatory point of view, these are:
- rights and obligations of MVNOs;
- interconnection rights of MVNOs;
- termination rates, impact on business case;
- wholesale prices for MVNOs (bundle of minutes and volume discounts);
- numbering range and routing;
- legal interception;
- number portability.
Conclusions
In many countries the regulatory framework has been neutral to MVNOs and their life has been very difficult; in other markets the threat of more strength regulatory intervention (e.g. in Switzerland, Italy and Spain) has been enough to open up networks and to promote price competition.
What MVNOs ask is certainty and transparent offering from MNOs and a clear regulatory framework. MVNOs find themselves as second class operator, no rights and no control over customers.
Moreover, it is often the case that there’s no effective competition between MNOs and when you are in the deal with one MNO you have to remain with it: sunk costs and number portability problems, are likely to override all benefits in migrating to another MNO.
Finally, in some markets the so called Service Providers or light MVNOs struggle in becoming full MVNOs. I can see a MNO wholesale service portfolio for MNOs as the limit to MVNOs’ business case and innovation.
ww.regulation.tk
There are some issues that should be discussed and analyzed from a regulatory point of view, these are:
- rights and obligations of MVNOs;
- interconnection rights of MVNOs;
- termination rates, impact on business case;
- wholesale prices for MVNOs (bundle of minutes and volume discounts);
- numbering range and routing;
- legal interception;
- number portability.
Conclusions
In many countries the regulatory framework has been neutral to MVNOs and their life has been very difficult; in other markets the threat of more strength regulatory intervention (e.g. in Switzerland, Italy and Spain) has been enough to open up networks and to promote price competition.
What MVNOs ask is certainty and transparent offering from MNOs and a clear regulatory framework. MVNOs find themselves as second class operator, no rights and no control over customers.
Moreover, it is often the case that there’s no effective competition between MNOs and when you are in the deal with one MNO you have to remain with it: sunk costs and number portability problems, are likely to override all benefits in migrating to another MNO.
Finally, in some markets the so called Service Providers or light MVNOs struggle in becoming full MVNOs. I can see a MNO wholesale service portfolio for MNOs as the limit to MVNOs’ business case and innovation.
ww.regulation.tk
Labels: business model, MVNO, Regulation
posted by Marco L. Gatti at
Wednesday, July 02, 2008
