MVNO: Revolutionizing the Cellular Market

MVNO-the acronym for Mobile Virtual Network Operators signify a relatively new breed of operators that use the infrastructure other established operators to provide a competitive service in the cellular market. The operator does not have its own spectrum allocation or license which are, instead, acquired from established Mobile Network Operators. MVNO provides an element of the physical infrastructure required to operate as a cellular operator rather than using only the Host Operator's network and appears to the customer as an independent operator in its own right rather than an entity using somebody else's network. MVNO's lease wireless capacity from pre-existing mobile service providers and establish their own brand names different from the providers. It typically offers subscription-based voice and data service, and the customers are not doing business with underlying wireless provider but with the MVNO brand.

Beyond these basic premises, the amount a MVNO does itself can vary widely. At one end of the spectrum, an MVNO may wish to control as much as possible. It may, therefore, control its own mobile switching centre; have an independent pricing structure and its own supply of handsets. At the other end of the scale, an MVNO is simply a different brand and dedicated customer care function with all other elements provided by the Host Operator. Whatever the differences in definition, the key point is that for customers the perception is that everything is being provided by the MVNO. Therefore, an MVNO requires a distinct brand, so the customer feels as if he or she is using a completely separate network. This requires some control over handsets, separate customer service functions and billing platforms. The model is different from reseller models as traditionally resellers buy minutes in bulk and do not go much beyond delivering the same services as the one offered by the network operator.

To operate a mobile network a firm has to be licensed to use the radio- electric spectrum. Since spectrum is scarce, this means that only a few firms will be licensed. The large investments required to deploy a mobile telephony network limit the number of MNO's (Mobile network operator) that the market can accommodate. In addition consumer inertia under the form of switching costs, network effects, or brand effects makes entry difficult. This is particularly true now that mobile telephony market share reaching their saturation levels.

The entry of Sps or any other type of firms that offers a limited range of services can help promote competition, at least in some dimensions like price. However to the extent that these firms have no autonomy from their hosts in terms of pricing policies cannot replicate the full range of services offered by MNO's or cant develop new innovative services, their ability to compete with MNO s is limited. In this regard MVNO's are different because it make possible the entry of firms that offer consumers a portfolio of services indistinguishable from those provided by MNO's, without requiring the allocation of additional radio-electric spectrum. MVNO's allow attaining free entry equilibrium.

Mobile telephony is an oligopolistic market, where the number of competitors was initially limited to the number of licenses assigned by sectorial regulators. Mobile virtual network operators allow overcoming any eventual entry limitations caused by the scarcity of the radio electric spectrum, and attaining free entry equilibrium. Additionally the mobile telephony industry is one of the few in which more than one firm can provide access to a bottle bottleneck input, a license to use radio electric spectrum. Incumbents may still foreclose the market. However competition between them may lead the incumbents to voluntarily concede access to their networks.

MVNO enterprise mobility solution providers are redefining the business methods and may it be banking or FMCG more and more major brands are adapting solutions to provide better and convenient customer service at marginal costs. Moreover MVNO solutions are both attractive and strategically sound. In near future, Mobile Virtual Network Operators will have a lot more to do with driving wireless-service growth than will the fixed-facility carriers.

by Christine Macguire