Project on Mobile Virtual Network Operator

Submitted to Submitted by

Ms. Parul sinha Ram kumar Raikwar

Assistant Professor-IT PG20095248

IILM Gurgaon PGP 09-11

Mobile Virtual Network Operator (MVNO) -Abstract

Mobile virtual network operator do not come from the telecom sector but they rent the network of mobile operators to become fully mobile operators on their own. So they compete directly not only with the other mobile operators but also with their hosting mobile operator. Hosting MVNOs, supporting them from both operational and commercial perspectives are new challenges for the mobile operators: they have to set up a specific internal organization because they used to be a vertically integrated industrial structure. All of this represents tremendous changes for them. The aim of the thesis is to research and analyze the current status of the MVNO industry, present different views on implementation approaches, identify markets and market segments served, note weaknesses and strong points, refer to successes and failures, research current legislation(s)/ regulatory aspects (that are an essential driver for the liberalization of network economies) and in general show the industry’s evolution path over time. The key element is to see if the MVNO is able to increase the efficiency and competitiveness of mobile markets in specific. Additionally, starting from the Western European market, an effort will be made to specifically analyze the case in the Greek MVNO market by providing some specific data such as type of service (prepaid/post-paid), airtime replenishment volumes (prepaid case), brand awareness, market segments, penetration/ adoption rates, etc). Having gone through the MVNO insights at the end, a description of all the steps involved for an entity/ business, in becoming an MVNO from scratch (in the form of a generic guide) will be prepared. A step-by-step approach will be used for implementing a Mobile Virtual Network Operator (MVNO), stating actions to be adopted and

mistakes to be avoided. Given that most of the current implementations have followed different/ diversified paths (depending on the market needs to be served each time as well as the intended capital investment by the MVNO candidates), an effort will be made to come up with guidelines (hopefully the most suitable ones, having learned from former/recent MVNO adoptions) for aiding such future implementations. Another important aspect is the modelling of a mobile network: the MVNOs will use some components while other components are un-useful for them. Without such model, it is impossible to derive the right costs and price to be charged to the MVNO in order to have a win-win industrial model for both the MVNO and its hosting operator.

The Mobile virtual network operators

There is a lot of definitions for MVNOs in the sector but a sound definition of virtual operators would consist in saying they are actors not totally integrated who lack at least a part of the asset at the basis of the network. Applied to mobiles, this means they do not own the radio access.

However they supply to the market a complete mobile service and they own partially or totally their customers. They rent at least the radio access to their hosting operator but nothing prevents them to rent more than that to the operator as some elements of the service provided to the end user (billing, contact center). They also complete the radio access by their own assets like a transport network or some switching infrastructure. However MVNO today are most of the time simple resellers of mobile services that the hosting operator operates technically. Scarcity of spectrum has allowed only 3 to 5 mobile operators with a full infrastructure per country via a licensing process. However it appeared quickly this number was insufficient to have a fully efficient (and competitive) market despite the existence of 3 to 5 competing networks.

National Regulatory Authorities (NRA) has seen MVNO as a (too) quick remedy at least for the access mobile market. This new kind of actors was deemed to bring more competition (which is not an objective in itself) that would boost innovation and economic welfare. Today NRAs consider other remedies like spectrum trading as a means to enable more innovation in wireless sector. However MVNO remain an efficient means to break the vertical integration of MNO that is considered by some authors as one of the root cause for a player not to innovate any more; the MVNO comes indeed between the MNO and the end user. Other authors consider on the contrary that vertical integration allows economies of scale and scope that amortizes more easily investment. It is an incentive to take more commercial and financial risks. MVNOs too use 3rd parties for their own innovation so that this argument may not sound completely true. The multiplication of wireless technologies, the emergence of UMA and IMS will demand new players active on multiple networks without having the opportunity to own all of them. They will become de facto virtual operators on other’s assets to operate their services seamlessly across networks and technologies. Such virtual operators will be innovation-driven. Another more accepted obstacle to innovation in network economies are the guaranteed incomes that mobile operators can expect due to their oligopoly situation. The mobile sector is indeed a kind of oligopoly with guaranteed income. MVNO can break this situation as the guaranteed income is based on the difference between the costs of the network (assets), the revenues and the limited number of players. An MVNO does not own a network and is not stuck to this logic.

The Beginning of Mobile Virtual Network Operators

It all started in 2000 in Denmark with what was then a small start-up called Telmore. Using the mobile network of the former state operator TDC, Telmore launched an MVNO business solely online. Customers bought SIM cards only (solely on-line), using phones they already owned. They prepaid a single per-minute rate regardless of what time of day they made a call or whether they called a mobile or fixed line. "In the beginning, it went slowly, but gradually it increased mainly by word of mouth. Within three years, Telmore had attracted 10 percent of the mobile market. Perhaps more importantly, within a 10-month span, the price of a prepaid minute in Denmark had dropped by 50 percent. MVNOs though will only really have an impact if the incumbents lose their nerve on price and try to follow them down. If they can hold their nerve and not panic and accept some leakage, the market can accommodate a few extra niche players. Along those lines, however pioneering, this first online SIM-based concept was a niche concept and targeted only a small share of the market. This first MVNO model however has paved the way for others to follow.

Characteristics of an MVNO

(1) MVNOs are new breed of wireless network operators who may not own the wireless spectrum, or wireless infrastructure but give a virtual appearance of owning a wireless network. These operators lease the wireless capacity from traditional operators and then repackage it for a specific vertical industry application

(2) Main added value that MVNO provides is billing and customer care functions. In that sense MVNOs own the customers.

(3) MVNOs generally provide both voice and data services to end users through a paid up subscription agreement.

(4) To become an MVNO, one should cobble together a

partnership that consists of a connectivity of a regular Telco, a customer base, and a sales channel. Most important, they need unique and compelling data services

(5) An MVNO usually provides: Brand, Marketing, Portal, Rights management, billing platform, Customer base

A typical MVNO Business Model

At its most basic level, an MVNO is a standalone entity. It buys access from a host carrier—often per-minute or per-megabyte—and resells it under its own brand and marketing. MVNOs typically have a strategic intent focused on a recognized brand, with existing points of distribution and an already installed base of customers. That doesn't mean upstarts wanting to become MVNOs can't succeed, as evidenced by Virgin or Boost—neither of which were pre-existing brands in the mobile space at their inception. Success for those companies depended on delivering high-quality service, rather than just a brand. The term ‘MVNO' has become a catch-all for any consumer reseller, so there can be seen a variety of business models. But a classic MVNO minimizes capEx and keeps expenses as success-based as possible. That means leveraging outsourcing solutions for billing, customer care and content delivery. Considering the typical retail and network elements involved in an MVNO, there is a range of MVNO classifications/ types between Service Providers (SP) and full MNOs. Different functions can be carried out by the MVNO or MNO. Some may be carried out by a Mobile Virtual Network Operator Enabler (MVNE) which may

simplify the MVNO provisioning for either the MVNO or the MNO. MVNEs develop systems and processes to help facilitate MVNOs, such as handset distribution, channel management or billing.

MVNO Defined From a Customer Perspective

To Fully understand the MVNO, and moreover Next Generation MVNOs, we have to look outside the legacy network led definitions of an MVNO, as an MVNO is a customer driven, and therefore business driven business model. From a customer perspective both the MNO and the MVNO are their "Network Provider". That is in Greece for example Frog is seen to its customer as their network provider, not the host MNO (Cosmote), just as Cosmote is seen as a network provider

Customer experience The customer’s perspective is a simple four-stage process: Buy -> Use -> Pay -> Care BUY a SIM card, handset, or starter pack USE for calling, SMS, or other services PAY recharge or other payment method CARE get advice with questions or problems There are different ways of handling each stage: from the internet through to stores, other point of sale, invoices, care centres, the handset itself.

There are different ways of handling each stage: from the internet through to stores, other point of sale, invoices, care centres, the handset itself

MVNO opportunities increase with 3G rollout

3G offers MVNOs an exciting opportunity to offer users a rich multimedia experience. While many of the MVNOs today are offering low-cost pricing (voice and SMS), 3G will allow them to focus offerings equally on data. Some of the opportunities identified for potential MVNOs include: -- Focus on offering convergence -- Focus on a pan-European offering allowing for low-price calling While roaming abroad -- Focus on 3G and in particular data such as mobile music or Mobile sports -- Focus an offering for enterprises, whether based on voice or data, That could potentially be broadened to include roaming as well

For any new MVNO, it is important to focus on niche markets and get to market sooner rather than later. This will certainly provide the company with a competitive advantage and allow it to build its brand and raise awareness in the marketplace. So the market for MVNOs opens up the space for established and new players such as billing and customer care companies to sell into. Billing and customer care is just one opportunity, and there are also opportunities for IT companies and those that specialize in data. This in turn will allow

MVNOs to personalize their data offerings, which can increase usage and reduce churn. The insight Opportunities for MVNOs in Western Europe, analyzes developments in some key Western European countries and major companies. It also addresses opportunities for new companies looking to enter this space.

MVNO Global Market

The future of MVNOs

Mobile Virtual Network Enabler is increasingly relieving the pressure that MVNOs continue to experience as they seek to enter markets quickly and effectively. Outsourcing the complex business of billing and customer care for converged services to an MVNE creates real flexibility for the MVNO. Indeed the very best MVNEs are those that have given their MVNO clients the opportunity to fine tune their service portfolio and be most responsive to changing market conditions or new technologies.

MVNEs are becoming an integral part of a maturing converged communications industry. This already includes network providers and the branded service businesses that have a direct relationship with a customer. As these proliferate and seek competitive advantage, the role of the MVNE will grow.

Naturally, there is a rush of businesses positioning themselves as MVNEs, as well as brands evaluating the MVNO model. The criteria for success in this MVNE field obviously must include assured capabilities in running a network service business, however close collaboration between all players is absolutely essential to success. Specialist skills, experience and systems are of little good unless the MVNE has worked out how to share risks and responsibilities with its MVNO client and the other third parties involved. An open relationship with clean demarcations is critical.

Managed carefully and integrated successfully, quite often requiring the support of an MVNE, Next-Generation MVNOs have certainly got the potential to cause even more excitement than they already do.

VALUE TO MNO & MVNO

-Easy start - Economies of scale - Time-to-market - Innovation & differentiated services - Field trial with light integration work for MNO - Risk reduction VALUE TO MVNO

Operational MVNE Platform and team - Critical mass in expertise & skills - Agreements with GSM operators - On the shelves technologies and services

Financial advantages - Mutualisation of investment between MVNOs customers - Lower upfront and operating costs and investments

Multi-country access

MVNE positioning

Conclusions

Mobile Virtual Network Operator (MVNO) is a GSM phenomenon where an operator or company which does not own a licensed spectrum and generally without own networking infrastructure. Instead MVNOs resell wireless services under their brand name, using   regular telecom operator’s network with which they have a business arrangements. Usually they buy minutes of use from the licensed telecom operator and then resell minutes of usage to their customers of MVNO. In this paper, we have studied about MVNO, its types, concepts, network architectures, how it use  GSM networks, feature, strategies, business models. We have a great opportunity for establishing a MVNO network in our country. This will be profitable for MVNO operators, MNOs and the sub scribers as well,,,,