Fedor Smith

Why Isn’t eBay an MVNO?

At the peak of the mobile virtual network operator fervor we witnessed in the 2005 to 2007 timeframe, common wisdom held that a successful MVNO must have killer content, a highly targeted brand or great devices or, better yet, all three. It quickly became clear that those models were not enough to bring customers running, and that the drivers of purchase for MVNO customers were more practical than personal. The failure of some very high profile MVNO launches and the complexities of getting an MVNO off the ground cooled the market, but over the past few years the MVNO model has proved viable on a variety of scales. With carriers again encouraging wireless resale, why aren’t some of the most promising resellers grabbing the opportunity to sell wireless services? I’m talking to you, EBay.

To put this question in perspective, we need to look at the failure of the presumed content/brand/device model. ESPN and Disney wanted to sell on brand and content, but the fully functioning browsers of other phones made content available to any wireless user. So, why sell mobile services to a few devoted customers when you can sell cross-device content to tens of millions, either directly or with (or supplemented by) ad revenues? Also, phones are app driven, which translates to software-scale lifespans. ESPN and Disney spent so much time in development they were dead before the made out of the starting gate.

Virgin Mobile USA and Boost went for cool branding to appeal to younger, urban customers who couldn’t get their own postpaid phones. Their products sold like hotcakes on competitive pricing and cheap devices – especially Boost’s $50 everything plan – but family plans were exploding at the time, so many young customers were able to get phones on their parents’ plans. In the end, Virgin Mobile USA and Boost were successful but more with budget conscious and/or credit-challenged consumers than their original target demographic.

Helio and Amp’d went for device-oriented customers at a time when American consumers were not yet ready for high-priced phones. The iPhone eventually cured this ailment, but both Helio and Amp’d fell victim to the largest barrier to successful market entry by MVNO’s – the high costs compared to other telecom resale models, of device acquisition and management (though many would argue that the lax credit standards of Amp’d helped to hasten its demise).

With the benefit of hindsight, it’s now clear that customers respond to value and convenience, but also demand current/new devices and reliable service. Boost, Virgin Mobile USA and Tracfone were able to secure leadership positions in the retail space because they were simple, ubiquitous, aggressively priced and had sufficient capital to weather the growth phase and achieve critical mass. We also know that smarter MVNO plays are made by companies with ready access to customers and existing payment platforms. For example, Krogers/IWireleess leverages the Kroger’s customer relationship to offer greater value to customers on the wireless side of the proposition while increasing customer royalty on the retail side.

For their part, carriers are trying to make it easer to do business on the wholesale level. Sprint is the most prominent example, with services in place to facilitate the establishment of an MVNO and the ability to manage virtually all of the back office functions for MVNO partners that lack existing facilities or systems. It has even taken it a step further and now offers wholesale partners the ability to activate Sprint-branded phones. Verizon Wireless and AT&T, which have invested heavily in network upgrades, also are eager to help others use their networks (read: monetize their new networks to the max).

All things said to this point, it’s noteworthy that Amazon has proven that it’s not only possible to sell wireless devices without a physical location, but it’s possible to thrive while doing so. So much so, in fact, that it’s currently planning to build upon its enormous successes with the Kindle (including wireless subscriptions) and is working with HTC to develop its own mobile phone. Which gets us to the point I began with: Why isn’t EBay getting into the game?

It would be difficult to name a retailer better positioned to resell wireless services than EBay. It already facilitates what is probably the largest public market for used mobile devices in the world and could easily supply calling plans for those devices – especially under models like Sprint’s, which facilitates branded devices for MVNOs.

Walking through the sales cycle, EBay also has direct access to customers at the time of purchase, information on those buyers including, through PayPal, a confirmed address and means of collecting payment. And it has ongoing access to customers after the sale for upgrades, add-ons, additional devices and other offerings to layer onto plans in the future. EBay also has a fiercely loyal core of users and an enormous pool of cost-conscious shoppers that would eat up deals on last year’s devices and discounted connectivity. In short, the company’s operations and demographics are tailor-made for success in the MVNO space.

The public failures of MVNOs in the model’s early days continue to drive lingering skepticism. In my view, those skepticisms are valid for the generic MVNO model but are significantly overblown now that we know what works and what doesn’t. In EBay’s case, the auction powerhouse is leaving money on the table.

This analysis originally appeared at RCR Wireless.  

 

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