Abstract: Mobile Virtual Network Operators (MVNOs) create value for the telecommunications industry, but should change their business model and adopt a niche and targeted approach to alleviating incredibly high competition in the markets they operate. The Utility industry is a profitable segment MVNO should consider. In this article, I describe who MVNOs are, their role in the telecommunications industry, their challenges and success factors, and the great opportunity they have, and the strategy, for establishing a win-win partnership with Utilities.

Keywords: Mobile Virtual Network Operator, MVNO, MNO, Utilities, Telecommunications, Sensors, IoT, Predictive Maintenance, NB-IoT, 5G.

What is a Mobile Virtual Network Operator (MVNO)

A Mobile Virtual Network Operator ( MVNO) is a telecommunications operator providing mobile services without a licensed frequency allocation of radio spectrum ownership and generally relying on the network infrastructure of the traditional Mobile Network Operator (MNO) [1].

Mobile services are provided through licensed frequency allocation of the radio spectrum, which is a restricted resource that limits the number of MNOs, but new entrants can avoid this infrastructural constraint by simply operating as MVNOs. An MVNO usually does not own the wireless network infrastructure from which it offers services to its clients. Instead, it enters into a commercial arrangement with the MNO to obtain wholesale access to network infrastructure at wholesale rates and then, sets out its retail prices separately. MVNOs are operators offering the same services like those offered by MNO without having access rights to the spectrum they use [1].

The “purity” of the MVNO depends directly on the number of network elements it owns and manages (the more of the network elements it owns/manages, the more the MVNO can be considered “pure”) [1]. On the basis of this “purity” level, we can identify five different MVNO functional models, as shown in  Figure 1: Full MVNO, Hybrid MVNO,  Light MVNO, Reseller. A Full MVNO integrates all aspects of network service (design and implementation), paying MNO just for spectrum charges and offers a wide range of mobile services. As a result, a “full” MVNO competes directly with the MNOs on the market in a more independent position than other MNOs [1].

Figure 1 – MVNO Functional Models

In order to make more efficient use of their own capabilities and to complement their portfolio with ‘best-in – class’ MNOs in each area, some MVNOs contract with several MNOs. In this Multi-MNO model, the MVNO breaks the hosted service package into separate functions and purchases it from different suppliers. Multi-MNO MVNOs negotiate supply agreements with several MNOs, but only assign one MNO to each subscriber who would receive all the hosted services from that MNO. With this model, the MVNOs achieve some degree of independence and operational choice, and the MVNO business becomes more ‘opaque’ to the MNOs. This multi-suppliers scenario increases the ability of MVNOs to negotiate competitive network charges [6].

MVNOs have emerged from a plethora of industries (multinational consumer brands, media companies, financial institutions, or consumer electronics) and leveraged their strong brands to access the market and compete by implementing strategies that differ from traditional MNOs [1]. Examples include Virgin Mobile, part of the British multinational venture capital conglomerate Virgin Group, or Poste Mobile, part of Gruppo Poste Italiane, born as postal savings and financial products in Italy. As of December 2018, there were 1,300 active MVNOs operating in 79 countries, representing more than 220 million mobile connections – or approximately 2.46% of the total 8.9 billion mobile connections in the world [5].

MVNOs Success and Challenging Factors

The success of the MVNO is independent of the ownership and management of the network infrastructure but is strictly dependent on factors that would appeal to customers, such as tariffs, billing methods, customer care, distribution, and marketing. [1].

The ten major success factors of MVNO are [6]: niche markets, innovative services, competitive low-pricing, tariff packaging, bundling services, promotions, lower cost base, favorable regulations, benefits to MNO, reach & ubiquity.

In a mature telecommunications market, MVNOs create value by segmenting the market itself and offering its customers focused services, with better efficiency and customer care, and possibly at a lower price than its competitors. MVNOs are gaining significant market share, changing the supply chain of telecommunications, and increasing the cost of churn and subscriber acquisitions in mobile markets. Because most MVNOs have focused on offering discounted services, they have increased competition to the benefit of consumers [3].

Since MNO often offers generic services, trying to serve millions of consumers and businesses with a standardized approach, MVNO succeeds in focusing on specific market segments, offering customized plans for that segment, whether they are consumers (youth, travelers) or businesses (workforce, WAN networking, IoT, etc.). Usually, MVNO does not have a large workforce and investment required to build and maintain networks so that they can fully focus on serving customers and have higher customer satisfaction compared to MNO.

Researches noted that MVNOs did not differentiate their offering from traditional MNOs, and showed a clear sign of decline since the MVNO business model only works for niches or areas where the MNO is not prepared to venture or is not effective. Virgin Mobile, for example, leverages the Virgin brand and the bundled offerings of other Virgin Group companies, something that can not be reproduced by any other traditional MNO [3].

MVNO faces challenges similar to traditional MNOs, such as the signing of an agreement with MNO, obtaining favorable MNO terms and conditions, and managing cash flow. However, the key challenges of the MVNO, which we would explore here and propose a solution, are the technical knowledge, which requires MVNO to work with partners with deep knowledge of ICT (e.g., Core Network Architecture, IT) and the customer acquisition, which, in incredibly high competitive markets, require significant investment to raise brand awareness and convince customers to switch to MVNO [2].

MVNO for Utilities

As described above, niche markets and innovative services are two of the most crucial success factors for the MVNO. The MVNO should adopt a niche and targeted approach to mitigating the identified challenges. The niche market is a segment of the broader market that can be defined by its own unique needs, preferences, or identity, which makes it different from the larger market. That’s why the MNO would find it challenging to address niche markets that are as good as MVNOs.

Utilities are even more dependent on telecommunications that are essential for the monitoring and control of their networks and assets, which are usually spread across large territories on the field. As a result, Utilities companies are always faced with the dilemma of whether to purchase services from MNO, often offering rigid and expensive managed services, or whether to develop their own telecommunications networks and application services to meet their specialist needs. However, developing their own telecommunications networks means not focusing on their core business, increasing their capital and operating costs, and taking a long time to reach the required level of maturity and reliability. Setting up a dedicated telecommunications division involves the selection, acquisition, implementation and operation of the right and expensive technologies, learning, and handling of specific telecommunications processes, and ensuring the resilience of their private telecommunications network, which is continuously under increasing scrutiny by governments, regulators and investors [4].

On the basis of these considerations, Utilities is undoubtedly a niche market where MVNOs have not yet appropriately acted and can instead establish a win-win and profitable partnership with Utilities, provide them with effective services and address their needs better than MNOs.

MVNOs can provide Utilities with many of their in-house needs, taking advantage of its native availability of telecommunications infrastructure. In fact, most of the core business and operating processes of Utilities depend on telecommunications technologies and infrastructure like 2G/3G/4G/5G, NB-IoT, LTE-M. Many remotely monitored and controlled sensors and devices are essential for the operation of core Utilities processes such as generation, transmission and distribution network management, outage and load balancing, fieldwork management, meter-to-cash, asset maintenance, and many others. Remotely monitored sensors are also essential for an effective response to field asset failures or for predicting their maintenance using artificial intelligence algorithms and models. These are just a few examples of how MVNOs can effectively meet the success factors previously explained in addressing the needs of the niche market as the Utilities.

In reality, MVNOs can offer many more services to this industry. As we have seen before, one of the success factors for MVNO is the provision of end-customer bundled services, and Utilities end-customers are an excellent opportunity for MVNOs to increase their customer base by attracting them with products and services bundled with legacy Utilities products and services. For example, a Utility customer can have a mobile alert service free of charge if its electricity consumption is high.

For most MVNOs, moving towards the Utility industry market is a new venture, and the complexity of this strategic action should not be underestimated. The availability of telecommunications technologies often gives telecommunications operators the impression that they can effectively provide services to Utilities, but this is not the case. Most utilities obtain from telecommunications operators only access to their network (2G/3G/4 G, NB-IoT, etc.) by purchasing SIM cards and implementing the necessary services in-house. The root cause is the type, quality, and priority of resources offered to Utilities by telecommunications operators in terms of people, processes, and tools (i.e., technologies). The success of a telecommunications operator ‘s strategic intention to provide services to Utilities is greatly influenced by whether or not these elements have been completed, customized, and addressed in the correct order. Each of these elements has specific attributes that must be defined, executed, and measured to successfully implement the strategy and execute Utilities specific projects. The prospects for success could be enhanced if these elements are addressed in an integrated manner and with a timely focus on each of them. Unfortunately, this does not happen consistently and, as a result, the success rate of implementation of the strategy is at best mediocre. The project involves change management and, therefore, it is absolutely essential that people, processes, and tools are perfectly balanced and fully aligned. Otherwise, the failure of the project is not only inevitable but also predictable. MVNOs which desire to emerge in the Utilities market, should place emphasis on the alignment of the people, processes, and tools they offer to Utilities, rather than focusing mainly on intensive marketing efforts aimed at establishing a clear identity and promoting maximum awareness [7].

Utilities Consulting for MVNO

Utilities Consulting (www.utilitycons.com) is a team of consultants with an in-depth knowledge of the Utilities and Telecommunications industries providing MVNO with a specific, comprehensive, and balanced offering that enables them to enter the Utility market quickly and effectively. The offering includes effective business and operational services and specific ready-made solutions such as pre-installed and pre-configured appliances based on the world’s best-in-class and leading software products for Utilities.

Conclusions

While creating value for the telecommunications industry, MVNOs should change their business model and adopt a niche and targeted approach to alleviating incredibly high competition in the markets they are. Utilities are even more dependent on telecommunications, and this market can be a really profitable segment MVNO should watch out for. However, the main mistake MVNOs should avoid approaching this market is focusing their offering mainly on technologies and not in people and processes, as often happening today.

References

[1] Modelling the competition of an HNO vs. an MVNO in the mobile telecommunication industry – L. Cricelli, M. Grimaldi, N. Levialdi – 2009

[2] What challenges have MVNO? – Steve Attard – 2016

[3] MVNO services: Policy implications for promoting MVNO diffusion – Dong-Hee Shin – 2010

[4] A private mobile virtual network operator approach will offer new opportunities for utility companies – Ian Adkins – 2019

[5] Mobile virtual network operator, Wikipedia, 2020

[6] Modelling multi-MNO business for MVNOs in their evolution to LTE, VoLTE & advanced policy – Rebecca Copeland, Noel Crespi – 2015

[7] People, Process and Tools: What is more important – the order or the mechanics? Anil Wadhwa, Neeraj Mittra, Baker Hughes

Author

Andrea Desantis, 30+ years of experience in Systems Engineering and Information Security management and consulting, especially in the Energy&Utility and Telecommunications industries. Expert in AI (Machine Learning and Deep Learning) algorithms and systems applied to the Energy&Utility industry ( e.g., Predictive Maintenance), Information Security Governance, and Application Security.

Message To The Reader