Network for Lease

 
 
By eweek  |  Posted 2001-08-20 Email Print this article Print
 
 
 
 
 
 
 

Dropping data into MVNOs

The idea of mobile virtual network operators or resellers is hot, especially amid the swirl of rumors that Virgin Mobile is this close to signing a deal with a U.S. operator to begin marketing a wireless service here. But a less-often-told turn to the story is the potential that wireless data adds to the reseller concept.

In the U.K., Virgin made the concept of MVNOs popular by buying airtime from One 2 One and marketing the service under its own brand. Since then, analysts have said that the MVNO model could help operators generate revenue to help pay off the exorbitant sums theyve pledged for spectrum and to fund construction of next-generation networks.

ArrayComm — perhaps best known for the ideas of Chairman and CEO Martin Cooper, who is credited with inventing the cell phone — is pitching the concept of using its technology to build a data-only wireless network that would sell capacity only to resellers. NextWave Telecom, though it still is mired in legal trouble with the Federal Communications Commission over rights to its nationwide wireless licenses, has long planned to serve as a carriers carrier. While its initial network will be data only, it plans to eventually add voice capability.

Although there are major obstacles between both NextWave and ArrayComm and the market, they tout an idea that aims to significantly broaden the market of wireless data applications.

"There are a lot of companies with great ideas and great applications that have been stymied because of the way the incumbent carriers operate in the U.S.," says Roy Berger, NextWaves chief marketing officer. "By providing open access, well unlock that potential."

Look at Me! Look at Me!

The wireless world is different from the internet in that developers cant reach end users without partnering with an operator. Currently, companies that develop wireless data applications have to form deals with wireless carriers in order to deliver their services to customers. But getting the attention of service providers isnt easy. More than 45 percent of small wireless development companies say their biggest worry is the slowness of the big operators to commit, according to a recent survey by Booz Allen & Hamilton.

ArrayComm was approached last year by hundreds of startups touting mobile Internet services of all kinds. They were pitching their ideas to wireless operators hoping to deliver applications to end users.

"Frankly, most of them have gone out of business," says Nitin Shah, ArrayComms executive vice president and general manager of business development and strategy. Those companies assumed that the wireless industry was like the Net, and they could introduce their apps and let the market determine their fate. "But something else decided their fate," he says. "It was the operator picking and choosing who to work with."

Service providers are still focused mainly on voice services — which account for the bulk of their revenue — instead of enabling as many applications as possible, Shah says. But ArrayComm and NextWave believe that opening up the market is the only way to discover the "killer app." Shah wants to fashion the wireless Web after the wired Net, which has grown and been shaped by the whims of the market. "It wasnt that one entity like a telco or a carrier governed what would be done with the Net," he says. "It was very much the marketplace."

ArrayComms technology would allow a network operator to build the network so that any application provider could gain access to it via the Internet; application providers could then offer services directly to end users. The model is very similar to that employed by Japans NTT DoCoMo, where the operator allows any developer to use its platform.

NextWave also hopes to allow a wide range of application developers to use its network to reach users. Companies in the media, entertainment, retail, financial and telecom sectors would like to have access to wireless data to offer wireless as a part of their core products and services.

"There are a lot of companies that fit that description, but dont have wireless assets. Well meet that need," NextWaves Berger says. "Theres no question that our model will unlock vast sources of innovation in wireless in the U.S."

Not So Fast

Not everyone agrees that the model will work, however. While it is difficult for startups to strike deals with large mobile operators, thats exactly what many of them believe is necessary for them to succeed, says Eric Kintz, associate partner of Roland Berger Strategy Consultants. "The small players dont have the customers, so the key issue is to leverage someone elses customers" — and thats a tough strategy, he says. Big operators probably wouldnt be willing to work with an unknown startup network provider without an installed customer base.

Kintz has also spoken with a number of large, content companies in the music or film industries, for example, that have been investigating how to enter the wireless space. They are deciding if they should enter content licensing relationships with an operator, or take the next step and actually resell a service so they can market directly to the end user. Those companies havent considered the possibility of working with a new wireless operator, but are instead focused on established players that already have the scale and proven reliability, he says.

And, while data may be the focus for some hopeful MVNOs, few want to completely avoid the voice business, Kintz says. "Voice still matters, and will for quite a few years," he says. Studies show that in Europe, one out of four uses of a wireless data application is followed by a voice call.

Even without the questions surrounding the business concept, ArrayComm and NextWave each have big regulatory issues to solve before their ideas become reality.

ArrayComms product, called i-Burst, uses Time Division Duplexing, which requires a different allocation of spectrum than traditional wireless. So far, the FCC hasnt made spectrum available in batches that could be used by TDD technology.

While ArrayComm works to convince the FCC to make such spectrum available, it hopes to prove its concept in Australia. Although the company doesnt want to be a network operator, it bought spectrum in Australia on the cheap — $5 million for coverage of almost the entire country. By the end of next year, ArrayComm hopes to have built a network in a couple of cities there and to begin reselling airtime to application providers.

NextWave has been mired in legal wranglings with the FCC since it originally won spectrum licenses in 1996. After NextWave declared bankruptcy, the FCC reauctioned the upstarts licenses. A district court ruled that NextWave still has rights to the spectrum, but the FCC has appealed that decision to the U.S. Supreme Court — so its still not clear which company will end up in possession of the licenses.

 
 
 
 
 
 
 
 
 
 
 

Submit a Comment

Loading Comments...
 
Manage your Newsletters: Login   Register My Newsletters























 
 
 
 
 
 
 
 
 
 
 
Thanks for your registration, follow us on our social networks to keep up-to-date
Rocket Fuel