Saving Dollars and Cents with MVNOs
Opting for a Mobile Virtual Network Operator may help you cut mobile costs and lead to a better customer experience.
Imagine you own a high level hotel with 800 rooms. On average, you sell 500 rooms at a premium price ($600/night). However, you realize that you are losing revenue with 300 rooms going empty every night. While you could lower your rates, and sell more rooms, this will tarnish your "premium brand" identity. How can you obtain additional incremental revenue for capacity that would go unused every night?
One solution is to sell a bulk number of rooms (i.e. 100 room) to a consolidator who will resell the rooms under their label. The consolidator will do its own marketing, sales, service, etc., and resell the room, usually at a lower price. Thus, you can retain your premium brand identity, while still gaining additional revenue by selling excess capacity to the consolidators. Of course, the problem with this scenario is that the consumer who buys the hotel via a third-party consolidator, will know they are getting your premium room at a discount.
Now imagine you are a Mobile Network Operator (AT&T, Verizon, Sprint, T-Mobile), and you also have plenty of spare capacity. Rather than get nothing for this extra capacity, you enter into agreements with MVNOs (Mobile Virtual Network Operator). These companies will buy your excess network access at wholesale prices and then resell their services at their own prices. And unlike the hotel example, your network remains opaque (i.e. consumers generally do not know whose network they are using). Thus, if you are Verizon, AT&T, Sprint or T-Mobile, you can sell your excess capacity without jeopardizing your premium pricing.
There are about 300 US MVNOs, which represents about 14% of the overall market. In other developed countries such as the Netherlands and Germany, the MVNOs represent 40% of the market. As the wireless market matures and the need to upgrade phones is less compelling, the MVNO market share is expected to grow. Without a compelling reason to upgrade, pricing will become a larger factor in choosing a wireless company.
Now If you are happy with the network performance of your current wireless provider (AT&T, Verizon, T-Mobile, Sprint), you have an unlocked phone, and are at the end of a term, you should check out which MVNOs use their network. You may be able to save up to 50% by switching to a MVNO that uses your current network.
The following are some popular MVNOs and the network(s) they use.
For some MVNO's the relationship with a carrier's network goes beyond simply using their network. They are actually owned by the carrier. For example, Cricket is owned by AT&T, Virgin Mobile by Sprint, and Metro PCS by T-Mobile.
Successful MVNOs compete by tailoring their products/services to specific consumer markets:
- Family/Group Plans (Boost and Cricket) -- Cricket (owned by AT&T), has a $110 group plan for 4 devices with 2.5 GB per device. When a device reaches its data limit, the speed is reduced to 2G speeds to avoid overage charges.
- Seniors -- The Jitterbug phone from GreatCall is designed for seniors, with big buttons, a loud speaker, and a large text display. Additional features include daily/weekly calls, an operator who can place calls or make appointments for the user, and a one-touch button to call 911.
- Frugal -- Republic Wireless has a plan starting at $5/month (voice and text only) and a $10/month (with data added). The secret of Republic is its dependency on Wi-Fi. By extensively using Wi-Fi, Republic avoids paying carriers to handle its traffic. If you're usually near Wi-Fi (i.e. home) this can an inexpensive solution. As an added bonus, Republic allows users to place free voice calls from international locations (via Wi-Fi).
While you can save money by using MVNOs, there may be some drawbacks:
- Limited phone selection -- The type of phones supported may be severely limited with a MVNO. For example, Republic Wireless only supports Samsung Galaxy, Motorola MOTO and Huawei Nexus phones.
- No 4G or LTE Service -- Some MVNOs do not support 4G/LTE service; for example, GreatCall.
- Data limits -- Some MVNOs do not offer unlimited data plans. For those who do, they may throttle data usage once you exceed a certain limit. For example, Cricket LTE limits its speed to 8 MB, which is OK for social media use but may not suffice for streaming HD video.
- Streaming -- Even with unlimited data plans, some may restrict streaming.
Assuming that you are satisfied with your current major service provider (AT&T, Verizon, Sprint or T-Mobile), it may make sense to check out the MVNOs that use its networks. In addition to saving money, the added bonus is better customer support. In the latest Consumer Report rankings, Consumer Cellular, Ting and Republic were the top three, while the major carriers were at the bottom. You can have your cake and eat it, too.
"SCTC Perspectives" is written by members of the Society of Communications Technology Consultants, an international organization of independent information and communications technology professionals serving clients in all business sectors and government worldwide.