If, as many would have us believe, virtualisation is the next big thing,  then maybe one of the first examples of virtualisation in the mobile industry, the Mobile Virtual Network Operator (MVNO) is due a comeback. True, they never really  went away but then again they have never really made the commercial breakthrough that many thought they should have done.

The MVNO is a service provider without a radio access network. For radio access they rely on buying airtime minutes in bulk from a host Mobile Network Operator (MNO). By buying in bulk through a kind of wholesale deal, they achieve discounts on the airtime minutes, sms, and data they buy, thus allowing them to retail to their own customers at competitive rates. Often, the MVNO will discount the retail rate of the host MNO, which may well be one of the reasons why they have struggled to get real market traction.

An MVNO may decide to deploy their own network core, making them less virtual, whilst others use the MNO core and therefore focus more on providing their own billing and CRM and leave all the network technology to the MNO. We tend to call these two ends of the MVNO spectrum, full (or thick) and thin. There are also many variations in between the two. There is not such thing as a ‘standard’ MVNO. MVNOs can trade on their brand, their existing channels and distribution,  better customer care or even their ability to serve niche market segments such as ethnic communities, as well as novel retail pricing and bundling. MVNOs have, however, always suffered from three drawbacks; being tied to an MNO and an MNO dominated wholesale pricing structure, the inability to differentiate their service offering, and the inability to offer price competitive roaming services. Add to this that it has been the 3^rd and 4^th operators in markets most interested in doing MVNO deals and that these tend also to be the MNOs with the lowest quality of network in the market. No matter how strong and well known the MVNO brand may be, breaking free of this stranglehold has effectively put a glass ceiling on their ambition.

At Azenby, we think the market for MVNOs is changing, and changing rapidly. There are many factors all coming together to create the perfect storm for MVNOs.

1. MNOs in developed markets have reached saturation point and retail pricing competition between MNOs has intensified. On the face of it this may not seem like good news for the MVNO but the upside is that increasingly more and more MNOs see selling air time (their factory output) through wholesale as being a good way to sell their full production capacity. This is especially important given the price they pay for spectrum and the costs of upgrading technology. Using all of that spectrum profitably is a major objective of all MNOs so some are becoming a bit more MVNO friendly.
2. Wi-Fi has changed the mobile market dramatically as we all know. For data, and soon for voice as well, it is becoming the default access bearer for businesses and many consumers. Some estimate that already 70% of data consumed on smartphones goes over Wi-Fi. The majority of tablets no longer even have a SIM slot today. So an MVNO can start to make use of Wi-Fi to lessen their dependency on the MNO and also to reduce the access charges they have to pay the MNO. Wi-Fi first MVNOs such as Google Fi and FreedomPoP are already changing the face of the MVNO market in the US and certainly have international expansion in their plans. These new entrants have also broken the mould of exclusive ‘locked’ deals between the MVNO and the MNO by being the first to achieve multiple deals with two or more MNOs in one market. It does seem the time is right for MNVOs to be renewing their MNO commercial and technical deals.
3. That brings us to the third factor. MVNOs have been local suppliers, requiring wholesale deals with an MNO in each market they want to serve. The enhancements in multi IMSI technologies – the ability to change IMSI on a device – coupled with the ability to ‘flip’ between Wi-Fi and Cellular when Wi-Fi is not available, is allowing MVNOs to now think about being international service providers.
4. Virtualisation is also a big factor in emerging technologies now. Using Network Function Virtualisation (NFV) the cost of a core and the speed of deployment now makes it a viable proposition for an MVNO to use their own core including IMS and HSS functions. Not only does this change the costs of doing business for the MVNO, it also means they can start to differentiate themselves and introduce new services independently of the host MNO. A full MVNO will now be thinking about moving to a core of their own for these reasons. A thin MVNO may now consider this to be a viable option for them where hitherto is was too costly to consider. There is one other very attractive reason for an MVNO having their own core: changing MNOs or even having multiple deals with different MNOs is a whole lot easier with your own core.
5. With the advent of their own NFV core and HSS, and the ability to use multi IMSI technology, an MVNO can now think about a new approach to roaming deals. This is particularly important for those thinking beyond their home market.
6. We can see the nature of the MVNO changing. There are less Telco ‘look-a-likes’ today, traditionally strong ethnic based MVNOs have suffered from pricing competition in the market in general, roaming regulation has had an impact in Europe for the roaming ‘concessioners’ and the domestic retail discounters have felt the breath of the MNOs down their neck as they have reduced their own retail pricing. What is emerging are the Wi-Fi first service providers as mentioned above, the quad players (fibre/broadband ISP, TV and phone, now adding mobile) and the content owners looking to control the distribution of their content.

Today, Europe is still the centre of MVNO activity. Despite the commercial barriers and difficulties discussed above, their number remains healthy in Europe. Some 65% of the world’s 1300 MVNOs are in Europe according to the Global Mobile Radar report from GSMAi in June 2016. Across Europe some 10-20% of mobile connections are with an MVNO. The market is healthy in terms of the number and players and the customer base, but the economics still remain challenging, certainly for those following the more traditional MVNO business model of price discounting. It is likely that we will see a spate of consolidation of MVNOs in the coming years and the only thing that has delayed this to date has been the ‘lock-in’ with the host MNO. Don’t be surprised if we also see MNOs buying MVNOs.

The emerging MVNO market now has attraction for many that previously had not considered mobile. Whether it be to add mobile to a bundle of Telco services such as Sky are doing in the UK or to increase accessibility for users as Google are doing with Google FI, soon to be followed by Apple some speculate, the MVNO market is now beginning to look like a very different species to the we have been used to do. Evolution is happening and it’s happening fast.