Out of the Blue

Sprint Rebound?

My first blog entry, on the first day of this new year, contained unsolicited advice for Dan Hesse, Sprint’s then new CEO. My first recommendation was that he create a separate Sprint Wholesale unit, and that Sprint should return to its earlier channel strategy which recognizes that wholesale is an important driver of growth and profitability. (It certainly was for Sprint before they shut it down!) I said they should make Sprint Wholesale an autonomous unit with an experienced senior executive leading the unit.

Well, I’d like to think that Dan read my post, because the other day, Sprint appointed Steven Elfman as President of Network Operations and Wholesale. Reporting to him is Jim Patterson, President of Wholesale. Yes, that’s a President position, and if one can make inferences by title alone, this is an important indicator that Sprint is not just returning to the wholesale market, but re-committing to it. Maybe they will be more cautious with MVNOs, in light of ESPN, Disney and Helio’s troubles, but there’s still growth and opportunity in the wholesale space and Sprint can return to leadership here. There are many significant companies seeking a friendly (and hungry) host carrier.  From FierceWireless:

Sprint appoints Elfman networks president

Sprint Nextel created a new position for Steven Elfman, who left Motricity to become Sprint's first president of network operations and wholesale. Elfman will report directly to Sprint CEO Dan Hesse after taking the new post on May 4. Elfman previously worked with Hesse at Terabeam and AT&T Wireless. Elfman will oversee the combined network and IT organizations at Sprint that are led by Chief Network Officer Kathy Walker as well as the wholesale business, which Jim Patterson leads. Additionally, Elfman will oversee Sprint's technology development and product development initiatives.

For more on Elfman's new position:
- read this press release

In fact, part of an aggressive (and winning) wholesale strategy would position Sprint as the Open Access alternative and host network of choice. In this way, Sprint could be a leader. Such a strategy on their existing network would complement a WiMAX play, however it shakes out. Because wherever WiMAX ends up — the resurrection of the Sprint-Clearwire partnership, or the transfer of some or all of Sprint’s WiMAX holdings to Clearwire (with an investment by Intel, Google, Comcast, Time Warner and/or others) — Sprint will almost certainly have a stake or preferred access to the WiMAX network regardless of ownership position. WiMAX is important strategically for Sprint, and finding a way to have some stake in Clearwire is important for Sprint.

In fact, it might be early — change takes time — and it will by no means be easy, but the makings of a rebound are starting to emerge. Sprint has to make it easier to do business with it, for subscribers, partners and other mobile players. Maybe an extreme makeover. But Dan Hesse seems to be assembling a strong team to do this.

Is Sprint on the rebound? They still have the most elegant mobile network in the industry, the lowest price kitchen-sink (okay, “Everything”) plan, and only one direction to go. Whatever steps they take tomorrow or the next day won’t show immediately (or in several quarters) in key metrics (gross/net adds, churn, ARPU, subscribers). The more important measure for Sprint right now — perception — must change sooner!  Changing any big company, and especially a carrier, starts with strong management, and in this regard, Hesse seems to be making bold changes, and bringing strong people in. How long it takes to rebound will depend on the sense of urgency and purpose they instill, how quickly they can make things happen, and how fast they can change the perception.

The industry needs at least three national players to even resemble a competitive environment. A stronger Sprint can reverse the growing concentration that now finds AT&T and Verizon controlling nearly three out of every five mobile subscribers (and 64% of those served by the four national operators). A reversal of this concentration will help everyone, from shareholders to consumers to innovators. Increased competition in telecommunications. What a concept!

Tags: Sprint, wholesale, WiMAX, ESPN, Disney, Helio, MVNO, Clearwire, Intel, Google

Don't Call Us an MVNO

A week or so ago, Virgin Mobile launched in India, but emphasized that this was not an MVNO, but a brand franchise. It reminded me of the old story about the sign in the butcher shop — “No Bad Meat Here.” Why Virgin would go to such great lengths to explain why this new initiative was not an MVNO would soon be clear — a week later, Virgin Mobile USA announced disappointing earnings and predicted modest 1Q08 growth. The result —their stock was hammered. Given the high-profile failures in the MVNO space — ESPN, Disney, Amp’d — and huge losses at Helio, is this business model a bust? And how does a strong brand without its own mobile network get into the space?

A few years ago, before these flameouts, I wrote a piece for Telephony on the term “MVNO”, preferring Mobile Service Provider (MSP). I wrote:

…the term MVNO describes an MSP's relationship to its host network. We've come to understand that it's not the underlying network, but the features, pricing and approach to the market — the customer proposition — that defines a new service. For that matter, what provider isn't “virtual” in some area? Today, no telecom firm does it all. Call centers, logistics, billing, towers — just about everyone outsources something.

Virtual or “real” (i.e., “facilities-based”), the challenge for any new entrant is building a business around a compelling customer proposition in a competitive marketplace, and as Sprint, T-Mobile, metroPCS and other network operators have found, as market penetration increases, it’s getting increasingly difficult for anyone — network operator or MSP — to grow a business. In that Telephony piece, I added:

…there is nothing virtual about building a subscriber base in a competitive industry, differentiating service in a crowded marketplace and pushing innovation in a world full of innovators. Getting the job done right is as real as it gets.

Indeed, the challenge for an MVNO/MSP is greater because even where they have a well-established and revered brand, like Disney, if people don’t associate the brand with mobile, if the product isn’t compelling (content is not enough), or if prospects don’t know where to find it (poor distribution), indiscriminately throwing money at the market won’t assure success. And of course, incumbent operators have a huge cost, infrastructure and distribution advantage over any new entrant that demands ingenuity and efficiency.

So is the MVNO business model a bust? Probably not. bit what we have learned, at least in the US, is:

1. Big or well-financed companies cannot simply throw money at the mobile market and hope to succeed;
2. Content alone does not assure success. When ESPN launched, instantly every mobile operator touted its sports content and differentiation failed;
3. Distribution is critical and an increasing challenge, ESPN and Disney had miserable distribution, Voce was even worse. Virgin Mobile USA has probably succeeded better than any other US-based MVNO in establishing a strong and varied retail presence. If potential subscribers don’t know where to touch your handsets and sign-up for your service (preferably at a “wireless destination”), no amount of advertising and promotion can overcome this deficiency; and
4. Especially after the launch of Apple’s iPhone, mobile competition has moved to “who has the coolest handsets” and in the battle of handsets, traditional MVNOs cannot win that battle.

The business model for strong brands without their own mobile networks is morphing from MVNO/MSP to a hybrid arrangement, which will be the subject of my next entry. Stay tuned!

Tags: Virgin+Mobile, ESPN, Disney, Amp'd, Sprint, T-Mobile, metroPCS, MVNO, Helio, Telephony, iPhone

Sprint to Spin Off Nextel? The sooner the better!

From this morning’s NY Times Dealbook,

Far more speculative still was a report on Seeking Alpha, which said it had heard a “curious” rumor that Sprint had hired Morgan Stanley to explore a spin-off of Nextel.

The source, Seeking Alpha, notes:

A curious rumour surfaced today a couple of hours before the close, saying Sprint Nextel Corp (NYSE:S) has hired Morgan Stanley and initiated director Ralph V. Whitworth's plan to spin-off Nextel.

I have been recommending Sprint spin off Nextel (and Boost) for some time now. The Sprint-Nextel merger has been a disaster from day one because of different (and incompatible) technology platforms (CDMA vs. iDEN) and the failure to blend each of the party’s strengths — Nextel in the business segment and Sprint in the residential (and wholesale) space. Sprint began with the most elegant mobile network in the US – single band, single technology, all built to the same standard, and ubiquitous coverage. It still has this network, but trying to merge it with Nextel’s iDEN network will never accomplish what the proponents of the merger promised. Instead, the merger has created confusion in the user’s eye about who and what Sprint Nextel was, and the outstanding positioning of Nextel in the business market — no carrier has been so successful penetrating the business market — has been lost.

The sooner Sprint spins off both Nextel and Boost — separately or together, the better it will be for everyone. There is still great value in these assets, but not as one company.

Tags: Sprint, Nextel, Boost, iDEN

Unlimited Data Plans

Have received so many notes since my Telephony piece came out yesterday. While unlimited voice plans have not come close to the price point they need to to reach the masses, unlimited data plans are. As I mention in my piece, if the price is right, flat rate plans can make a huge difference, as they are beginning to do in mobile data. For example, the iPhone data plan includes e-mail, web and texting, for as little as $20. When you start with a well-priced unlimited data plan, and add a great device for web browsing, like the iPhone, usage skyrockets. This has been born out both in the US and in Europe. According to AT&T, 95% of iPhone owners surf the mobile web, more than six times the roughly 15% of all mobile users who browse. Google says iPhone users make a staggering 50 times more searches than users of other mobile devices. T-Mobile in Germany said that iPhone is driving up mobile data usage to levels as much as 30 times higher than other handsets. And in the UK, O2 observed an “unheard-of level of mobile Internet usage” on the iPhone bundled with an unlimited data plan.

A content purveyor friend sees the Sprint Kitchen Sink plan as a good thing, especially as it makes browsing more accessible. I couldn’t agree more! Once all the operators’ data plans are $20–25/month “bolt-on’s” and we have more devices with great browsers, mobile surfing will really take off. And that’s a good thing!

 

 

Tags: data, unlimited, iPhone, AT&T, Sprint, T-Mobile, O2

Unlimited Plans and Shift from Telecom Service Model to Internet Service Model

Before we get into it, ponder this: Wireless phone users worldwide will outnumber landline customers 3-to-1  by 2009, according to IBD story on 2/29/08.

Now that I have your attention, I’ve been writing about unlimited plans for some time. Last month, VZW, AT&T and T-Mo rolled out unlimited voice plans for $99. Last week, Sprint responded (sort of) with an $89 unlimited voice plan, and a $99 “Kitchen Sink” plan, which threw in everything but the Kitchen Sink for another $10 — data, messaging, e-mail, web access, TV, music, navigation, push-to-talk, everything. (Talk about devaluing these services!)

In my return as a Regular Contributor to Telephony, my latest commentary addresses this issue. Check it out at: http://telephonyonline.com/commentary/contributed/unlimited-voice-plans-030308/

Later today, UBS’ telecoms analyst John Hodulik who does the quarterly, must-read Wireless 411 Reports, described the AT&T’s “bullish” management meeting last week. John summarizes AT&T’s unlimited plan:

AT&T's new, flat-rate plan has only been available for less than 2 weeks and management does not expect it be able to gauge its impact on the segment for another month or so. That being said, in the two weeks the new pricing has been in the market its "been kind of a yawn," with little impact. While the sample is very small, more customers have bought up than have bought down.

And that’s the point of my Telephony piece: 99% of mobile customers don’t need $99 unlimited voice or kitchen-sink plans. These $99 plans are just the latest gimmick to sell users more than they need, while averaging up carrier ARPUs in the process. At $99, this is indeed a yawn, and less a revolution than a ploy to bring people into the stores, which apparently is working.

The underlying trend is far more important, as there’s a fundamental shift now underway from the Telecom Service Model to the Internet Service Model. Under the old Telecom Service Model, a carrier, handset, plan and features are selected and a long-term contract signed. The Internet Service Model replacing it includes always-on high speed data, flat-rate (non-usage sensitive) pricing, voice, data and a world of applications all running on an open platform, and a range of devices available. If this sounds like Open Access, you are right; the Internet Service Model is the platform, and flat rate pricing a big first step.

Please check out the TelephonyOnline piece, and look for more commentary to follow.

Tags: AT&T, Sprint, Verizon

Telephony

I’m excited to be returning as a Regular Contributor to Telephony magazine and TelephonyOnline, with my first installment to appear this Monday, March 3. Telephony is the leading telecom publication, going to more than 70,000 ILECs, CLECs, ISPs, IXCs, wireless and cable operators. My piece is on the many new $99 unlimited wireless rate plans. You can find my commentary on unlimited plans at: http://telephonyonline.com/wireless/commentary/unlimited-voice-plans-030308/

Tags: Telephony, unlimited, Sprint, Verizon, AT&T, T-Mobile, Internet+Service+Model, Telecom+Service