Why U.S. MVNOs will find it hard to survive


First there was the spectacular demise of ESPN Mobile (the MVNO), then there was slow and timely death of Amp’d Mobile. ESPN Mobile was idiotic – who is going to pay about $60 a month the whole year to watch ESPN on a small screen, when most fans follow just one sport (e.g. baseball or football or basketball) and ONLY during the season. Amp’d was stupid – they invested in expanding in other countries, when they were hardly getting any customers in the main base in the U.S.

And now Helio is not so far behind. Helio is a Mobile Virtual Network Operator (MVNO) launched on May 2, 2006 by Earthlink founder Sky Dayton. It is a $440 million joint venture between SK Telecom, the South Korean mobile operator, and Earthlink. Helio runs on the Sprint Nextel network and is marketed to the younger demographic, to carve out a niche with technology-savvy. Helio and its parent Earthlink both reported losses for the second quarter. Helio passed the 100,000-subscriber milestone in the second quarter but only generated $33.2 million in revenue for a $83.8 million loss. Fortunately, the joint owners of Helio have each agreed to provide the MVNO with an additional $100 million in funding (suckers!).

There have been successful MVNOs – the biggest success stories are prepaid providers Tracphone Wireless and Virgin Mobile USA. These folks got early starts and concentrated at the low end of the market. So why is it hard to be a MVNO?

You see MVNO’s are a bit like standalone VoIP providers – because they are mostly unknown and unheard of, MVNOs and VoIP providers have to spend a lot of money on acquiring customers. The mistake MVNO’s make is to market on popular media at a huge cost, and end up mostly wasting their marketing dollars.

The whole point of being an MVNO is to focus on a niche area that others are ignoring and focus on serving these customers well. The key is to know the target market, get the right distribution channels and offer a product the big carriers can’t. This is where MVNO’s must use guerilla marketing tactics to get to the right demographic. MVNO’s should market to targeted media – essentially use the same techniques that Toyota’s scion uses.

Otherwise, Helio and others like it will end up in the RIP list.

Crown Castle tunes out of Modeo mobile TV

crown_castle_logo.gifCrown Castle International, the Tower operator is dumping its multimedia mobile TV service called Modeo that is based on the DVB-H standard that it tested successfully in New York City earlier this year. Crown Castle is now going to lease the U.S. nationwide 1670-1675 MHz spectrum it used for Modeo to Telcom Ventures, LLC and Columbia Capital, LLC, two private equity firms, for $13 million a year and write off Modeo’s physical assets, which includes an operations center in Pittsburgh and various small transmitters in the New York area. Crown Castel will retain the spectrum itself. Modeo never got off the trial stage and must have been in trouble for a long time because the trials started a long time ago.

The company will “write-off all, or substantially all, of its Modeo assets, other than its Spectrum, in the third quarter 2007.” The lease is from July 23, 2007, until Oct. 1, 2013. When the lease ends, the PE firms have the option to acquire the spectrum for $130 million or renew the lease for up to 10 years at $14.3 million per year.

Interestingly, this means that Qualcomm is the last-man-standing in Mobile TV that is transmitted outside the cellular spectrum. This is testament to Qualcomm’s lobbying and marketing capability – Qualcomm already has agreements with Verizon Wireless and AT&T to launch mobile TV using Qualcomm’s MediaFLO technology in the 700 MHz spectrum that Qualcomm owns. Verizon Wireless has already launched mobile TV. Sprint uses an Mobi TV, which transmits mobile TV within the cellular spectrum (in-band). Back in 2004, I remember thinking how smart Qualcomm was in acquiring national spectrum where it effectively becomes the service provider. Qualcomm may be a tad arrogant, and over-confident in their abilities, but these guys develop good strategies and execute very well.

Why Skype is Better than Ooma

ooma_logo_lg.gif skype_logo.png

Ooma has a lot of buzz and hype around it, despite still being in private beta. But let’s look beyond the hype and compare Ooma with other telephony services. I’m specifically choosing Skype although there are other players to consider. This will give a good idea how Ooma stacks up against Skype and for who Ooma may make sense.

First, looking at features, both Skype and Ooma offer unlimited calls to telephone numbers in the U.S. and voicemail. In addition, Skype has a nice colorful user-interface where you can set your presence status and see your contacts’ (buddies) presence status. There’s also Instant Messaging (IM) capability, and the ability to call both telephone numbers and buddies, no matter where they are in the world. While Ooma charges for all international calls, Skype only charges for International calls to telephone numbers (calls to buddies anywhere are free). Skype also higher voice quality because it uses high-quality codecs (e.g. iLBC) that provides better than toll-quality (what you get with landline phones) that is even good for music. The good thing about Ooma is that you can just use a single telephone number to reach all the contacts (kinda sorta like GrandCentral). Whereas for Skype, there’s a buddy name and a telephone number.

Also, neither offers 911 service, so you still need a local service for 911. In addition, Ooma users your local telephone service. Of course, a broadband service (e.g. DSL, cable) is also required.

Next, Ooma has several concerns about it service, especially relating to privacy. It’s all on this page, and there’s no need to replicate it.

Last but not the least, lets look at price. Ooma costs a flat one-time fee $399. There’s talk about a monthly charge for premium services, but that’s in the future so let’s ignore that for now. On the other hand, a Skype-enabled cordless phone or a WiFi phone costs about $150 (the Netgear WiFi Phone is $120 after a mail-in-rebate). The SkypeOut service to call anyone in the U.S. and Canada is $29.95 per year. SkypeIn (so your buddies can dial a phone number to reach you) with Voicemail costs $60 per year. That’s $90 per year or a whopping $7.50 per month. The cost of a Skype system is even cheaper, considering that Ooma costs up front and Skype costs on an annual basis. Skype devices also come with some nice extras – the SMC WiFi Phone ($160) comes with a free FON WiFi Router and + 12 months of Skype Voicemail. You can use the WiFi router for other purposes as well and comes with a revenue-sharing opportunity.

The break-even price is about 3 years. In other words, Ooma is cheaper if you keep it for more than 3 years. Till then, Skype is the cheaper option. Overall, Skype is a better option for most people because their time-span for electronics is less than 3 years. Three years is a long time – people tend to break things, want to get new stuff, or wont have the receipts when equipment breaks down

Verizon Wireless Enables YouTube Video Uploads

verizonwirelss_logo.gifVerizon Wireless is now the first U.S. Wireless Service Provider (WSP) to enable YouTube Video. Now you can record videos on your mobile phone and upload the videos directly to YouTube using the shortcode YTUBE (98823) using MMS. This is a pretty easy to remember shortcode, but UTUBE would’ve been easier to remember (perhaps that was already assigned). In order to upload videos, subscribers need to first update their YouTube accounts with their wireless phone numbers at www.youtube.com/mobile.

For the most part, videos should be of good quality but wont be able to match the quality of a good video camera (of course!). How long a video you can record depends on the memory size of your mobile (which usually isn’t much) and the size of the memory card in your wireless device. Verizon Wireless currently has more than two dozen video messaging-capable phones.

Other than uploading videos, subscribers with V CAST-enabled phones can also access selected YouTube videos through the YouTube channel on V CAST. V CAST subscribers can also access Veoh videos through V CAST. V CAST costs $3.00 for 24-hour use or $15.00 monthly subscription (no airtime charges).

Just yesterday, I wrote about the rising number of mobile video subscriptions. Well, these events will only further increase mobile video subscriptions.

Mobile Video subscriptions surge

The popularity of video and Internet TV is proliferating to the mobile! About 8.4 million wireless customers in the U.S. now subscribe to mobile video, reports Telephia – that’s 4% of all U.S. mobile subscribers. In the first quarter of 2006, there were 3.3 million mobile video subscribers, and in the first quarter of 2007, this number had grown to 8.4 million, signaling a Year-over-Year growth of 155%. This is starting from a very low number, but it’s still very decent growth. Mobile video revenues in the U.S. totaled $146 million in Q1 2007, growing 198 percent year-over-year.

In comparison, mobile music, which includes realtones, ringtones and full-track music, is a $239 million per quarter business in the U.S. Mobile music has been around for 3-4 years and music subscriptions grew 42% during the same period, from 19 million subscribers who downloaded some form of audio on their mobile devices to 27 million.

More interestingly, the survey has found out that nearly half of the mobile video subscribers were willing to put up with view ads on their cellphones – that should be very good news for the likes of Google/YouTube and other video providers.

Recent agreements between wireless operators and video content providers, such as this between Veoh and Verizon Wireless and this will further increase interest in mobile video. Of course, a compatible wireless device is required to view video on mobile phones.

IThentic to launch under-three-minute mobile entertainment videos

ithentic_logo2.gifiThentic, an online and mobile video content company, has teamed with Independent Television Service International to commission eight short films from award-winning filmmakers around the world. This work will be for a project dubbed “Global Mobile” banner with food as the common theme. Each segment will run under three minutes. iThentic has also completed pilot episodes for a range of in-house productions, including “Green Minutes,” “Hot or Not?” and “Reel Stand-Up.”

The film series will launch in October for distribution on globalmobileproject.com, itvs.org and iThentic.com and to other distribution partners, including Cellfish in the U.S. and Rogers Vision in Canada. IThentic is also looking for original, high quality, independent content for the web and mobile devices, and will share revenues with content providers.

The iThentic mobile video service is currently available on Rogers Wireless and Telus, two major Canadian mobile operators. iThentic distributes video content In the US to wireless carriers through Cellfish. Cellfish reaches a potential 350 million cellular customers through its carriage arrangements, and provides direct downloads to wireless devices from http://www.cellfish.com.

The mobile video space is just heating up and iThentic is positioning itself as a provider of short-form mobile entainment video. This is just the beginning, and we can expect many more content distributors to join the fray.

AT&T Video Calling service goes Nationwide

AT&T Video Share AT&T/Cingular started with a limited commercial rollout of the Video Share service in June 2007. Now, AT&T Video Share goes “nationwide” in nearly 160 Markets. While Europe has seen video calling services earlier (albeit with limited success), this is the first-ever service in the U.S. that enables mobile subscribers to share live video over their wireless phones while on a voice call.

This is still one-way live streaming-video feeds where one has to manually switch streaming direction (making it half-duplex video calling). There is still a laundry list of drawbacks with this service. I’m still skeptical that this service will catchup anytime soon.

Video Share works exclusively over the AT&T 3G wireless network. So the real good news here is that AT&T has expanded its 3G footprint, which was earlier limited to a few select cities. With 3G, users will get faster data download speeds using a technology called HSDPA. Another technology called HSUPA will increase upload speeds, but this will come much later.

Amp’d Mobile Shutting Down Today

Amp’d Mobile It’s been almost 2 months since Amp’d Mobile went bankrupt (Amp’d is a mobile virtual network operator (MVNO) that runs on the Verizon Wireless network). Since then, it has been slowly but surely limping into the deathbed. Amp’d Mobile has sent a text message to customers announcing it will shut down today (Tuesday, 24 July). I guess it’s a nicer way to stop service, rather than hang up on callers like Sunrocket did.

The final nail in the coffin was when Amp’d Mobile struggled to meet the terms under which it was to pay US$2.5 million to retain its connection with wholesale network partner Verizon Wireless. Verizon has lost patience with Amp’d, saying in a statement:

‘While it is not the court’s responsibility to second-guess the debtor’s business decisions, it is the court’s responsibility to protect creditors’ interests from the actions of inexperienced, incapable or foolhardy management.’

Apparently, it costs Verizon Wireless $370,000 a day to maintain service to Amp’d customers. Amp’d has been encouraging subscribers to port their services to another operator. I always thought that Amp’d was a cool concept, including having mobile money/mobile wallet/m-commerce services with Obopay, but one that never got off the ground.

I hope that Verizon Wireless will take back the 200,000 customers that Amp’d had (perhaps less because some customers would’ve left soon after the bankruptcy). Their phones and service will definitely work on the Verizon Wireless Network (with a new PRL).

Anti-Caller ID Spoofing Law to put a few companies out of business

About a month ago, the United States Senate Committee on Commerce, Science, and Transportation passed S.704, the “Truth in Caller ID Act of 2007”, a bill that would outlaw causing “any caller identification service to transmit misleading or inaccurate caller identification information” via “any telecommunications service or IP-enabled voice service.” Essentially this bill makes it a crime to spoof caller ID.

This bill doesn’t outlaw caller-ID blocking (and that’s a good thing), but makes it unlawful for anyone in the United States to use misleading or inaccurate caller ID information in connection with any telecommunications service (including Voice over IP ). For example, all those prank calls you made to your friends with the Caller ID “Dept of Homeland Security” will be illegal. Law enforcement and court ordered authorizations are exempt. A similar bill was recently passed in the U.S. House of Representatives, making it a real possibility of becoming law.

I really like this idea because I believe that people should not to be tricked into thinking that a call is from someone when it is actually from another person. I can see that debt collectors and foreclosure agents trying to get to consumers by using this means. Not to say that foreclosure agents and debt collectors don’t have a legitimate reason to call. Another big use of Caller ID spoofing is for pretexting, which is used to fraudulently obtain personal records of someone else. Pretexting has been a big issue lately.

The easiest way to spoof Caller ID is to Voice over IP (VoIP) or T1 PRI lines. Anyone can get a VoIP service, but T1 PRI lines are expensive because it has 23 phone lines and usually is for businesses.

There are several companies that offer Caller ID spoofing. Most of them work like a calling card, where the user dials a toll free number, and enters the pin number, desired Caller ID, and the number to call. Prices start at $10 for 60 minutes of talk time to U.S. and Canada numbers.

When the law passes, these companies will have to change their business model or go bust.

Some of the companies are: Telespoof, SpoofCard, and PhoneGangster (wow, nice name!)




Concerns about Ooma


I haven’t tried Ooma yet, but it sure feels like the greatest thing since sliced bread, given all the hype and buzz surrounding it. And it’s just started private beta. You can find some of the greatest reviews at GigaOm, Crunch, Engadget, Mossberg, – some of the writing are pretty clear indications that Ooma reached out to these folks to publicize the private beta launch. So I thought I’d do a quick analysis to see if there are any drawbacks.

In any case, here are some of my concerns:

  • Ooma routes calls via another Ooma box’s POTS telephone connection to terminate calls. This also means that you could hook up a recording device or an IP-PBX like Asterisk between Ooma and your phone jack on the wall and record conversations. You might not know the people in the conversation, but the receiver of the call is in your area code. The called number should be trackable, and then you could easily get the name and address associated with that number online.
  • If some else’s call is terminated through the telephone connection hooked to your Ooma box, the caller ID seen by the called party would be your number, even though you wouldn’t even know that a call is routed through your Ooma box.
  • If some else’s call is terminated through the telephone connection hooked to your Ooma box, your local calls (for many people most calls are local) will be routed via the Internet and then via someone else’s Ooma box. Despite having local phone service, you will now get lower quality service. Might as well not get rid of local service and get vonage.
  • If you are making a call that goes through someone’s Ooma box and that person dials 911, then your call will be automatically and immediately get disconnected. This has low probability of happening, but a valid concern nonetheless.

Ooma is still in private beta. By the time Ooma goes “public beta”, hopefully these concerns will have been alleviated!