What's an MVNO?What does MVNO mean? It stands for "Mobile Virtual Network Operator." And why is this a topic of interest? Well, this is very much a misunderstood term, but key to having a good understanding of the wireless industry. MVNOs are essentially wireless companies that don't own their own network. Building a wireless network (i.e. towers, switches, etc.) is EXTREMELY expensive. It takes armies of network engineers and IT resources, not to mention a bundle of cash (!) to buy spectrum to build and maintain wireless networks. So, a lot of small wireless companies buy wireless minutes at a wholesale price from larger carriers (ex. AT&T, Verizon, Sprint, T-Mobile, etc.). In other words, these smaller companies pay for each minute their customers use at a discounted rate. This allows them to focus their resources on building their brand and basic business, rather than spending time raising capital and spending years building their own wireless network. MVNOs, however, have a very difficult time competing with the large carriers that own their own network. This is because although they buy minutes at a wholesale price, the cost is still quite expensive compared to the carrier that owns the network. The interesting thing, that you may have already uncovered, is that large wireless carriers are actually selling minutes to MVNOs that are essentially their competition! They do typically try to sell minutes only to companies that aren't competing in the same space or targeting the same demographic. That said, at some level, all wireless companies are competing in the same marketplace. Some good examples are:
These companies own and operate every other part of their business, such as Marketing, Finance, HR, Product Development, Customer Care, etc. This gives them full control over their end-to-end business. They simply don't have to worry about maintaining the physical wireless towers, managing capacity, etc. You'll also note that two of those listed above are no longer in business. Amongst a number of factors, one key element of their failure has to do with the fact that it's very expensive to operate as a Mobile Virtual Network Operator. The trade off of all that control is the high cost they pay per minute to the large wireless carriers. It's also interesting to note that although Virgin Mobile USA is still in operation, they have not many even a dollar of profit since launching more than five years ago! Since their IPO (Initial Public Offering) in 2007, and Virgin Mobile USA's books were available to the public, this fact became visible to the public, as well as angry investors. You may have noticed that Boost Mobile is not in the list above. Of course, the list is not even close to being a comprehensive, however, no matter how many would be included, Boost Mobile would not be part of the list. Why not? Well, Boost is actually not an Mobile Virtual Network Operator, and of someone says they are, that will be your first sign that they don't know what they're talking about ;-). Seriously though, Boost is not an MVNO because they are a fully own subsidiary of Sprint Nextel Corporation. Boost is simply another division, or brand, within the company. Sprint Nextel has full ownership over the profits (or losses) of the Boost business. Also, Boost shares the same IT, engineering, HR, and other departments with the parent company. In addition, Boost does not pay a per minute wholesale cost. This gives Boost a much greater advantage over MVNOs because its cost structure is so much lower. It's certainly not uncommon for people to lump Boost into this category, however, those that do either don't understand what an MVNO is, or they are not fully aware of the structure of the Boost business. Please don't get me wrong, this is a very confusing and often misunderstood topic, so it's very easy to gloss over some of the details, and many may not be interested in calling out the unique elements of companies like Boost. This topic is extremely interesting, so if there's any further detail you're interested in knowing, please don't hesitate to contact me.
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