MVNO Pricing

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MVNO Pricing

by Larry
(OKC)

Does anyone have any knowledge on how carriers are pricing their service to the current MVNOs, such as Simple Mobile, Tracfone, or any other existing MVNOs in the U.S. today?

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MVNO Pricing

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May 17, 2010

MVNO Wholesale Pricing
by: PrepaidWirelessGuy

While I can't claim to have personal experience with a lot of MVNO pricing contracts, I do have some knowledge. The deals I've seen and heard of were pretty straightforward. Basically, the MVNO buys chunks of wholesale minutes. It's usually tiered, such that the more minutes they consume, the better pricing they get. In addition, if the MVNO agrees to purchase a minimum number of minutes (or MB) within a specific period of time (ex. one year), they can get even better pricing. Though I'm not certain if they'll actually pay for some or all of those minutes/MB upfront, or simply agree to a large minimum amount for that period.

That's not to say that there aren't other types of deals out there, and I'm sure some of them can get pretty creative. But generally speaking, I think this is the a good baseline.

May 17, 2010

Thanks for the reply
by: Larry

Prepaid Guy, thanks for your comments and insight. I agree with what you are saying. As a follow up question, you mention that the MVNO consumer pricing is contingent upon what they are getting from their host network provider. Do you have any insight as to how the agreements are being structured today between the MVNO and the Host Network provider? Are MVNO's paying a traditional per minute and per KB rate or are there some other variations on how they are paying for the network they are using?

May 13, 2010

Pricing to Compete with MVNOs
by: PrepaidWirelessGuy

I assume you're referring to whether/how the big carriers (that own their own networks) are pricing their services to compete with MVNOs? If so, generally speaking, there are dozens of small MVNOs (like Simple Mobile) that don't even hit the radar as competitors. They're either so niche that the big carriers don't care to compete in that space, or they just don't pose a threat. That's not to say that they may not end up posing a threat later on. For example, Sprint/Boost ignored Cricket and MetroPCS in 2006 and 2007, and got completely crushed by the time 2008 rolled around!

For larger ones like TracFone, that are formidable forces in the marketplace, carriers tend to price their services to directly compete. Where it's a host carrier competing with its own MVNOs (ex. Sprint used to have Virgin as an MVNO before they acquired them, Ready Mobile, Verizon with PagePlus, etc.), it gets a little trickier in terms of restrictions that may be in their contract regarding how the MVNO can price their services. However, at the end of the day, it's really business as usual. Have the best product, pricing, distribution, and general value proposition, coupled with the right brand promise to meet the target demographic's needs, and compete with any worthwhile competitor regardless of their MVNO status.

The advantage that the host carriers have is that their per minute cost structure is always going to be much better than what an MVNO can get. What this means is that ultimately, MVNOs will almost never be able to compete on price, which is why we saw that Virgin Mobile was never profitable despite their large customer base; they were simply paying too much for their wholesale minutes.

If push came to shove, the large carriers could lower their prices so far that they would essentially drive the MVNOs out of business. However, you'll rarely see that, for everyone knows that they can't sustain a price war, and competing on price is rarely a profitable long term strategy.

All in all, it's all fair game out there, and we even see competitors like MetroPCS and Cricket, and Cricket and Sprint making roaming agreements. It's really the wild wild west out there in the world of prepaid wireless!

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