Archive for September, 2006

Concrete: innovation hotbed

Friday, September 29th, 2006

One of the next great areas of technological advance may be right beneath your feet. Concrete, the ubiquitous construction material responsible for millions of miles of paved highways as well as countless gloomy Soviet-era apartment blocks, is undergoing a high-tech renaissance. So says The Economist, which features it in the current issue’s Technology Quarterly section.

Concrete embedded with tiny conductive fibers allows bridges and roads to be kept free of snow and ice without damaging salt and plowing. Spray-on concrete can create inexpensive housing in poor areas which is durable, well-insulated and hurricane-resistant. Who knew there was so much room for innovation in such a humble material?

According to the Economist, every year one cubic meter of concrete is put to use for every person on earth—making it the second-most used material after water. Could that amount yet increase? It’s a concrete possibility.

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Vince sells out

Thursday, September 28th, 2006

Say it ain’t so! Vince, the $50 million fashion label founded by Christopher Lapolice and Rea Laccone, and cited in this space as an exemplar of brand-building, has been sold. (See article in today’s New York Times.) The lucky buyer is the Kellwood Company, a $2B aggregator of fashion labels.

It seems a shame that they wouldn’t have continued to go it alone. Perhaps it got too big for them. (Ms. Laccone had told the Times, ”I would have been really happy if Vince was a $12 million business.”) And I guess $75 million–the purchase price–would be hard to turn down by anyone. The company says the founders have agreed to stay, but… what are the odds that, a couple of years down the line, they’ll be at it again?

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It’s the handsets, baby

Thursday, September 28th, 2006

One message at the MVNO Strategies & Markets Conference this week is that the handset has become perhaps the most important aspect of a wireless service.

Time was, people took whatever phone their carrier offered free. Then came the Sidekick and especially the Motorola RAZR and all of a sudden the phone ceased to be a tool and instead became an object of desire. DP Venkatesh of mPortal pointed out that the RAZR was the first Motorola phone that didn’t have a techie name (like StarTAC, V810, etc.). Now we have the Pearl, the Kickflip, the Chocolate and the Q.

And we want one.

This causes a problem for MVNOs. They typically don’t have access to the best handsets (or even the second-best). The carriers serve their own retail operations first, then offer handsets to their MVNOs. Hamilton Sekino of Diamond Consultants asserted that the RAZR was partially responsible for the slow growth of MVNOs launching over the past year.

Mobile ESPN has the best data user interface in the industry, but launched with a single, low-tech Sanyo model, and look what happened to them?

Helio, by contrast, has sourced their own custom handsets, at great expense, from VK Mobile and Pantech. And they’re pretty cool. Perhaps this strategy will prove successful for Helio. And then other MVNOs will follow, regardless of the price.

(picture: the Hero model from Helio)

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R.I.P., Mobile ESPN

Thursday, September 28th, 2006

Well, the news ripped through the MVNO Strategies and Markets conference in New York like a tornado. Mobile ESPN, one of the pillars of the US MVNO market, yet dogged by press and investor questions about its slow growth, has decided to shut its doors, “as soon as today,” according to the Wall Street Journal, in order to focus on being a broadly-distributed content provider.

What does this mean for the US MVNO market? I’d said earlier this month that the success of Mobile ESPN, along with Disney Mobile and Helio, was crucial for the long-term health of the US MVNO market. Now one of them is gone. More opportunity for the remainder? Or a sign of things to come?

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MVNOs need more consumer marketing expertise

Wednesday, September 27th, 2006

Dan Neal, president of the startup tween MVNO kajeet, bemoaned the lack of consumer marketing insight in the MVNO world. “We need more consumer marketing sessions at conferences like this,” he said yesterday at the MVNO Strategies and Markets Conference.

And the importance of knowing the consumer market was underlined today at the conference by Thomas Desarnaud, VP of Marketing for Universal Mobile, the largest French MVNO. Universal, a sister company of Universal Music, the largest global music company, has used its deep understanding of the teenaged market to attract 550,000 subscribers and become the #1 wireless operator in France for customer satisfaction.

The MVNO has capitalized on Universal’s success in the music market (35% market share in France) not by simply leveraging their promotion and distribution assets, but by applying the lessons they’ve learned in communicating and creating a brand that is attractive and desired by their target market—allegedly unpredictable teens.

Desarnaud used terms different from what we’ve heard from the the other presenters (a nod to Neal’s plea). He discussed the service as a status symbol and invoking emotion in its customers. More than simply claiming to be cool, Universal knows the language of its audience and, as Desarnaud said, “speaks to youth in codes they understand.”

They speak a different message to parents, who pay for the service. To them, the message is all about budget control (as an parent of a teen can relate to).

A clever way they’ve merged the two messages is one of their advertisements, which parodies teen slasher movies with a teen terrorized by an electric-knife-wielding crazy—his mother, upset about a high cellular bill. The message? “Don’t get on your mom’s wrong side. Keep your spending capped.”

An important factor in Universal’s success, and a cautionary lesson for US MVNOs—Universal has been able to succeed as a “SIM-only” MVNO. That is, they don’t sell phones, but instead sell SIM cards that users can insert in their existing phones. This model is limited to GSM and as well because of locked phones would be difficult to achieve in the US even for a GSM-focused MVNO… and, of course, the GSM operators (Cingular and T-Mobile) have been the least aggressive enablers of MVNOs in the US. Zut alors!

Desarnaud’s final thoughts:

Content is about life style

Mobile is about life style

Therefore, content and mobile go perfectly together. I couldn’t have said it better myself.

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“The world is not being fair right now to MVNOs.”

Tuesday, September 26th, 2006

At today’s MVNO Strategies and Markets Conference, Dave Johnson of Sprint’s Private Label Services group–speaker of the above quotation–asserted, despite what you may have read in the newspaper, that opportunities still exist for MVNOs.

Sprint has analyzed their numbers being ported out (i.e., being switched to other operators) compared to their MVNOs’ port-ins, and is seeing very little cannibalization of its customers from its MVNOs. Therefore, the MVNO market is more attractive for Sprint than people might assume.

Johnson outlined six key capabilities that MVNOs need to be successful:

  1. Ability to attract switchers – 90% of new prospects will be switchers – and switchers often want something different from their prior provider (i.e., don’t want to trade one basic offer for another basic offer)

  2. MVNOs must focus on underserved segments. Johnson implied that MVNOs would not be approved by Sprint if they can’t clearly identify a compelling target segment. He displayed data showing that although overall wireless penetration is high (73%), many segments have lots of room for growth (examples shown – children, elderly, low-income)

  3. Strong distribution. This we’ve heard often before (and reiterated several times by speakers today), but, according to Johnson, distribution is the #1 predictor for success of Sprint’s MVNOs

  4. Strong brand and differentiated marketing

  5. Exclusive, relevant or compelling data content

  6. Strong financial backing and understanding of wireless financial and user metrics. $5M investment is not enough to sustain. A typical MVNO will be cash flow negative for 3 years

He also cited some example MVNOs (disclaimer – they are all Sprint MVNOs). Movida – strong segment focus on Hispanic market, including in-language content and support. Virgin – superior distribution – 25,000 retailers. Helio – strong financial backing. ESPN – compelling content. Disney – strong brand.

He also highlighted kajeet, a tween MVNO in the implementation stage, for having strong financial backing and admirable patience. They are trying to “do it right” and are “not in a hurry”–a rarity in an industry where people feel they must launch day after tomorrow.

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MVNO Strategies & Markets Day 1 – here come the Hybrid MVNOs

Tuesday, September 26th, 2006

Posting this week from the Informa MVNO Strategies & Markets conference in New York. The theme of the conference is “Sustainable Business Models.”

The first message at the conference, sounded by Andrew Cole, president of CSMG, and Tammy Parker, Informa principal analyst, is: hybrid is the next wave of MVNOs (what the hell is an MVNO? check here). A hybrid is an MVNO that works closely with its network operator and relies on that partnership for many of its wireless back-office and operational needs. The MVNO provides brand, marketing and (often) proprietary content. Rather than receiving a wholesale rate for minutes and megabytes, the network operator shares in the venture’s revenue.

Amp’d Mobile’s deal with Telus in Canada is the best example of the hybrid model. Amp’d provides their branded content and customized handsets, while Telus provides sales & distribution, network, customer care, billing, collections, etc. Boost Mobile’s relationship with its parent Sprint Nextel is a variant of this approach.

What are the advantages for MVNOs? Especially for companies with limited telecom experience (and little desire to build it), the hybrid model allows the MVNO to focus on what it does best–be that distribution, content or branding. The network operator can leverage its existing investments in customer service, billing, etc. It also is proving attractive to the network operators–an important consideration in a market where an MVNO with no network contract has no business.

Hybrid MVNOs will not replace the standard arm’s length relationship of MVNO to network operator, but they represent an important evolution that will be an important segment of the MVNO market into the future.

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SeeMe TV – YouTube for your phone

Tuesday, September 26th, 2006

At the MVNO Strategies and Markets conference yesterday, Andrew Cole of the Cambridge Strategic Management Group discussed what MVNOs can do to improve their business performance via mobile content. As an example he cited SeeMe TV, from the UK operator 3.

SeeMe TV allows users to upload videos, and users to download and view the videos, a la YouTube. Innovatively, however, 3 charges users a small sum (50 pence) to upload, and 10 pence to download. The video producers get 10% of the download revenues for their videos. Fifty downloads, and you’ve broken even. It’s a variation of the self-publishing concept, for video on the mobile platform.

It’s all been done, certainly. But never this way with this type of package. And the results speak for themselves. A commendation from the UK New Media Awards. More than 1M downloads of 30K clips in the first few months since launch, according to Cole. And for 3, a distinctive, even brand-making new service.

Upload that!

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Hello from Mobile Monday

Tuesday, September 26th, 2006

I happened upon a very nice event tonight in Manhattan. Mobile Monday, a monthly discussion series, tonight featured a discussion on MVNOs. How timely!

Kudos to Steve Chang and his cohorts who put on a well-attended, informative session at the Samsung Experience at Time Warner Center.

The featured speaker was Joe Lazlo of Jupiter Research. He had some matter-of-fact advice for prospective MVNOs, such as:

- The barriers to success have risen in the past twelve months.
- MVNOs need an exclusive something… It doesn’t have to be exclusive technology; even some kind of gimmick could work, or something that can be pitched in a novel way.
- Prospective media MVNOs have a conflict between distributing via every possible channel versus reserving some content for their MVNO customers.
- The “quieter” MVNOs may end up being most successful. Who are they? Shhh…..

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What the hell is an MVNO?

Monday, September 25th, 2006

This week I’ll be blogging from the MVNO Strategies & Markets Conference in New York (registration information here if you’re interested). The posts will be more narrowly-focused than normal. Therefore, to orient our non-telecom-professional readership, I’ll need to provide some background.

MVNO stands for Mobile Virtual Network Operator. In the old analog days, that meant cellular reseller; i.e., a company that resold cellular service under its own name. Three major changes have occurred in the US and many other markets around the world that have enabled this old reseller market to reform into what we now call MVNO.

  1. Digital cellular has replaced analog. With that transformation has come more open standards, such as GSM, CDMA and various advanced intelligent network (AIN) protocols. This has opened up wireless network technology to new suppliers and, important for the MVNO market, improved the ability for partners of the network operators.

  2. Creation of multiple, nationwide carriers. Both modifiers are important. Multiple network operators (preferably three or more) create a competitive environment that incents carriers to resell excess capacity to MVNOs. Nationwide coverage allows MVNO to sell service most everywhere in a country with a single carrier agreement, an important simplification that improves the marketing leverage of an MVNO and also reduces cost.

  3. Investment in wireless data infrastructure. Carriers throughout the world have spent tens of billions of dollars on 3G infrastructure. Gaining a return on that investment is important and again incents carriers to bring in MVNO partners.

The result has been an explosion of MVNOs around the world. Tesco, a grocer, has brought on millions of prepaid clients in the UK. Disney has created a specialized mobile family application that it is selling in the US. And PLDT from the Philippines provides service to hundreds of thousands of Filipino expatriates in Hong Kong and soon in Singapore.

Will MVNOs remain an important part of the wireless landscape? Or will the marginal ones fade away, and the strongest merely become subsidiaries of the ever-growing carriers? We’ll have to stick around for a few years to know.

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