Wal-Mart and New Age MVNOs

Wal-Mart recently its new MVNO wireless brand called Wal-Mart Family Mobile. This is a great move for what is undeniably the largest retailer in the world and has unfettered access to a tremendous customer base. While the plan is not quite optimized yet (new lines are $25/line and a bit too expensive, phones are locked to the Wal-Mart service, among others) I’m sure they’ll learn a lot after launch, marketing and selling the service. In fact, they’ll find out that as they rollout into international markets, i.e., outside of the US, the requirements and behaviors from those local markets will be different. Details of the plan are outlined below:

“The service, called Wal-Mart Family Mobile, will run on T-Mobile USA’s network and will cost $45 per month for unlimited voice and texting; additional lines can be added for $25 per month. Interestingly, there is also a prepaid component to the plan: Users who want mobile data can pay into a prepaid account that can be pooled for an entire family, and the data does not expire. The first 100 MB of data are free, and come pre-loaded on all of the phones using the service. Customers can buy more data for an extra charge: $10 for 200 MB, $25 for 500 MB or $40 for 1 GB.

Importantly, Wal-Mart’s plan does not have a contract for customers to sign or come with early-termination fees. However, phones for the offering will be locked to Wal-Mart’s service, and will not be able to work on other networks or even under a T-Mobile plan.”

What are the most disruptive of this are: big brands launching new mobile services, and who owns the customer. Best Buy Mobile is marketing and selling many devices across many carriers. When will they actually launch their own service under their own brand? They are one of the largest CE and appliance retailers, not quite on the same plane of existence as Wal-Mart but in a different one (Ed.: Stephen Hawking may chime in here). Or LVMH in France? Or Boots or Tesco in the UK? It’s just a matter of time as costs of smartphones (or tablets or other interesting devices) come down and infrastructure-based carriers, especially tier 1.5 or 2, are willing to open up their networks to other big brands. Of course Amazon has been doing this since the launch of the Kindle and is very successful though hard to tell if Sprint or Qualcomm are making money on leasing their infrastructure to Amazon/WhisperNet.

The longer term and most disruptive impact will be ownership of the customer relationship and ultimately wallet. Prime example is the iPhone. Does Apple or ATT own the customer relationship? Some may disagree but I think it’s Apple, hands down! They own the AppStore, all extensibility of the device, upgrades, and most of the profitability of the value add elements of the device. ATT charges for the 3G service voice and data pipes. I don’t trivialize this but it’s a matter of who you think of when you think of iPhone. Case in point. Yesterday as I was trekking down University Avenue in Palo Alto, CA, I noticed an ATT store right across the street from the Apple Store. ATT store was desolate…Apple Store was booming! As always.

What do you think of the future of the convergence of MVNOs and big brands with big customer bases? I think it only has one direction: up and to the right.

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The Cloud Completes the Connected Experience

Owners of iPhones are probably tired of hearing all the AT&T “network issues”, dropped calls, or other user experience degrading issues. I’m certain AT&T is also tired of hearing the complaints. I know the customer service agent who took my call last week had a fair bit of experience with iPhone customers calling in to complain. But this post is not yet-another bitchfest about AT&T’s network or how I love the iPhone…except for the phone! In experiencing the stellar experience with the iPhone platform and its extreme dependence on the network, I’m reminded of just how important the carrier experience is for the overall positive user experience.

Google’s CEO, Eric Schmidt, agrees with this. He delivered an engaging keynote appearance at Mobile World Congress stating the importance of the cloud, i.e. operator network, in the device and application experience.

“We feel very strongly that we depend on the successful business of operators globally,” he said. “We need advanced, sophisticated networks.”

Eric was reacting to an audience member’s statement that Google would basically make the operator network a “dumb pipe” and all the value would be over-the-top. But I disagree with this mindset. The connected experience that we are increasingly engaging with our smartphones, app stores, data, and social media would incur a tremendous amount of friction and dissatisfaction without the right networks in place and operating properly. Good session and roaming management will yield great experiences to end users, and that results in sticky, ARPU-rich subscriptions to all kinds of services and applications.

“Applications are sharing-intensive, and the cloud is all about sharing and replication,” Schmidt explained. “An application that does not leverage the power of the cloud is not going to wow anybody.”

It’s hard to find a successful application on an iPhone or Android device that does not have some sort of persistent or recurring network connection. Whether it’s location, gaming, messaging or productivity, the application experience is enriched with a great network. It seems that I’m stating the obvious however the notion of Over-The-Top has been on the minds and desired of users and application developers ever since the first walled garden went in place. Yes, many mobile computing platforms will have a variety of applications on them and accessing services in the cloud that are relatively transparent to the billing platform of the wireless operator (maybe the application specifics, but not the bits). The ultimate Always Connected User Experience will happen only with the integration and cooperation of the end-to-end value chain elements. This includes the pipes!

Mobile Exabytes…that’s a LOT of zeros

According to an article on GigaOm, by 2012 mobile will generate up to an exabyte of traffic per month! Just to illustrate, this is an exabyte: 10,000,000,000,000,000,000 bytes. The prediction is part of Cisco’s Visual Networking Index which offers up many dimensions of how the Internet will grow and what will drive that growth.

This is all fine and dandy, but Om also makes the same observation that I’ve written about several times as the biggest barrier to the emerging Exabyte Age…the carrier business model and economics. The carriers have yet to make a quantum leap in how they charge for mobile data and are still generally hovering at hard limits for monthly usage on mobile data plans, Cricket Wireless Unlimited 3G Broadband notwithstanding. The tier-1 carriers in North America (ATT, Verizon Wireless, T-Mobile, Sprint) can’t seem to figure out the attractiveness of family plans for mobile broadband. They don’t seem to be doing the price elasticity analyses on how they will get more subscribers with more of an appetite to consume new services and value-add applications (see ANY iPhone Appstore article) thereby creating an additive effect for ARPU which would probably yield more positive results than they’re seeing today. In fact, it’s ALL about the services and apps to drive adoption from the Average Joe mobile subscriber who, even in a down and miserable economy, still seems to prioritize his mobile services above other everyday conveniences, like his morning latte at Starbucks (sorry, Starbucks).

When will the operators wake up and smell the coffee (to extend the frivolous pun already constructed)? Maybe it’s just a matter of time. Such as when 4G gets deployed offering better price/performance/bit economics for the operators. But are they really that concerned with the load on their 3G networks? Is this reality or a smokescreen?