Russell Beattie

Over the past few weeks, there's been a pretty good drumbeat of news about the upcoming American MVNOs (mobile virtual network operators - i.e. cellular companies that rent the wireless infrastructure from the bigger companies and focus mostly on marketing and selling handsets). Amp'd, SK-Earthlink, and Disney have all been in the news lately, and there's been wild speculation in Forbes that Apple wants to get into the MVNO game as well. Combine these new guys with Virgin Mobile, Boost Mobile, and it seems MVNO is the hottest buzzword in mobility.

So what does this mean? Well, first there's the question of whether so many players can survive in a market of only a few hundred million people. Yes, the U.S. has lots more room to grow - we're at about 70% mobile penetration whereas many countries are nearer 90% or even 100% - and we're the biggest economy and a consumer society that is willing to spend lots of money on new gadgets and services. But even with this big market, there are going to be lots of competitors fighting over the spoils. Om called it a train wreck yesterday, pointing out that when all is said and done, these new mobile companies are always going to be at the mercy of the telcos they're renting infrastructure from. When the going gets tough, those big guys are going to put the screws to their competitors - its an inevitability. Om also points out that Virgin Mobile and Boost did the right thing by getting carrier investment and wonders about these new entrants who are on their own.

The most successful MVNO to date (to my knowledge) is Virgin Mobile, which has about three million subscribers world wide. As a percentage of the current 170 million mobile subscribers in the U.S., that's not a whole hell of a lot. I can't imagine that the other MVNOs will garner more subscribers than that within the next few years. But then again, if the U.S. is anything like Europe, when combined, MVNO subs should number in the 10s of millions, skimming the high and low end of the markets from the carriers and really causing problems to their bottom line. It'll be interesting to see how it all shakes out.

But honestly, the actually business of telecoms themselves is Om's specialty, what I'm concerned about is mobile content and services. And from that perspective, the coming months are going to get really exciting for all of American mobile. I'm not sure the exact timelines, but from what I gather Amp'd is going to launch this year, and Disney within the next 12 months and SK-Earthlink (a placeholder name for their eventual offering) in the next 18 months. I think ESPN Mobile is also on track in the next year as well.

What's exciting about this is that all of these new services are going to try to differentiate themselves from the carriers and national low-end MVNOs - like Tracfone/Net10 and 7-Eleven's Ztar powered offering - by their content offerings. They'll start with branded custom versions of the Holy Trinity of Mobile Content: Ringtones, Wallpapers and Games, and then expand out into more advanced data services which will enable richer content such as music, streaming media, location services, multiplayer gaming and more. In fact, Amp'd and SK-Earthlink are both building on top of Verizon's 3G EVDO network and consider it an essential part of their service.

To get a preview of what a Disney phone would look like, you can take a look at their UK and US mobile sites. You can see that Disney is already leveraging their huge library of content to make customized versions of the standard fare. You can do the same for ESPN's MVNO as well by checking out the current offerings on ESPN Wireless which include score trackers, quiz games and more all geared towards the sports enthusiast.

Amp'd is taking their cue from Boost Mobile (many of the people at Amp'd are Boost expats) and aiming at the extreme sports enthusiast (I'm not hip with the new generation, so maybe this is really cool but it feels a bit 90s to me). They've signed up what seems to be top talent in a bunch of sports from skating to moto-cross to hawk their wares and will be focusing on lots of data services. From what I've heard from people who've seen what they're doing, they've got some really impressive phones and content.

If you check out SK-Earthlink's home page, you'll find a cute video where a "reporter" walks around Venice Beach, California and asks people what they do with their mobile phones, to which they inevitably reply: "make phone calls." Then he flies over to Soeul, Korea where he asks people and gets a litany of activities such as listening to music, watching video, etc. The idea of SK-Earthlink (if you check out the interview with Sky Dayton in Wired) is to bring the SK Telecom handsets and experience with advanced mobile services here to the U.S. *including* an American version of their insanely popular CyWorld. The other day at the Always On party, Marc introduced me to his new client at SK Telecom who mentioned this and I was pretty blown away.

So this is all pretty cool. Lots of different strategies, but all centered around the idea of data services as a main selling point to the mobile phone. Yeah! It's about time! Though Voice is King right now, Data is the Future of mobility as shown in this article over at Always On about DoCoMo, in which data and 3G plays an important part:

NTT DoCoMo is by far the leader by earning over $1B/month from data services. Their stated goal is to derive 80% of their revenues from data services by 2010. ...

The Upcoming players consist of operators from North America, China, and India. Wireless data contribution to their overall ARPU is less than 10%. It should be noted that the two biggest wireless markets � China and US respectively lag in data revenues. Also, though India is the fastest growing market in the world right now, contribution from data ARPU to total revenues is still relatively small.

It is also clear that the introduction of 3G has helped carriers to boost their data ARPU, in some cases tremendously. Hutchinson Wampoa�s 3G properties across Europe and Asia derive approximately 20% of their revenues from data services. Similarly, the average non-voice ARPU for Vodafone operators was over 17%8. EV-DO helped generate more than four times the revenue (on a per subscriber basis) as compared to its 1x data service for SK Telecom�s9. Similarly, KDDI�s EV-DO service generated approximately $35/sub, more than twice its overall data ARPU.

So over the next few years, it seems the main growth in cellular is going to be in data services and that's what all these new MVNOs are banking on. But with all this new content centric offerings, what are the current mobile operators going to do? Roll over? Same ol' same ol'? Of course not! This is where everything gets the most interesting to me.

If you think of last Christmas as the beginning of the Camera Phone Boom here in the U.S., you can think of next Christmas being the beginning of the Mobile Data Services boom. The major carriers and the current MVNOs aren't going to sit back and let the new guys come in and skim the cream off the top of the mobile market, they're going to start ramping up their offerings as well. We're already seeing a lot of this movement happening actually, mostly focused on Music right now (as carriers scramble to offer services similar to Apple's iTunes), but the key thing to understand is the same infrastructure that allows mobile music, will easily allow other advanced data services as well. This is a very good thing.

Always on connections, high-speed access, mobile multimedia, multiplayer gaming and more will not be something that only the mobile elite get to use, but something that - because of the increased compeition - will start being promoted to the mass market in an affordable manner. With all these competing factions, this should bode well for content creators and mobile-oriented services offered by third parties who will be able to provide the arms to big guys to fight their ever escalating war of mobile content. Carriers can't provide everything, though, so I forsee an ever-opening wireless network as the operators start to focus on data revenues and who provides the best connection to the Internet as we know it now.

Now, imagine in this sort of competition what would happen if you happened to create the proverbial Mobile Killer App? Exactly. Building a better mobile mousetrap will bring the world to your door. We're at the cusp of finally going beyond SMS and Ringtones and into a whole new world of mobile services and though there's a lot of low-hanging fruit that the carriers are going to go after first, there's tons of opportunity for something more innovative. To me, an app that takes advantage of the inherent ubiquity of mobile phones and their natural place in connecting us together will be huge.

Okay, so maybe this is a bit wide-eyed and optimistic, but you can really feel the momentum here in the U.S. and these new MVNOs are just the latest sign of what's happening. The buzz here in the Valley is getting pretty loud, deals are being announced, and money is starting to flow. Though you *have* to think of mobility as a worldwide market, the Valley naturally tends to focus on opportunities at home first and internationally second, so having a vibrant domestic market will be key for to get things moving here. And because of its history, the Valley is also very Internet centric, so now that data services are actually becoming a differentiating factor for the carriers, I expect that we'll see an upswing in focus on mobility as well. Actually, more of an upswing - this place is already booming, as shown by the ever growing Mobile Monday turn out (make sure to go tomorrow!).

I never can tell if the mobile industry moves fast or slow. Sometimes it seems to lag - we were talking about 3G services back in 2000 and it's just arriving now. But I think those sorts of wait for tech is over and that time to market is accelerating. The adoption of camera phones seemed insanely fast didn't it? Consumers are now changing out their phones an average of every 16 months, which means the baseline phone is rapidly moving upwards as well. We should have a new term: Mobility Time, which is like Internet Time, except that instead of being constantly fast, it's more like "waiting, waiting, waiting, BAM!" :-)

How long it will take for my Mom to be using mobile data services, I'm not sure yet but I can feel this stuff accelerating rapidly, no? For mobile data services, this is really just the quiet before the storm and the ensuing downpour is going to make the $3 billion ringtone market look like pocket change. By this time next year, I expect to see a lot more focus on mobile data services just about everywhere - operators, handset makers, media, etc. If you're here in the U.S., now is *definitely* the time to take advantage.

Just a heads up.

-Russ