3 ms·

I don't understand the latest turn in the MVNO business model. The big carriers operate their gigantic networks and sell spare capacity to smaller players to m

by paxys 3y ago

I don't understand the latest turn in the MVNO business model. The big carriers operate their gigantic networks and sell spare capacity to smaller players to make extra money. These small operators sell service to customers who want lower costs and don't mind the fewer features and congestion. So everyone is happy and making/saving money. Then in the last ~10 years the big carriers all go "nah" and start acquiring these MVNOs (MetroPCS by T-Mobile, Cricket by AT&T, TracFone/Straight Talk/Total by Verizon, Visible by Verizon, now Mint by T-Mobile). So...what was the point of the whole thing? The carriers just spent billions of dollars for each of these acquisitions to gain back the customers that they gave away in the first place?

SigmundA 3y ago
"I like money"
unclad5968 3y ago
Customer acquisition would be my guess
choilive 3y ago
> The carriers just spent billions of dollars for each of these acquisitions to gain back the customers that they gave away in the first place? Yep exactly. My guess is they are going to be positioning their "primary" brand as a premium offering and push the MVNO they just bought as a "value/discount" brand. Toyota & Lexus. Same company, same car platforms, different features.
BurningFrog 3y ago
Theory I just made up: The big carrier doesn't know what to do with all their extra capacity, so they let startups buy it. Once a startup has figured out what to do with the capacity, it makes sense for both parties to merge. Everyone makes a profit, and life goes on! You can think of it as a way to outsource innovation.
- paxys 3y ago
  > Once a startup has figured out what to do with the capacity But...they didn't really figure out anything new. They just sold the same service for cheaper. If T-Mobile had a $15/mo unlimited plan then there would be no reason for anyone to use Mint Mobile. And TMo could have saved the $1.5B.
  - malfist 3y ago
    That's proven now, but it wasn't always known. Better to make money letting others take risks first and then buy them once they've proven the market
  - hnav 3y ago
    It's stratification. People using their $15/mo plan would talk about how t-mobile as a whole is garbage and turn off higher end customers.
  - ssl-3 3y ago
    If T-Mobile sold a $15/mo unlimited plan with their own name on it, then nobody would be buying their plans for $50+/mo.
turtlebits 3y ago
Sometimes you don't have the resources to go after the lower tier market, or don't want to segment your brand. Let startups fight it out and just aquire the most successful one.
hnav 3y ago
I think it goes something like. 1. MVNOs allow the big carriers to maximize the utilization of their network without sullying their own brand image by having people on their lowest tier plans with de-prioritized traffic complain about the brand. Imagine if AWS sold preemptible EC2 instances under a different brand. 2. Successful MVNOs tend to grow their customer base, often at the expense of the big 3 and get too big. Too big to be useful as a sink for preemptible capacity and too much of a revenue cannibal. 3. This prompts one of the big 3 on whose infrastructure they operate to buy them out thus regaining the market share. 4. The big carrier then extracts more value from the in-housed MVNO by raising prices. 5. GOTO 1
rogerbinns 3y ago
If you are offering consumer products, then you generally want to offer 3 tiers. It is conventionally known as good-better-best [1]. But you also have to be careful attaching your brand to all three because people don't want to pay best prices for good level product. If you visit the carrier websites they are targeting the better and best level. You'll note they don't list the acquired mvnos in their plans on their sites. Those mvnos all competed on price and lowest product level. While it may not seem like it, it is expensive and time consuming to build a brand. Many fail. And many upper brands fail really badly when they try to build a low end brand. The carriers are acquiring an established low brand: * that has figured out how to do it and survived * along with a bunch of customers * that use your unused network capacity * have retail locations and staffing (except Mint) * have figured out how to distribute their product (eg other and own retail locations) * have figured out how to acquire and retain customers * have figured out how to provide customer service They get to acquire all that without affecting their main brand. The people involved aren't idiots, and it turns out it does have great value. Billions in some cases! [1] https://en.wikipedia.org/wiki/Good%E2%80%93better%E2%80%93best https://en.wikipedia.org/wiki/Good%E2%80%93better%E2%80%93be...

by paxys 3y ago

SigmundA 3y ago

"I like money"

unclad5968 3y ago

Customer acquisition would be my guess

choilive 3y ago

> The carriers just spent billions of dollars for each of these acquisitions to gain back the customers that they gave away in the first place? Yep exactly. My guess is they are going to be positioning their "primary" brand as a premium offering and push the MVNO they just bought as a "value/discount" brand. Toyota & Lexus. Same company, same car platforms, different features.

BurningFrog 3y ago

Theory I just made up: The big carrier doesn't know what to do with all their extra capacity, so they let startups buy it. Once a startup has figured out what to do with the capacity, it makes sense for both parties to merge. Everyone makes a profit, and life goes on! You can think of it as a way to outsource innovation.

paxys 3y ago
> Once a startup has figured out what to do with the capacity But...they didn't really figure out anything new. They just sold the same service for cheaper. If T-Mobile had a $15/mo unlimited plan then there would be no reason for anyone to use Mint Mobile. And TMo could have saved the $1.5B.
- malfist 3y ago
  That's proven now, but it wasn't always known. Better to make money letting others take risks first and then buy them once they've proven the market
- hnav 3y ago
  It's stratification. People using their $15/mo plan would talk about how t-mobile as a whole is garbage and turn off higher end customers.
- ssl-3 3y ago
  If T-Mobile sold a $15/mo unlimited plan with their own name on it, then nobody would be buying their plans for $50+/mo.

turtlebits 3y ago

Sometimes you don't have the resources to go after the lower tier market, or don't want to segment your brand. Let startups fight it out and just aquire the most successful one.

hnav 3y ago

I think it goes something like. 1. MVNOs allow the big carriers to maximize the utilization of their network without sullying their own brand image by having people on their lowest tier plans with de-prioritized traffic complain about the brand. Imagine if AWS sold preemptible EC2 instances under a different brand. 2. Successful MVNOs tend to grow their customer base, often at the expense of the big 3 and get too big. Too big to be useful as a sink for preemptible capacity and too much of a revenue cannibal. 3. This prompts one of the big 3 on whose infrastructure they operate to buy them out thus regaining the market share. 4. The big carrier then extracts more value from the in-housed MVNO by raising prices. 5. GOTO 1

rogerbinns 3y ago

If you are offering consumer products, then you generally want to offer 3 tiers. It is conventionally known as good-better-best [1]. But you also have to be careful attaching your brand to all three because people don't want to pay best prices for good level product. If you visit the carrier websites they are targeting the better and best level. You'll note they don't list the acquired mvnos in their plans on their sites. Those mvnos all competed on price and lowest product level. While it may not seem like it, it is expensive and time consuming to build a brand. Many fail. And many upper brands fail really badly when they try to build a low end brand. The carriers are acquiring an established low brand: * that has figured out how to do it and survived * along with a bunch of customers * that use your unused network capacity * have retail locations and staffing (except Mint) * have figured out how to distribute their product (eg other and own retail locations) * have figured out how to acquire and retain customers * have figured out how to provide customer service They get to acquire all that without affecting their main brand. The people involved aren't idiots, and it turns out it does have great value. Billions in some cases! [1] https://en.wikipedia.org/wiki/Good%E2%80%93better%E2%80%93best https://en.wikipedia.org/wiki/Good%E2%80%93better%E2%80%93be...