Spectrum, Regulation, and the Future of MVNOs

By: Tim Young

Competition:  It’s something that many CSPs didn’t have to worry much about at one point, but we all know those days are long gone. Telcos have video plays. Cablecos have VoIP plays. Over-the-top (OTT) providers offer versions of pretty much everything that they can, threatening ARPU in certain segments. 

Most matters of competition are qualitative in nature: Which provider delivers quality of service levels that keep you happy? Is the price right? How many channels come with the basic package? Is caller ID included? 

However, the mobile question is essentially dichotomous. Does your provider of choice offer wireless service or don’t they?

And despite once-high hopes, more and more service providers can’t say that they do. 

For some cablecos and other competitive carriers, the hegemony of the most successful mobile carriers has been too much to overcome.  Within the last few months alone, we’ve seen Cox hang up its spurs, getting out of the mobile game altogether. Other cablecos are making alternative arrangements, which I’ll get to in a moment. Infrastructure is massively expensive, and wireless isn’t the native tongue of cable providers. Across the board, there seems to be a cooling underway of hopes for cablecos to go toe-to-toe with wireless giants.

A lot of that has to do with the extinguishing of one bright flame, in particular.

As I’m writing this, the news for LightSquared, once the best and brightest hope for MVNOs in the U.S. market, is pretty bleak. It was just days ago that Philip Falcone, head of LightSquared majority owner Harbinger Capital, mentioned that the company is seriously mulling bankruptcy, which would be yet another step toward the ultimate demise of the $5 billion gamble that was designed to turn every cableco, retailer, or other would-be competitor into a major 4G voice and data player, drastically disrupting the current competitive landscape in the process.

Thanks to potential signal interference with GPS systems on the spectrum frequencies on which LightSquared played (or, according to some, due to political influence on the part of the major wireless carriers, not keen to welcome a disruptive new competitive threat into the mobile fraternity), LightSquared is all but kaput, taking with it its compelling value proposition.

Now, instead of having a wholesale-only player to turn to, MVNOs are stuck with the same deals with wireless carriers that they’ve had for a while now, which are generally priced on a retail-minus basis, and which often come with more than a few restrictions on the type of devices that can be operated over the network, preventing MVNOs from offering the kind of high-end devices that would have been welcome on a LightSquared-backed network.

And, of course, this isn’t the first wholesale-only network to fail to find its feet due to complications, whether technical or regulatory in nature.  How many of us remember Nextwave, the wholesale broadband effort that offered so much promise in the late 1990s, only to fold and eventually sell its last PCS licenses to mainstream wireless carriers.