Why MVNOs are set to grow in importance

The connectivity landscape is made up of a number of key providers, including mobile network operators (MNOs), mobile virtual network operators (MVNOs), and mobile virtual network enablers (MVNEs). Consumers may know that they have an account with Virgin Mobile or Xfinity Mobile, but do they know what the difference is between these brands and carriers such as Orange or Vodafone?

MVNOs – which include both well-known brands such as Virgin, but also lesser-known names such as Champions Mobile – are smaller than MNOs, which have strong network partnerships that enable them to offer multiple networks in each country and, therefore, better coverage. The biggest MNOs all have international networks but not necessarily global ones.

The dynamics between MNOs and MVNOs are changing as new technologies and trends – such as eSIM, IoT and 5G – start to take off. In turn, these technologies and trends are providing opportunities that MVNOs in particular are keen to capitalize on.

How MVNOs can seize the IoT opportunity

MVNOs have frequently been viewed as a source of innovation within the world of mobile networks. These wireless providers do not own any physical network infrastructure, but instead lease its use from incumbent MNOs. This results in lower pressure to invest in capital assets and has meant that their core strategy has been about targeting underserved market niches and, more recently, developing strong intellectual property (IP) to service new market demands.

The emergence of MVNEs – resellers of network infrastructure and cellular network IT services – has facilitated the path for almost any company to become an MVNO. There are more than 1,400 MVNEs operating across the globe today. Frequently, they will have connectivity agreements with many MNOs, meaning that a new MVNO can potentially service customers on a global scale.

Historically, MVNOs have operated by implementing a targeted strategy, such as offering specialized services to migrant groups or data-centric plans to younger demographics. This has not changed, although the opportunity now lies in IoT systems and technologies. According to research firm Kaleido Intelligence, so-called IoT MVNOs were servicing 134 million connections at the end of 2019, an increase of 73% since 2017.¹ This growth is a full 25 points ahead of MNOs’ own growth when the Chinese market is excluded. By 2025, Kaleido predicts that IoT MVNOs will support 658 million connections.

With IoT, the importance of supporting a secure, global connectivity footprint and the ability to reduce customer complexity cannot be overstated. It is here that IoT MVNOs currently hold the advantage. Their willingness to partner and focus on the development of IP over the connectivity layer is a crucial part of this strategy. In practice, this means being able to offer a connectivity footprint that is equal or superior to most MNOs, while also facilitating flexible solutions to meet the complex needs of IoT customers. These latter innovations come in the form of global SIMs (worldwide flat-rate data plans), virtualized API-driven network infrastructure, and a heavy focus towards eSIM.

Scaling while remaining flexible

eSIM and network virtualization represent a crucial part of IoT deployments for both MNOs and MVNOs. The ability to scale and remain flexible will become increasingly important as 5G networks emerge to support one million devices per square kilometer: differing application, cost, security and regulatory requirements will force this issue. Therefore, having access to virtualized core infrastructure alongside multiple points of presence across the globe must be a key strategy moving forward, whether achieved via partnerships with MVNEs or the development of in-house MVNE technology stacks. This will aid in delivering optimum application performance aligned with budget constraints and ROI expectations.

For eSIM, MNO buy-in remains essential. While operators are now coming around to the idea of eSIM, they still have concerns about security and commercial agreements. Thus far, this has limited MNO appetite to share eSIM profiles to widen MVNOs’ ability to support single-SIM global connectivity. This challenge will require not only the support of digital security specialists to aid in protecting MNOs’ networks, but also innovation on the commercial side to convince operators that partnerships can be mutually beneficial, even if some customer control is lost.

A revenue opportunity

Kaleido Intelligence believes that this realization will become increasingly apparent within the next 2–3 years. The impact of COVID-19 means that many businesses will accelerate their IoT strategies as a mechanism to ensure business continuity and to reduce future risk. By 2024, Kaleido foresees some 4.8 billion cellular-connected IoT devices, with 800 million of those connections roaming.² The total and roaming installed base is a significant increase in the number of connections reported at the end of 2019. In turn, this will result in a substantial growth in IoT data traffic, as well as in revenue opportunity. Issues such as permanent roaming and mobile signaling traffic overheads will lead MNOs to embrace both the eSIM as well as the ecosystem partner concepts.

Published: 04/12/2020