MVNOs forced into the European Mobile Market?
Regulation and its effect on the use of the MVNO business model in Europe
MVNOs are not present in all European markets. Why? Can MVNOs guarantee the successful development of mobile markets? Do the general public thus benefit from the existence of MVNOs? And, if this is the case, what are the consequences for the regulatory bodies’ obligation towards ‘the general well-being of the population’? Do responsible regulatory bodies thus have to introduce MVNOs? In this article these questions will be discussed using the examples of a selection of European States along with a description of the guidelines provided by the European Union.
The geographical distribution of virtual mobile operators (MVNOs) in Europe is surprising. MVNOs are providers without their own networks which supply mobile services on their own account to end users. It appears that there is a virtual division line running through Europe. In the northern part MVNOs are an integral part of the national telecommunications markets. In the south on the other hand the MVNO business model is all but non-existent (see figure 1).
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Why is there this difference? It is not a question of culture. MVNOs would be just as acceptable for the end users in southern Europe as they are for their northern neighbors. After all, in most cases the customer doesn’t even realize that the virtual mobile operator doesn’t have its own network. The number of MVNOs in the countries in which the business model has become established allow a number of conclusions concerning potential success to be drawn:
> The profitable operation of an MVNO is obviously possible.
> The origins of the MVNO operators vary widely: from supermarket chains to music and electronic retailers and on to fixed network telecommunications providers without their own mobile infrastructure.
This type of ‘typical’ operator exists in southern Europe too. So why aren’t the different operator models simply being copied there?
Mobile network operators are resistant
Potential operators such as Tele2 have already registered an interest in entering the southern European markets. It is the mobile network operators (MNOs) which are preventing cooperation here. According to analysis carried out by Goldmann Sachs Research („Europe: Telecom Services, MVNOs - a wholesale change, September 2004") it doesn’t make economic sense for the MNOs to use the MVNOs as an indirect sales channel. On the basis of the analysts’ assumptions a churn rate of more than 52% in the mobile market is necessary before the acquisition of a customer using a wholesale partner becomes more commercially attractive than acquisition using one’s own sales channels.
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