Why MVNOs are edging out the competition

The ‘Big Four’ wireless carriers—AT&T, T-Mobile, Verizon, and Sprint—may own the marketplace, but over the past few years smaller carriers are getting a piece of the action. Mobile virtual network operators, or ‘MVNOs’, like TracFone, Virgin Mobile USA, and Beyond Mobile are enjoying a unique position and mounting a challenge.

What’s the draw for consumers? Much like cable subscribers switching to streaming services, many wireless customers are drawn to the flexibility and tailored service MVNOs provide—one in 10 U.S. subscribers, in fact (Source: Strategy Analytics).

Let’s take a closer look at how this trend began.

What exactly is an MVNO?

An MVNO is essentially a reseller of wireless communication services. Big carriers like Verizon and T-Mobile choose to lease extra wireless capacity to MVNOs at wholesale prices, capacity that would otherwise go unused. MVNOs then resell that wireless capacity to consumers at reduced retail prices under their own brand, says Kevin Cundiff is VP of Retail for Fortegra Financial Corporation (a Tiptree Inc. company).

Under this arrangement, MVNOs can use their own customer service, billing support systems, marketing and sales personnel, or they can employ the services of a mobile virtual network enabler (MVNE).

Typically, MVNOs offer prepaid wireless plans on a subscription basis, an option customers have been using increasingly in recent years.

More flexibility is win-win

With MVNOs reselling the ‘Big Four’ networks under their own badge, it gives them a bit more wiggle room as to how they operate their business. Additional flexibility allows them to mark down rates, spend more aggressively on marketing, and run promotions independent of their parent carriers.

For consumers, this results in more affordable wireless plans with similar benefits. On the flipside, leasing wireless capacity to MVNOs is appealing to carriers as it provides the potential to reach into more niche markets where they may not otherwise have access.

Zooming in on customer service

From carrier billing to distribution, because some of the Big Four carriers handle back-office logistics for their MVNOs partners, it frees up MVNOs to focus on doing what they do best: marketing and customer service. MVNOs have the capacity to appeal to customer needs, offering options like tailored service packages, no contract obligations, and unlocked phones that permit customers to switch between carriers more easily. And, again, all this can be offered at a considerable savings.

MVNOs cater to what today’s typical customer is looking for: affordability, flexibility, and great customer service. With these advantages, it’s not hard to see why these small operators continue to make big moves in the wireless marketplace.

The author of this blog is Kevin Cundiff is VP of Retail for Fortegra Financial Corporation (a Tiptree Inc. company)

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