A MVNO Train Wreck Coming?

Mobile Virtual Network Operators are quite fashionable these days, but eventually they will prove to a train wreck. How crazy it is? Forbes.com published a seriously speculative and flimsy piece about Apple building its own MVNO. It got Slashdotted, despite the fact there were no facts in the story. Even Boing Boing, the directory of wonderful web things was gushing about Disney Mobile MVNO. The argument, most people are using – if its good for Virgin Mobile then it must be good for everyone. Not true. Virgin Mobile and Boost Mobile bought protections by offering the piece of the action – aka equity to the network operators!

Sure you can lease capacity on a carrier’s network, set-up shop and market the hell out of your MVNO, but in the end you are beholden to the carrier. Where have we heard this before? In the wired phone business of course! before some dude came-up with the term MVNO, there were hundreds of resellers who would buy wholesale and sell retail. They had razor thin margins and their existence depended on the largesse of the large phone companies. MVNOs are exactly the same, and are very dependent on the carriers that own the spectrum. Essentially, given how phone companies think, if you (i.e. MVNO) get too big for your jock straps, they are going to do a slight squeeze play.

Carlo Longino points out that the best outcome could be a buy out by the network operator. He points to Elisa acquiring MVNO Saunalahti, and TeliaSonera taking out Sense and Chess. How will it play out in the US? Email/Post your thoughts, and you might become part of an exciting new feature of this weblog: reader contributed post!