Friday, January 06, 2006
great article from the SF Chronicle about what my company does
Battle rages for the luxury phone market
Virtual networks go after high-end mobile customers
Ryan Kim, Chronicle Staff Writer
Monday, January 2, 2006
Back in the late 1970s, ESPN and a host of other budding channels rode in on cable and flooded the nation's television airwaves that had been dominated by a handful of national broadcasters.
Today, ESPN is making another push, this time with cell phones, to offer subscribers a personalized, sports-focused alternative to the big national cell phone operators. And just like at the dawn of cable, ESPN has company -- other rivals poised to take on the established likes of Verizon, Sprint and Cingular.
Pretty soon, a sports fan will be able to watch SportsCenter, follow a fantasy football player and get live updates of NFL games. A hip-hop aficionado will tune into the latest video from Kanye West. Techno-geeks could watch live satellite television on the go while Spanish speakers could send text messages and get customer support services in Spanish. It will all happen on specially designed cell phones.
Mobile ESPN is part of a new breed of cell phone carriers called mobile virtual network operators that buy wholesale minutes and data from the large cell phone carriers and then use them to sell cell phones and service for a niche audience.
Theoretically, the partnership helps a cell phone carrier expand its customer base at minimal cost while opening the door to new opportunities for profit for the network operator.
There's a potential downside: The niche operators are banking that enough subscribers will buy the new product, which can cost as much $400 for a handset and $65 for monthly service.
In addition to Mobile ESPN, the companies set to begin service this year include ESPN's parent company, Disney; Amp'd, an Irvine cell phone carrier that goes after young people; and Helio, a Los Angeles partnership between EarthLink and SK, the leading cell phone company in South Korea.
They join established companies like Virgin, the first large virtual operator, prepaid calling plan Tracphone Wireless and Movida, a new service for Spanish speakers.
The companies say that as the big national cell phone carriers try to gobble up the last nonusers of cell phones with their broad service approach, they have overlooked a market: people seeking a personalized cell phone experience.
Now, 2 out of 3 Americans own a cell phone. But as that percentage approaches 75 to 80 percent, the pool of new customers dries up.
The new niche carriers are trying to snap up some of the people who have yet to buy a phone and also lure away from the big firms those customers who yearn for a phone experience that caters to their tastes.
"The carriers are realizing to get the last customers they need to offer more than just a mass approach," said Marina Amoroso, an analyst with the Yankee Group. "The companies offer everything, but it's not customized to really penetrate the rest of the market."
She said the virtual networks are using an approach similar to that used by cable TV companies to "reach out and tap a group of people ignored or underserved by wireless."
Virtual networks generate about $3.5 billion in annual revenue from about 12 million subscribers in a country of 200 million cell phone users. Amoroso predicts the market, with about three dozen established or soon-to-be started companies, will grow to 29 million in 2010 and about $10.7 billion in revenue.
The rise of niche carriers is being assisted by companies like San Francisco's Visage, a carrier support company that handles billing and customer service. Visage, which has signed deals with ESPN and Voce, a luxury-brand carrier, has made it easier for newcomers to start operations with as little as $50 million in seed money.
Advances in handset and network technology have also nudged many brands to take the plunge. These advances allow new carriers to show off a wide range of data-intensive services and content like video and music.
"The wireless phones have evolved to a place where they're not just about talk anymore," said Manish Jha, general manager of Mobile ESPN. "The phones can deliver a really good wireless content experience and that has piqued the curiosity of content providers."
ESPN a major player
Much of the expected growth in this market is predicated on the success of names like ESPN, which is set to start nationally on Feb. 5 and boasts one of the largest customer bases of all the new services. Close to 100 million people watch the company's cable channel, visit its Internet site, listen to its radio station and read its magazine at least once a week.
The mobile service, which will include a jet-black phone, will serve up video clips, statistics, player information and scores using a sports-centric interface.
While Mobile ESPN will clearly try to duplicate its cable television success, Amp'd is hoping to become the MTV of the virtual carriers. To do that, it has struck a partnership with MTV and Universal Music to bring videos, music, games and other content to the teenage and young adult set. The service, which starts this month, will be just the second to offer downloadable music and the first to price it at 99 cents per song.
Helio promises to bring a slew of advance features that Americans technophiles only have read about or seen on trips to Asia. This spring, the company will offer new devices that have unavailable in the United States and services including satellite television beamed directly to a phone.
Premium price is asked
While the personalized operator market also includes low-cost prepaid carriers like 7-Eleven's wireless service, the latest wave includes many companies looking to charge a premium for both the handsets and the cell phone plans. ESPN, for example, plans on pricing their phones at $399 and its most basic service at $65 a month. No one tops Voce, a luxury brand that offers service for a $1,500 sign-up fee and $500 a month.
The higher prices underline the larger challenge facing the new carriers: customer acquisition. Will people be willing to pay for these niche services, and will there be enough business to go around?
It typically costs a carrier about $300 to acquire a new customer. That financial burden now falls to the upstarts, who may have some brand awareness but will still need to work at snagging customers, many of whom have already signed contracts with other carriers.
"It's definitely going to be harder than it sounds to acquire millions of users in the U.S.," said Gartner analyst Michael King. "It's going to be a lot of work, and you can't make light of that."
The challenges don't faze the new carriers, who say you don't need gaudy numbers to get off the ground. The beauty of being a niche operator is that you can make plenty of profit with a small but high-paying customer base, said Peter Adderton, founder and chief executive officer of Amp'd Mobile.
"We don't need tons and tons of people," he said. "We're more interested in quality over quantity and saying we have good customers, low (turnover) and high revenue per user."
While the growth of virtual operators may ultimately cost the established national carriers some of their individual customers, the operators have increasingly been giving their blessings to these ventures. Sprint has historically led the way, but Verizon and Cingular have recently followed suit, signing wholesale agreements with various startups.
The partnerships, once viewed with extreme skepticism, have become a popular way to expand a carrier's customer base without shelling out the marketing dollars required to do so. Sprint, for example, has 4.6 million wholesale subscribers, a tenth of its total.
The only issue, said David Bottoms, Sprint's vice president of strategic partners, is finding the right partner, someone who won't steal away a significant number of your customers.
"ESPN, for example, is going after high-end customers, and in some cases there is a risk of cannibalization, but we expect they will take our new fast data network and really showcase our ability with streaming video and clips," he said.
Analysts said the string of new carriers offering service is likely to continue. Wal-Mart and Apple have been rumored to be considering a move into mobile, but Amoroso said there are other media or retail companies that could easily move into the virtual carrier market.
The key to success won't be in simply tapping a well-known brand name, said King, the analyst. It's about delivering truly unique service.
"It's going to completely depend on the operator's ability to set expectations and then really provide a branded service that isn't just brand name on a phone," said King.
E-mail Ryan Kim at rkim@sfchronicle.com.
Page C - 1
Virtual networks go after high-end mobile customers
Ryan Kim, Chronicle Staff Writer
Monday, January 2, 2006
Back in the late 1970s, ESPN and a host of other budding channels rode in on cable and flooded the nation's television airwaves that had been dominated by a handful of national broadcasters.
Today, ESPN is making another push, this time with cell phones, to offer subscribers a personalized, sports-focused alternative to the big national cell phone operators. And just like at the dawn of cable, ESPN has company -- other rivals poised to take on the established likes of Verizon, Sprint and Cingular.
Pretty soon, a sports fan will be able to watch SportsCenter, follow a fantasy football player and get live updates of NFL games. A hip-hop aficionado will tune into the latest video from Kanye West. Techno-geeks could watch live satellite television on the go while Spanish speakers could send text messages and get customer support services in Spanish. It will all happen on specially designed cell phones.
Mobile ESPN is part of a new breed of cell phone carriers called mobile virtual network operators that buy wholesale minutes and data from the large cell phone carriers and then use them to sell cell phones and service for a niche audience.
Theoretically, the partnership helps a cell phone carrier expand its customer base at minimal cost while opening the door to new opportunities for profit for the network operator.
There's a potential downside: The niche operators are banking that enough subscribers will buy the new product, which can cost as much $400 for a handset and $65 for monthly service.
In addition to Mobile ESPN, the companies set to begin service this year include ESPN's parent company, Disney; Amp'd, an Irvine cell phone carrier that goes after young people; and Helio, a Los Angeles partnership between EarthLink and SK, the leading cell phone company in South Korea.
They join established companies like Virgin, the first large virtual operator, prepaid calling plan Tracphone Wireless and Movida, a new service for Spanish speakers.
The companies say that as the big national cell phone carriers try to gobble up the last nonusers of cell phones with their broad service approach, they have overlooked a market: people seeking a personalized cell phone experience.
Now, 2 out of 3 Americans own a cell phone. But as that percentage approaches 75 to 80 percent, the pool of new customers dries up.
The new niche carriers are trying to snap up some of the people who have yet to buy a phone and also lure away from the big firms those customers who yearn for a phone experience that caters to their tastes.
"The carriers are realizing to get the last customers they need to offer more than just a mass approach," said Marina Amoroso, an analyst with the Yankee Group. "The companies offer everything, but it's not customized to really penetrate the rest of the market."
She said the virtual networks are using an approach similar to that used by cable TV companies to "reach out and tap a group of people ignored or underserved by wireless."
Virtual networks generate about $3.5 billion in annual revenue from about 12 million subscribers in a country of 200 million cell phone users. Amoroso predicts the market, with about three dozen established or soon-to-be started companies, will grow to 29 million in 2010 and about $10.7 billion in revenue.
The rise of niche carriers is being assisted by companies like San Francisco's Visage, a carrier support company that handles billing and customer service. Visage, which has signed deals with ESPN and Voce, a luxury-brand carrier, has made it easier for newcomers to start operations with as little as $50 million in seed money.
Advances in handset and network technology have also nudged many brands to take the plunge. These advances allow new carriers to show off a wide range of data-intensive services and content like video and music.
"The wireless phones have evolved to a place where they're not just about talk anymore," said Manish Jha, general manager of Mobile ESPN. "The phones can deliver a really good wireless content experience and that has piqued the curiosity of content providers."
ESPN a major player
Much of the expected growth in this market is predicated on the success of names like ESPN, which is set to start nationally on Feb. 5 and boasts one of the largest customer bases of all the new services. Close to 100 million people watch the company's cable channel, visit its Internet site, listen to its radio station and read its magazine at least once a week.
The mobile service, which will include a jet-black phone, will serve up video clips, statistics, player information and scores using a sports-centric interface.
While Mobile ESPN will clearly try to duplicate its cable television success, Amp'd is hoping to become the MTV of the virtual carriers. To do that, it has struck a partnership with MTV and Universal Music to bring videos, music, games and other content to the teenage and young adult set. The service, which starts this month, will be just the second to offer downloadable music and the first to price it at 99 cents per song.
Helio promises to bring a slew of advance features that Americans technophiles only have read about or seen on trips to Asia. This spring, the company will offer new devices that have unavailable in the United States and services including satellite television beamed directly to a phone.
Premium price is asked
While the personalized operator market also includes low-cost prepaid carriers like 7-Eleven's wireless service, the latest wave includes many companies looking to charge a premium for both the handsets and the cell phone plans. ESPN, for example, plans on pricing their phones at $399 and its most basic service at $65 a month. No one tops Voce, a luxury brand that offers service for a $1,500 sign-up fee and $500 a month.
The higher prices underline the larger challenge facing the new carriers: customer acquisition. Will people be willing to pay for these niche services, and will there be enough business to go around?
It typically costs a carrier about $300 to acquire a new customer. That financial burden now falls to the upstarts, who may have some brand awareness but will still need to work at snagging customers, many of whom have already signed contracts with other carriers.
"It's definitely going to be harder than it sounds to acquire millions of users in the U.S.," said Gartner analyst Michael King. "It's going to be a lot of work, and you can't make light of that."
The challenges don't faze the new carriers, who say you don't need gaudy numbers to get off the ground. The beauty of being a niche operator is that you can make plenty of profit with a small but high-paying customer base, said Peter Adderton, founder and chief executive officer of Amp'd Mobile.
"We don't need tons and tons of people," he said. "We're more interested in quality over quantity and saying we have good customers, low (turnover) and high revenue per user."
While the growth of virtual operators may ultimately cost the established national carriers some of their individual customers, the operators have increasingly been giving their blessings to these ventures. Sprint has historically led the way, but Verizon and Cingular have recently followed suit, signing wholesale agreements with various startups.
The partnerships, once viewed with extreme skepticism, have become a popular way to expand a carrier's customer base without shelling out the marketing dollars required to do so. Sprint, for example, has 4.6 million wholesale subscribers, a tenth of its total.
The only issue, said David Bottoms, Sprint's vice president of strategic partners, is finding the right partner, someone who won't steal away a significant number of your customers.
"ESPN, for example, is going after high-end customers, and in some cases there is a risk of cannibalization, but we expect they will take our new fast data network and really showcase our ability with streaming video and clips," he said.
Analysts said the string of new carriers offering service is likely to continue. Wal-Mart and Apple have been rumored to be considering a move into mobile, but Amoroso said there are other media or retail companies that could easily move into the virtual carrier market.
The key to success won't be in simply tapping a well-known brand name, said King, the analyst. It's about delivering truly unique service.
"It's going to completely depend on the operator's ability to set expectations and then really provide a branded service that isn't just brand name on a phone," said King.
E-mail Ryan Kim at rkim@sfchronicle.com.
Page C - 1
# posted by HST Overdrive @ 9:10 AM 
