ANTenna Blog -- Networking & Communications

Smiley faces are in scant supply at the executive offices of Disney Mobile, which announced recently that it will close up shop. If marketing maven, Disney could not build a viable MVNO business, can anyone else?

The idea of Mobile Virtual Network Operators (MVNO) arose a couple of years ago. Cellular network suppliers, such as Sprint, wanted to open their networks to third parties who could use cellular services to enhance their brand. Companies, such as Disney, viewed these new services as a way to tighten their bond to key customers, reinforce their brand and develop another revenue stream.

This business model is failing because it did not account for a few seemingly obvious factors. First, cellular network services are being commoditized. To expand their market reach, carriers have been dropping pricing. If they are selling these services with low margins, how likely is it that a third party will be able to make any money off of cellular services?

Second, companies like Disney have little to no expertise in the telecom marketplace. No one is recommending that wireless carriers start opening theme parks or begin creating animated features. Why would any company view the wireless business as an easy revenue stream? To have a chance to develop a viable MVNO service, there must be a synergy between an MVNO’s core business and cellular services. The only companies with such a synergy are cable service suppliers, who are already waist deep in the telecom market. Other ventures, such as those by Disney subsidiary unit ESPN, also seem to be dicey propositions.

The Disney disaster underscores the need for medium and small businesses to be skeptical of MVNOs’ promises. Disney gave its customers until December 31 to find another cellular service provider. A few months notice is suitable for consumers, but businesses need more time to find the right carrier. Unless a few MVNO initiatives are wildly successful, medium and small businesses should steer clear of this market or else they could find themselves like the Disney execs, fine tuning their resumes after getting kicked out of the Magic Kingdom.

Is your company using MVNO services? What has your experience been like? Are you worried that the company may close up shop ala Disney?