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Wireless Says “MVNO” To Resellers, Residential Broadband Just Says No

A funny thing happened at the wireless-industry trade show that the big carriers blew off: I didn’t lack for wireless services to write about.

That’s not because a vast new crop of wireless networks has sprouted alongside those of AT&T, Sprint, T-Mobile, Verizon and regional firms like U.S. Cellular. Instead, the services I discovered at the CTIA 2013 show in Las Vegas and others like them resell those companies’ networks, offering options that their larger and older competitors can’t or won’t.

For instance, Redwood City, Calif.-based Zact will let users build their own plan, selecting fine-grained allotments of voice, text and data usage–for instance, 100 minutes of talk time, 250 text messages and 1.5 gigabytes of data would run $42.11 before taxes and fees–and adjusting those totals from their phones anytime they want.

In a similar vein, Republic Wireless undercuts its network provider Sprint’s pricing–it only charges $19 a month–by offloading not just data use but voice calling and texting to WiFi whenever possible.

This happens often enough that the wireless industry has an undigestible abbreviation for the practice: MVNO, short for Mobile Virtual Network Operator.

And all of this has happened without any regulation compelling carriers to share their networks. They just do it on their own.

That’s not the case with a different telecom market: residential broadband.

Almost no cable companies have other firms reselling their bandwidth, aside from EarthLink’s deal with Time Warner Cable (AOL had a similar arrangement with TWC that ended this winter). And while phone companies still have some Internet providers reselling their DSL, that population has dwindled since a) the government stopped requiring “linesharing” in 2005 and b) most DSL services have not been able to keep up with the faster speeds of cable and fiber-optic services like Verizon’s Fios.

But shouldn’t the same economic rationale–it can be more profitable to let somebody else resell your service than to develop the expertise, systems or marketing needed to reach a market that third party already knows–apply to wired broadband as well as wireless?

Ross Rubin, an analyst at Reticle Research, said it’s a matter of one market having just enough rivalry and the other having almost none.

“Wireless carriers are more incentivized to do it because they have more competition,” he wrote in an e-mail. “If they don’t make their network available, someone else will and get the additional revenue.”

Fast Net News editor Dave Burstein made the same point: “In landline, with only two players, the odds were pretty good that the ‘MVNO’ customer would otherwise have been a full fee paying customer of the same carrier,” he wrote. “In wireless, with 4 and previously 6 carriers, it’s less likely you are cannibalizing your own.”

Harold Feld, a vice president with Public Knowledge, pointed to historical issues: Resale has been part of telecom since the Bell System break-up and that carried over to wireless, but cable wasn’t like that.

“Cable operators maintained iron control over their platform from end to end,” he wrote. “When they added broadband, they did their best to bring over the cable world rules–including a refusal to open up the platform even if they could make more money.”

And when the FCC reclassified DSL as an “information service” in 2005, phone companies could play by cable rules.

“I could point to technical things like the fact that wireless carriers roam with each other, so they are more used to the concept of sharing facilities and reselling each other’s capacity,” Feld said. “But the reality is we used to do that on the copper side with DSL. Telcos stopped allowing DSL resellers on their systems after 2005 because of a change in regulations, not because of a change in technology.”

Feld’s e-mail got me thinking of another possible factor: Wireless has no equivalent of wired broadband’s triple-play plans. And those combinations of Internet, TV and phone services don’t just bring higher profit margins and make it that much harder for customers to leave–thanks to the difficulty of getting name-brand TV content, they’d be tough for a would-be reseller to match.

Not all broadband providers resist the idea of wholesaling their connections–for instance, one of the few DSL providers to thrive after the end of mandated linesharing does just that.

Santa Rosa, Calif.-based–which itself relies on AT&T phone lines rented under terms that CEO Dane Jasper called “challenging”–leases out its network to such ISPs as DSLExtreme and (Jasper said Sonic’s new, exponentially faster fiber-optic service remains, “too tiny at this point to interest multiple ISPs”.)

That’s good news for the people living in Sonic’s three regional markets in California. For most of the rest of us, we can protest crummy service from a local-monopoly broadband provider by farming out as much of the job as possible to other companies–for instance, moving our e-mail to a Web-mail service and maybe even handing over something as basic as Domain Name System routing to a third party like OpenDNS. But if the connection itself is slow or unreliable, we may just have to live with it.


Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.