Analyst Angle: MVNO Handset Strategy

Editor’s Note: Welcome to our Monday feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Jupiter Research’s Julie Ask, iGR’s Iain Gillott and Telephia’s Levi Shapiro.
Now that Amp’d is officially dead, the post-mortems can begin. Amp’d did a tremendous number of things right, but clearly did some big things wrong-but where do handsets fit in the picture? The short answer is that, in Amp’d Mobile’s case, handsets were not a significant cause of the MVNO’s failure. But bad handset pricing and lack of variety was a major contributor to ESPN Mobile’s downfall, unique phones are a key competitive advantage for Helio and Virgin Mobile, and the lack of strong phones is a key danger point for Disney Mobile.
First, it is important to set the competitive stage: Any MVNO right off the bat is at a disadvantage as it has to compete with the wireless carrier brands entrenched in the public consciousness-carriers that not only own access to spectrum but are also building out content and handset portfolios of their own. Carriers can demand steep volume discounts on handsets, and-since they launched an average of 37 handsets each last year-that leaves plenty of room in their lineup to target niche markets. Finally, carriers have seemingly unlimited advertising budgets-Advertising Age lists AT&T’s yearly spend at $3.3 billion, behind only Proctor & Gamble and ahead of General Motors and Time Warner. Verizon Communications is next on the list with $2.8 billion spent on ads, and Sprint Nextel makes the top fifteen with a $1.7 billion budget. Not all of the money from each of these telecom behemoths is earmarked for wireless, but a lot of it is. And any significant percentage of, say, $3.3 billion is a ridiculously large number.
Mobile ESPN died primarily due to a misguided sense of self-importance: The company believed that its brand and sports content was all-powerful. As such, the common in-house wisdom was that sports fans would kick out their current wireless carriers and race over to Mobile ESPN in time to watch the latest sports video clips and other such content. With this incredibly na