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Guest Column

MVNOs and the Fragmentation Challenge

Paul Schaut
President & CEO
Tira Wireless

MVNOs (mobile virtual network operators) have quickly become an important force in the rapidly growing mobile marketplace. As they emerge and evolve, they are creating significant opportunities – and challenges – in the area of mobile content delivery.

Since MVNOs leverage their distinctive brands to differentiate themselves from other mobile service providers, these companies offer very specific devices targeted to particular subscriber demographics as well as customized mobile content. As a result, however, MVNOs are contributing to one of the most significant hurdles facing mobile content publishers today: device fragmentation.

Even before the presence of MVNOs, fragmentation has been a major concern for content providers. To launch a mobile Java game for broad distribution for example, a publisher has to create in excess of 150 different versions of that game. With the addition of MVNOs, this number increases substantially. Ultimately, to deliver applications to this increasingly fragmented mobile market and capitalize on the growing revenue opportunities, advanced automated porting capabilities are required to meet the demands of both old and new devices and services.

MVNOs Making Inroads in the Mobile Market

While the MVNO trend began in Europe, MVNOs have been making significant headway in North America. One example is Virgin Mobile, a company that has partnered with two CDMA carriers to launch mobile services in the U.S. (Sprint) and Canada (Bell Mobility). By March of 2004, Virgin Mobile had already passed the 1.75 million subscriber mark in the U.S., the fastest growth rate of any U.S. wireless service provider and a number that continues to grow. A number of other companies are considering launching mobile virtual network operations including The Walt Disney Co. (who also owns 80 percent of ESPN, the sports cable channel that recently announced its intention to launch ESPN Mobile) and 7-Eleven with its “Speak Out” service.

ARC Group estimates that subscribers to MVNO services will account for 195 million of the world’s 1,895 million mobile subscribers by the end of 2006, which translates into 10 percent of all mobile subscribers. Annual average growth rate (AAGR) of subscribers to MVNO services is averaging 127 percent versus a 17 percent AAGR for mobile subscribers as a whole.

Let the Games Begin

A number of MVNOs focus on the youth market, which represents the single, largest untapped market for mobile services and a lucrative market for mobile games in particular. Global revenues for mobile games in 2003 were $1.3 billion, a number anticipated by Informa Media to reach $6.6 billion worldwide by 2010. At the same time, projections on the number of available Java titles range from 2,000 games (Wireless Gaming Review) to 15,000 combined games and applications (Nokia). Nokia also estimated that in 2003 more than 10,000,000 Java games were downloaded per month worldwide.

While differentiation in handset and content design represents the all-important competitive advantage for MVNOs going after the youth market (or any other market niche), it results in increased fragmentation and thus drives up the costs and time it takes for content providers to get an application to market.

Many content provider budgets do not take into account the added demands placed by the distinct devices and branding requirements of MVNOs. As a result, the incremental price tag associated with custom development could ultimately hamper an MVNO’s access to mobile game opportunities, especially where the customization needs are too demanding or the porting costs too high. That means both MVNOs and content providers could easily miss out on potential revenue streams.

The Sum of the Parts

Given the number of MVNOs with smaller subscriber bases and the selection of unique devices that increase porting requirements, content providers may be hesitant to create games for this market.

If one looks at the hardware elements alone, there are a number of parts of a mobile device’s physical structure that can influence an application’s functions. Many of these are determined by economics and technology. In some cases, the choice is driven by aesthetics. Hardware interfaces, such as screen size, color and screen configuration, among other factors, influence how an application is seen and used.

MVNOs and other operators, in their quest for differentiation, also demand custom back office environments for billing, or require publishers to meet custom application requirements. Once the branding needs of a Disney or a Virgin are thrown in, this adds yet another layer of complexity for developers. For example, MVNOs will often demand the simple addition of a splash screen or the elimination – or addition – of key phrases or words to meet specific audience needs.

With more than 300 different Java devices plus 110 different mobile operators with Java programs (and still counting), the development challenges are immense. When combined with multiple languages and other customization requirements, content providers face a significant challenge in taking advantage of the considerable market opportunities.

If the logistics alone appear too much to bear, the costs associated with them are even more daunting. For a mobile game to become a best seller (i.e. more than 100,000 copies) it must be available in all of the leading global markets, in at least five different languages, and on a variety of different mobile phones. It may also need to tie into leading mobile operator back offices for billing and other systems. All of this requires rewriting elements of the game source, and then getting each version passed through the appropriate mobile operator’s certification program. Considering the costs associated with each application development effort, addressing MVNO needs may fall well down the wish list.

While porting budgets alone can easily reach into the millions, this is only the tip of the iceberg. Basic porting costs generally do not factor in specific operator requirements for billing and/or game community APIs or operator branding.

Reducing the Costs and Impact of MVNO Driven Fragmentation

There are two approaches for content providers to tackle this increasingly challenging problem: by porting applications internally, or outsourcing porting functions. In either case, the process of porting itself can be performed manually, which can be cumbersome and costly; or through automation using a new generation of products and services such as Tira Jump, designed specifically for porting mobile Java content across handsets, languages and mobile operator requirements. The CDMA Development Group recently awarded Tira Wireless with its 2004 Industry Achievement Award for Innovative Entertainment Technology for its Tira Jump product, recognizing the importance of automated porting solutions for the success of the mobile content market.

Managing an internal porting team provides content providers the control over scheduling and production that many desire. The costs of keeping up with all of the different devices and mobile operator requirements is, however, quite daunting and the ability to scale quickly is limited. Outsourcing offers an increasingly popular way for content providers to achieve the needed scale and flexibility to meet complex delivery demands of the mobile operators and MVNOs. It has, however, become a challenge to find resources with the necessary global testing facilities as well as the ability to meet high quality control standards. Inconsistencies between providers that perform manual porting services abound since individuals will often approach the process of creating code differently, resulting in different end user experiences.

Automated porting technology solves these problems facing content providers. Whether it is keeping up with device and operator requirements, or managing the incremental assets and porting process associated with dealing with multiple MVNO requirements, automated porting technology can provide significant benefits. For either the internal or outsourcing option, the resources required to manage the vast quantity of devices and applications are immense without the use of automated porting software. This technology also plays a major role in driving down development costs, speeding time to market and expanding availability of mobile games.

Breaking Down Device Fragmentation Barriers for MVNOs

Automation provides content providers with the device information and necessary workflow engines and databases to perform the ports and manage the growing number of builds. It also significantly reduces time to market and improves overall quality control. This opens the door for both large and small-scale content providers to compete on the proverbial level playing field. It also helps to break down device fragmentation barriers for MVNOs by providing greater access to more mainstream games at competitive prices.

While the entry of MVNOs into the mobile marketplace is viewed by some as a disruption to the status quo, it is also providing more opportunities for content providers and developers to reach broader markets – as long as the infrastructure is in place to port applications to multiple devices quickly and cost-effectively. With the power and performance available with today’s automated porting tools, content providers are slowly but surely finding effective ways to conquer the ever-growing fragmentation challenge that MVNOs are now also contributing to.

About the Author

With more than 22 years of diverse and extensive technology experience, Paul has served in a number of sales, marketing and executive management capacities during his career. Prior to joining Tira Wireless Paul served as President and CEO of Performaworks, a Goal-Driven Performance Management™ software company where he successfully ushered its growth and eventual sale to Workscape in March, 2004. Prior to Performaworks, Paul served as President and CEO of Engage, where he led the company through a dramatic growth period, including the integration of ten acquisitions, worldwide expansion, closure of private funding and a successful initial public offering.

Other executive management positions include tenure as Vice President of Strategic Partnering at Open Market. Prior to Open Market, he led the turnaround of an object technology company as Vice President of Sales and Marketing, and was Managing Director in Europe for a Client/Server DBMS System Provider (based in the UK for two years). Schaut served for many years in business development and sales roles for software and hardware technology companies, ranging from start-ups to large-sized companies.

Paul currently serves as a Board Trustee for the Massachusetts Software Council, is a Director of several private software companies, as well as a member of the CommonAngels® investment group.

Paul has lived and worked throughout the United States and Europe. He graduated from San Jose State University where he earned a Bachelor of Science degree in business administration.



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