As one of the largest MVNOs files for Chapter 11 protection, Philip Berne takes a look at the remaining MVNOs, and the business model as whole. Read on for our full take.
Why Amp'd is bankrupt
On June 1st, Amp'd Mobile filed for Chapter 11 bankruptcy protection, citing rapid growth as a disruptive element to their back-end infrastructure. In the days following, a more complicated picture emerged, implicating Verizon Wireless, the carrier from which the MVNO bought network time wholesale, in a strong-arm tactic to recover more than $30 million that the 200,000-member network owed the nation's second largest carrier.
Amp'd's problem wasn't its lack of customers. The problem was that customers weren't paying. A full 40% of Amp'd's 200,000 subscribers had missed payments, and the total amount owed was roughly $2 million, or a full month's payroll expenses, according to court documents filed by the MVNO in their bankruptcy case. So, the problem was mismanagement on one level, and poor customer credit screening on another. Hopefully, this isn't endemic to the MVNO industry as a whole. Still, it begs the familiar question: are MVNOs a viable option in today's marketplace?
We think so, if they can offer something the four major carriers don't offer. For the most part, this means offering better pricing, better handsets and equipment, or better services. Frankly, we rank these elements in just that order, and think that MVNOs that offer deep discounts over the networks will fare best (as in Virgin Mobile), and networks that rely on unique content and services will have the hardest time (as in Amp'd, and to some extent Boost Mobile and Helio).
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