The New Breed of Cell Phone Companies

Yesterday we talked about how Americans are becoming increasingly comfortable with technology. One sign of this is the spread of a new type of cell phone company that will sell you a cell phone and a calling plan anytime, anywhere.

It's all about reselling. Mobile virtual network operators resell phones from the leading manufacturers and resell network airtime from the major carriers. Most sell airtime at prepaid flat rates that are usually less than the rates charged by the major carriers to customers who go over their allotted minutes. Such plans are especially appealing to customers who don't use their phones much, who have bad credit, or who simply don't want a monthly bill. Mobile virtual network operators are selling their phones in such diverse locations as convenience stores, gas stations and discount stores.

Currently, Virgin Mobile is one of the biggest players in this space, but other companies, like Disney and ESPN, have their eye on the market as well. Some of these operators try to appeal to niche markets and customers' sense of social identity. Working Assets Wireless donates money to peace, environmental, social justice and other (generally liberal) causes, whereas Sienna Communications supports "needy Catholic and pro-life charities" (even though they resell airtime from Sprint, one of the services they accuse of "supporting abortion, pornography or homosexuality"). Movida focuses on Hispanic customers who don't speak English. ESPN phones will offer scores that scroll across the bottom of screens.

Niche markets might just be the most interesting aspect of virtual operators. It's a sign, after all, that cell phones have become an everyday necessity. Says Gowri Shankar of Wireless Service Operation, "Phones are moving from utility to lifestyle."

Remarkably, the pool of cell phone customers is large enough to support virtual operators. Thirty-five percent of Americans do not own a cell phone, and competition for the 13 million Americans who get their service through virtual operators is fierce (after all, they aren't tied down by contracts, and many may want to replace their phones after a year or so anyway). Virtual operators are expected to see a 42% increase in new business between now and the end of 2006.

Sources: The New York Times, MacNewsWorld