It was such a compelling concept. The idea of big entertainment brands leaping headlong into a mobile business dominated by carriers that had about as much marketing flair as a utility was incredibly attractive. So attractive, in fact, that the people in charge seem to have forgotten some of the basic principles of running successful businesses.

The demise of Amp'd Mobile, which filed for bankruptcy in early June, has shattered the already fragile confidence of the U.S. MVNO sector. It comes just a few months after Disney ripped out the charger of its Mobile ESPN MVNO. And people familiar with the financing terms of other U.S. virtual operators reckon there are more MVNO casualties on the way in the months ahead.

The reasons for Amp'd's bankruptcy are very different from those that led to Mobile ESPN's fall from grace. Amp'd never had a problem signing up subscribers. It just couldn't bill them. Mobile ESPN, on the other hand, simply wasn't able to come up with a compelling customer proposition. Verizon Wireless, Amp'd's major creditor, presumably wanted to throw Amp'd off its network because it thought it wasn't going to get its money however many customers the MVNO signed up. Mobile ESPN's owners pulled the plug on the business because of poor user take-up and, perhaps, as a result of a change in strategy.

Without wishing to drive a wedge between MVNO communities on either side of the Atlantic, it's fair to say that European MVNOs are leading the way in developing viable businesses while their North American counterparts seem to be doing their best to bury the MVNO business model before it takes its first breath.  

Handset + service = a step too far?

The iPhone, which launches this week, could very easily have formed the centerpiece of an MVNO business. Apple would have had few problems securing a network agreement, and it's easy to imagine how it could have bundled Internet access and iTunes downloads into a highly marketable mobile service.

The company chose not to, however, because it had no operational experience in the mobile phone business. Managing a base of millions of customers who need billing every month is very different from running a successful consumer electronics operation.

U.S. MVNOs have no choice but to bundle handsets with their services. The idea of separating the SIM card from the device - which has been central to the evolution of MVNOs in Europe - is alien to U.S. mobile culture, and it has been one of the key factors contributing to the operators' demise because it has forced them to resell phones.

Furthermore, handset strategy is especially important for a content MVNO, because the delivery of content requires advanced 2.5G and 3G devices.

But getting the right handset into the market is probably the most difficult task. Mobile ESPN discovered this to its cost when it launched with just one device. The world's most successful MVNO, Virgin Mobile, has never associated itself with one particular device or vendor, and it sees itself as a handset reseller as much as a virtual op. But an MVNO that has to set up its own distribution channels and strategy simply cannot afford to make its service available on as many devices as a mobile operator because distribution would be too difficult and expensive. And it would make it hard for the MVNO to create its own brand and service proposition.

MVN over and out?

It is hard to see where the U.S. content-MVNO concept goes from here.

Mobile ESPN has changed its business model, having become a sports-information service offered over the Verizon Wireless network. Its approach is not too dissimilar to the UK's Sky Sports, which offered an exclusive mobile TV service via Vodafone (though the period of exclusivity has now ended).

But there might be a market for more niche-content MVNOs. Virtual operators that seem to be having the most success both in Europe and North America are those that serve distinct communities, such as ethnic groups, as opposed to broad categories, like sports fans.

For example, the U.S. has a number of MVNOs - Tracfone, Movida, Azteca Mobile, Dexa and TuYo Mobile - targeting the Hispanic community, offering simple phones and services based mainly on prepaid plans. Like their counterparts in Europe offering services to North African and Asian communities, the MVNOs' services are based on offering bilingual service centers and cheap international calling to friends and family.

As these MVNOs build large, loyal customer bases, it should not be difficult for them to begin offering content services aimed squarely at the profile of their customers. Foreign news sites (text and video) and music, travel and visa services could all be added to the basic voice and text mix.

But these types of MVNO concepts - offering niche services to clearly defined communities - are very different from what the owners of Mobile ESPN and Amp'd had in mind when they plowed money into their startups. The reality is that the target markets for these ventures - sports and youth - are far too broad. Plus, they are core markets for the operators themselves. Even if Amp'd recovers from bankruptcy, it's hard to see how it's going to avoid clashes with its host network operator, which is never going to stop competing for the same types of customers.

MVNO Strategies and Forecasts to 2011

MVNO Strategies 2nd edition provides essential analysis on the developments in the MVNO sector as it undergoes sustained transformation from simple discount orientated approaches to complex multi-niche and micro-segment approaches. This exhaustive study includes detailed analytical and qualitative analysis of the MVNO business opportunity, supported by detailed forecast data to 2011 by country and includes 21 unique country profiles.  For more information, to download your free table of contents and to order your copy, visit www.informatm.com/mvnoreport