MVNOs Set Sights on Mobile, High-Data Applications to Fend Off Operator Competition and Shrinking Connectivity Revenue Share

By Elizabeth Stokes | 3Q 2024 | IN-7469

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Mobile Virtual Network Operators (MVNOs) are increasingly targeting high-data throughput applications as connectivity revenue shares diminish and video-led, mobile Internet of Things (IoT) use cases emerge. The market-wide transition flips the script on the original MVNO playbook that had virtual operators serving only the small, low-data IoT applications that Mobile Network Operators (MNOs) disregarded.

The high-throughput trend in the IoT MVNO market was solidified in February 2024 when 1NCE announced its High Data IoT service. The offering supports high-data devices like cameras for a flat rate of US$5 per Gigabyte (GB), mirroring the fixed, low-data pricing scheme that made the company famous. The announcement comes as other MVNOs like Wireless Logic and its recent acquisition, Webbing, have become known for their high-throughput bias. However, 1NCE's recent announcement, which is so counter to its reputation as a low-data IoT partner, signals that more players are planning to shift gears.

MVNOs' core products, connectivity and Connectivity Management Platforms (CMPs), continue to make up a smaller portion of total IoT MVNO market service revenue. According to ABI Research's IoT MVNOs Market Update: Services, Private Networks, and Supplier Analysis report (AN-5887), connectivity and CMP service revenue share is expected to decline by a 2.2% Compound Annual Growth Rate (CAGR) between 2023 and 2030, pushing some MVNOs to support high-data throughput applications with more tenable Average Revenue per Unit (ARPU) metrics. Several market forces have paved the way for such a pivot.

First, the introduction of the Embedded Subscriber Identity Module (eSIM) allowed MVNOs to offer dynamic, carrier-agnostic connectivity around the world. With this technology, virtual operators can now support large, global IoT deployments with more demanding coverage and connectivity requirements. Second, as eSIM became a staple MVNO offering, advancements in video-based monitoring created a new class of high-throughput applications that require flexible cross-country and international connectivity. New high-data devices like smart dash cams in commercial trucks, for example, require an operator that can offer consistent connectivity as they travel across different carrier coverage domains.

Equipped with eSIM and looking for higher-yield applications, MVNOs found their perfect match in these mobile, video-led, high-data use cases. These applications soon became an opportunity for virtual operators to flex their eSIM offerings and were profitable enough to stave off connectivity commodification.

Addressing high-throughput applications is a sensible move for MVNOs as they look to diversify their revenue sources. However, MVNOs will need to sharpen their high-data strategies as 5G IoT applications (slowly) emerge.

Most of the video-led applications that MVNOs are targeting rely on Long Term Evolution (LTE) connectivity. Given that the network type has almost equal availability around the world, it is easy for virtual operators to offer customers consistent international LTE coverage. However, more of these video-led applications will eventually turn to 5G, potentially disrupting MVNOs' value proposition. Global roaming for 5G is not yet established-the global rollouts have been too uneven for MVNOs to offer the same seamless, international coverage as they do for LTE connectivity. The slow-starting adoption of 5G could leave MVNOs unprepared if these high-data applications soon make the switch. Additionally, even if the rollouts become more equal and MVNOs can offer more international 5G support, virtual operators should prepare to meet greater resistance from their MNO partners. Operators have heavily invested in 5G and are eager to prove its success, and some will attempt to monopolize 5G IoT use cases, even if they have historically viewed the IoT as a less-than-profitable venture.

In light of these concerns, IoT MVNOs should be very discerning about which high-data applications they target, knowing that 5G could alter their abilities to serve certain international use cases and will result in intense competition from highly motivated MNOs. MVNOs' instincts are correct in that they have a unique advantage against MNOs in mobile use cases that require consistent, agnostic connectivity. eSIM technology gives MVNOs an envious advantage against operators that are naturally unwilling to allow mobile customers to hop across competing carriers. Video-led fleet management use cases, for example, are ideal use cases that require both the aggregated international connectivity of MVNOs and the high-throughput expertise they are now developing.

MVNOs should also acknowledge that many virtual operators will fight for the same slice of mobile, high-data applications. MVNOs with well-established, global partnerships with top carriers and Points of Presence (PoPs) to support ultra-low latencies will likely have an advantage as the whole market pivots, seemingly all at once.