Shaking the phone tree

Bill Bennett reports on a new breed of phone company that can be better for businesses.
Vodafone, Telecom and 2degrees dominate New Zealand’s cellular phone market, but they are not your only choices.
Operating below the big names is a whole new class of phone company. In the telecommunications business these organisations are known as mobile virtual network operators or MVNOs.
As the name suggests, MVNOs don’t own mobile phone networks – they piggyback off existing ones (see Box 1). If you choose an MVNO you’ll see all the advantages and disadvantages of the underlying network overlaid with a different kind of relationship – one that is often a better bet for small business owners than dealing with a mainstream cellular company.

Personal service
How different is the relationship? Jonathan Eele, managing director of Black + White, says the first thing you’ll notice when you sign an agreement with his company is the car pulling up in your driveway. He says your relationship with your telecoms company will be a face that you’ll come to know. Eele believes this approach is important to business owners. “After all, it’s how they do business.”
Black + White’s personalised service approach is common in the MVNO world. Eele contrasts it to the relationship a small business account might have with a larger cellular operator. “You might feel loved when you are brought on board, but that might be the last you see of the salesperson.” From that point your relationship with the bigger phone company will be mainly through a remote contact centre he says.
Shannon Fisher, CEO of Australian wholesaler Telcoinabox (see panel), has set up 22 MVNO franchises in New Zealand. He says customer relationships are the key to the business. “It’s a global trend that the SME space is neglected by large carriers. We see a need for tailored services. Our people can go into a business and make valuable suggestions; helping them save money or be more effective from day one.”

What about the prices?
What you won’t see from an MVNO is spectacularly lower call prices. Eele says while they can be cheaper in many circumstances, value is the issue rather than price. The nature of agreements between the smaller phone companies and the network operators doesn’t leave much room for heavy discounting. There are other advantages though; the operators have more motivation and opportunity to deliver value in other ways.
Mark Callander, CEO of CallPlus, says his company has the ability to be far more innovative about pricing.  He says CallPlus often bundles mobile with other services then adds in free calls to certain landlines or free calling between family members or company colleagues. Like many other MVNOs, CallPlus also has the ability to tailor plans to a customer’s specific needs.
Eele says there’s flexibility in Black + White’s billing system too. “We take time to understand a customer’s business then tailor packages to suit. For example, if a customer sells bucketloads to China, we can fix an attractive China call rate for them.”
Fisher agrees flexibility is the key. He says his Telcoinabox franchisees have the ability to tailor rates for their customers’ specific needs. “They don’t have to have ten or so plans on their books then say which one do you want? We encourage them to make valuable suggestions that’ll save customers money. For example, some small businesses still have a fax line, they can get rid of this and we’ll give them a fax-to-email service. They can even get that on a smartphone if they want.”
Billing systems
Consumers may be uninterested in phone company billing systems, but they are important for businesses – especially where costs need to be allocated against jobs and employees. It happens to be one area where MVNOs have a clear advantage over the mainstream carriers. Eele says offering customers clear-cut information about where they are spending money on phone services was the inspiration behind his company’s name. “It’s all there in black and white”.
Eele says Black + White works hard to simplify its billing system. “How the bill is presented is important. Many customers need to break the numbers down, to slice and dice the figures. We give them that and we give them inviting-looking graphics. They can optimise their reports by function or department and, if they want, we can give them a spreadsheet version of the information.”

A low profile, for now
Don’t worry if you haven’t heard of MVNOs yet. They are still a tiny sector in New Zealand and many operate in stealth mode. However, they are starting to gather momentum. If overseas experience is anything to go by, they will grow fast.
Telcoinabox’s Fisher explains why MVNOs tend not to have a high profile and why operators chase the business market. He says his partners mainly sell by word of mouth and personal relationship. “If you want to chase the broad market you have to pump in cash and become a brand. It takes a long time to get a return.”
He says many of his franchisees target the industries and vertical markets they came from using specialist knowledge of how those people use communications.
MVNOs aren’t set to stay small. CallPlus, which recently signed an MVNO agreement with the Telecom XT network, already has a substantial investment in broadband and fixed-line calling. CEO Callander says his company has already done a billion dollars worth of telecommunications business and expects over time to make a similar impact in mobile.
According to the Telecommunications Carriers’ Forum there were 4.7 million mobile connections in 2010 – that’s 108 mobile phone accounts for every 100 New Zealanders. At the time the survey was carried out, MVNOs accounted for considerably less than one percent of the total. The latest figures from IDC suggest they are now about 1.1 percent.
In parts of Europe MVNOs are approaching a 20 percent market share; ten percent seems to be the average. This means even if you’re not looking at shifting your business to a virtual network operator today, you may do in the future.
Bill Bennett is an Auckland-based freelance IT writer.