The budget mobile virtual network operator (MVNO) industry, whose position has narrowed under pressure from the three mobile carriers’ integrated plans and expanded data quality-of-service (QoS) options, has found a foothold for a counterattack. That comes as the government moves to further lower wholesale fees and extend data QoS options to MVNO plans as well.

On Aug. 3, the telecommunications industry said the Ministry of Science and ICT recently announced its “MVNO 2.0” measures to boost MVNO price and service competitiveness and strengthen operators’ ability to stand on their own.

A key element is expanding the data QoS option. For revenue-sharing (RS) plans, in which MVNOs receive carrier plans at wholesale and split sales revenue, a 400 Kbps QoS option will be applied at no extra cost even to products that previously did not offer it. The data QoS option is a service that lets users keep using data at a set speed even after they have used all of their basic data allowance.

Earlier, the government required the three carriers’ integrated LTE and 5G plans to include at least a 400 Kbps data QoS option to guarantee basic communications rights. As the carriers then extended the QoS option to low-priced 5G plans, assessments emerged that MVNO competitiveness weakened relatively.

QoS gap narrowing, hopes to curb defections to carriers

The MVNO industry sees the expanded data QoS option as a chance to narrow the service gap with mobile carriers. MVNOs recorded a net outflow of 1,895 customers last month, prompting analysis that they were being pushed back by the 5G and LTE integrated plans introduced earlier by mobile carriers.

An MVNO industry official said there had been complaints of reverse discrimination against MVNOs when only the carriers’ integrated plans had the 400 Kbps data QoS option. The latest move means some of the discriminatory elements cited so far have been partly removed, the official said.

For price-sensitive MVNO users, the data QoS option serves as a device to reduce anxiety over overage charges. That is because it can prevent additional fees from being imposed for slightly exceeding the basic allowance. Industry analysis says it could also work as a way to retain users who might be taken by the carriers’ low-priced plans.

The official said users whose data consumption sits at the boundary of their plan can face extra charges with only a small increase in usage. The official said it will help in keeping users who are considering carrier plans that include the data QoS option.

In addition, the government and the three carriers will lower 5G revenue-sharing wholesale rate ratios by up to 3 percentage points depending on the operator and plan. Wholesale fees are the costs MVNO operators pay in return for using the three carriers’ networks and plans.

The MVNO industry is expected to expand 5G plans that are cheaper than the carriers’ based on the lowered wholesale fees. That would include launching products with similar data allowances at lower prices, or increasing data and benefits while keeping existing prices.

Expanded relief on spectrum usage fees is expected to be a more direct support measure for smaller operators. The government will raise the spectrum usage fee relief rate for small MVNO operators to 90 percent from 50 percent. Given an industry structure with low revenue per subscriber and many small operators, it could help reduce costs for individual companies.

Pay-as-you-go QoS policy undecided; full MVNO also a variable

The scope and cost of the data QoS option also remain variables. While the option will be expanded for revenue-sharing plans designed by carriers, a detailed QoS policy for pay-as-you-go (RM) plans designed directly by MVNO operators has not been decided.

An industry official said the sector has repeatedly asked for a data QoS option to be added to pay-as-you-go plans as well. The official said the government’s pledge to encourage wholesale provision on reasonable terms would help, but added that the exact details have not been set and the actual terms must be checked.

“Service-type MVNOs (partial MVNOs)” that the government is seeking to introduce and “independent MVNOs (full MVNOs)” that add traffic management facilities to service-type infrastructure are also cited as cards to strengthen MVNOs’ ability to stand on their own.

At present, most MVNO operators must go through a separate consultation process with carriers or IT vendors to modify plans or billing systems. If partial MVNO and full MVNO models take hold in the market, operators above a certain scale will be able to independently design prices and services and respond quickly to user demands.

In the MVNO industry, the measures are seen as closer to a defensive line to prevent defection to the three carriers than a policy to immediately overturn the market landscape. It also remains to be seen whether wholesale fee cuts will lead to lower consumer prices. Smaller MVNO operators already sell products on thin margins, making it difficult to sharply cut prices further when marketing, customer management and IT costs are considered.

An MVNO industry official said the measures have at least created minimum conditions for competition, but whether subscribers will return is a separate issue. The official said practical conditions must follow to enable MVNO-only pricing and services.