New mobile approaches got a reality check in 2007

The last year was a dream come true for some and a nightmare for others

Sprint's soft launch of WiMax in Chicago and the Baltimore-Washington, D.C., area went ahead before the end of the year as planned, and the carrier said it still plans commercial service in the first half of 2008. But WiMax is starting to generate more interest for emerging markets than for advanced economies, including from Cisco Systems, which acquired Navini Networks in January. The company said its main focus with WiMax is to get broadband widely deployed in countries that don't have enough wired infrastructure.

The uncertainty surrounding Sprint and its plan is affecting the image more than the reality of WiMax, said IDC analyst Godfrey Chua.

"It's not problems with the technology, it's problems with the company," Chua said. "The momentum we're seeing behind WiMax in the rest of the world continues."

Mobile virtual network operators (MVNOs), which resell mobile capacity from established carriers, pulled in a lot of investment money in 2006 but suffered some high-profile failures in 2007.

At the end of July, youth-focused Amp'd Mobile shut down after it attracted nearly 200,000 customers in less than two years but failed to collect enough of the revenue it was due. In September, Disney said it would shut down its specialized service for families by the end of the year and look to offer its features through an established carrier. Helio, a money-losing joint venture of SK Telecom and EarthLink, stayed afloat thanks to $270 million of added investment from SK after EarthLink decided the MVNO game was too rich for its blood.

MVNOs and their supporters often didn't realize what an uphill battle they faced, according to analysts. They needed to build up in months the kinds of billing systems and distribution networks that traditional carriers had taken years to refine, and frequently they fell short. Meanwhile, trying to make a profit by buying minutes and bytes from another carrier and reselling them is hard even for a well-run company, analysts said. The foggy future at Sprint, which provides the underlying network for most MVNOs in the U.S., cast yet another cloud over the business.

GreatCall, a startup that launched the Jitterbug service for older cell-phone users last year, learned these lessons the hard way. The company changed billing companies twice before finding a provider that worked, said Arlene Harris, Jitterbug's founder, chairman and chief strategy officer. It also struggled to get funding, especially after other MVNOs started folding.

The service now has "tens of thousands" of subscribers and is growing, Harris said.

"Everything is working well," Harris said. "But I have to tell you, it's been very hard."

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Stephen Lawson

IDG News Service
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