Part Two: Growing from Service Provider to Virtual Operator

So how should a newcomer start in the business?

As an example, lets take a fictional company called FastForward that entered the mobile telecom market a couple of years ago. FastForward was a leader in its own business area and the brand was well known. As with most newcomers, FastForward didn’t want to invest in expensive network infrastructure. The quickest and easiest way to enter the business was to start as a Service Provider.

FastForward wanted to have subscribers of its own, renting network capacity from a Network Operator. This way the company was able to use its own brand and customer relationship program, and to focus on specific market segments.

The business set off well and now FastForward wants to expand. But as a Service Provider, FastForward is completely dependant on the service offering, pricing and technology of the Network Operator. This limits the marketing opportunities and pricing policy of FastForward. In addition, the company has to compete against Network and Virtual Operators that have more capacity to tailor their own services.

Therefore FastForward has started to look into a more enhanced business model, that of Virtual Operators. The company is ready to invest in its own network elements, such as switches, IN and billing infrastructure. This way it would have more freedom to tailor its own services and prices. With its own gateway switches the company would also be able to interconnect with several networks and charge for terminating traffic – an important revenue stream in today’s telecom business.

As a Virtual Operator, FastForward can actually take advantage of being both a Service Provider and an Operator with the ability to rent network capacity to other Service Providers. The latter enables the Virtual Operator to get additional revenues and return on the investments. Thanks to regulations, it is now easier to rent network capacity and make contracts with access networks.  .