Another look at the prospect of a WalMart MVNO

Always Low Prices. Always. Four words that could someday enfeeble wireless carriers. For now, the behemoth behind those words, Wal-Mart, sells more wireless handsets than any other retail outlet. In five years could Wal-Mart be selling subscriptions to its own wireless service? What is the likelihood of a Wal-Mart MVNO post-Mobile ESPN? Don’t discount it. Is a Wal-Mart branded wireless VoIP service running over a WiMAX network a laughable proposition? Stifle your chuckles; Engadget once reported this as a fact [1].

 

The case for a Wal-Mart MVNO

 

Two years ago the blogosphere was humming with rumors and speculation about MVNO plans: McDonald’s, Nike, Home Depot and Starbucks were each brought up as the next big brand to launch their own wireless service piggybacking on a wireless carrier’s network. Every list included Wal-Mart [2]. There is no need to make this case explicit: Wal-Mart is the force in retail today. No one can touch the company’s ability to move product because of it’s more than 3,756 stores nationwide. That removes two prime barriers for potential MVNOs:

• Marketing power. Check!

• A location to sign up. Check!

 

MVNOs need to pick a niche. ESPN went after sports aficionados; Disney Mobile goes after protective parents and Mickey-loving youngsters; Picante Movil markets to Latinos. Wal-Mart can market to its 25 million daily customers with a stripped down mobile service centered on the principle of Always Low Prices. Always. WalMart owned its own phone service in Germany (called Mango Mobile) for a few short months before selling off the country’s entire business unit [3]—no word on whether the phone service played a role in the exit.

 

Zee Germans aside, WalMart has been the focus of MVNO watchers for years, so here’s a quick summary of the many bloggers’ and columnists’ commentary on the subject:

 

• PBS’ Robert Cringely: “A prototypical WiMax network can cover up to about 1,000 square miles or the equivalent of 10,000 WiFi hotspots. The area of the continental United States is approximately three million square miles, which suggests that 3,000 WiMax networks could cover the entire country. And it just so happens that between its discount stores, supercenters, Sam's Clubs, and distribution centers, Wal-Mart has 3,756 U.S. locations, all of which are presently served by a hearty network.”

• Adam Guy, Compete: “Wal-Mart has already been in the ISP business.  Not sure if they are still doing it, but there was a time when you could get $10 dial up service from Wal-Mart.  I think they were just reselling Juno or Netzero or one of those services, but it was basically an MVNO deal for dial up Internet. WalMart lets people in RV’s and campers stay in their parking lots overnight as a way to make sure that road trippers buy all their crap there. You can basically drive all around the U.S. in your RV and never pay to park it and party every night with other RV people at Wally.  Brilliant way to drive traffic. I would imagine that Wally could launch a powerful hotspot business if it hasn’t already.”

• Strategy Analytics market analyst David Kerr made a friendly wager more than a year ago that Wal-Mart Stores would be the next giant entrant to sell wireless phones under its own brand [4]. Still holding your breath, David?

• "Wal-Mart...could very well launch an MNVO," says Current Analysis analyst Weston Henderek. "A Wal-Mart offering would most likely be targeted at value-oriented and credit-challenged prepaid customers looking for the best price." The company might do well to follow in the footsteps of convenience store chain 7-Eleven, which launched its own prepaid, discount wireless service in April of 2004, using its stores as distributors.

• The recent trend of municipal and city-sponsored wireless networks could play to WalMart’s advantage. If Wally can pitch broadband as a part of the “universal services” that the government supports, there might be a business case for deploying such a network with government subsidies.

 

Other things to note:

 

• WalMart already sells VoIP handsets from the Soyo Group [5].

• WalMart’s regular handsets sell so well and for such low prices that the chain recently limited its handset sales to two per customer [6] because hawkers could get lower prices at WalMart than from a distributor.

• WalMart is a leader in RFID for the retail vertical since they began tagging all of their shipments with the technology. A nationwide WiMAX network would only make such an initiative more feasible.

• WalMart, despite having the first financial downturn in recent history, averages $256 billion in annual sales. Don’t think for a minute WalMart couldn’t go toe-to-toe with a big telco if it had a mind to do so.

 

The Case Against a WalMart-branded phone service

 

• Building and supporting the backhaul required for a nationwide WiMAX network would require a huge commitment from WalMart [7], a commitment that many vendors say WalMart would want no part in.

• Nortel says they have not heard anything about a WalMart WiMAX network, nor do they expect to in the near future.

• "That could be one of the dumbest ideas I've ever heard," said Ivan Seidenberg, chief executive officer of Verizon Communications, after hearing the idea of a nationwide WiMax network. "It sounds like a good thing, but the trouble is someone will have to design it, someone will have to upgrade it, someone will have to maintain it and someone will have to run it."

• Compete’s MVNO expert, Adam Guy: “If you look at where WalMart has stores, it’s not so much in the cities but in semi-rural suburbia. I’m not really on top of the WiMAX business model, but I always thought it would make more business sense to deploy in cities where there are dense populations of people to support the model.” 

• Why would WalMart want to undertake such a project? Would it really help drive people to their stores?

• What about maintenance and customer support? Each would necessitate massive fleets of technicians and call centers.

• Are WalMart shoppers typical early adopters? WiMAX is a new and confusing technology, might be a hard sell to their user base.

 

In an age where sports alone cannot support a phone service, can Always Low Prices? I’d like to hear your take.