The MVNO industry is practically swimming in high-profile disasters. From Disney Mobile and Amp’d Mobile a decade ago to Solavei just last year, the MVNO space has proven an extremely tough nut to crack.
In general, those in the industry agree that MVNOs need to target a specific niche or offer a clear differentiator to be successful. For Helio, helmed by entrepreneur Sky Dayton, that was in part a focus on South Koreans in America. For Defense Mobile that was a focus on active military. And for Scratch Wireless that was a promise of seamless Wi-Fi calling.
But all these MVNOs are either long gone or have suspended customer activations.
However, an industry segment littered with failed ventures makes the successful ones that much more interesting. And there’s one MVNO that appears to stand out as a shining example of how to play the game and do it right: Consumer Cellular.
How is Consumer Cellular different from the likes of PTel and others? Well, for starters they’ve been doing this MVNO thing for 21 years now. “We’re finally old enough to drink,” Consumer Cellular CEO and founder John Marick told me.
And secondly, the company seems to be doing pretty good: Marick said privately held Consumer Cellular ended last year with roughly 1,250 employees, 2.1 million customers and revenues of $609 million (that’s up from 700 employees, 961,000 customers and $263 million in revenues in 2012). That probably makes Consumer Cellular the nation’s second largest MVNO behind America Movil’s TracFone (since most MVNOs don’t release customer numbers).
And while TracFone appears to have plateaued at roughly 25 million customers, Consumer Cellular predicts continued growth. By 2018, Marick expects the company to expand to 2,000 employees, 3.25 million customers and fully $1 billion in revenues. And there’s reason to believe that forecast: Marick estimates the company has enjoyed 30 percent year-over-year growth for the past decade.
These metrics would be impressive for almost any company in any industry, but they’re especially impressive in the MVNO market, where the whole business model is based on buying wholesale wireless network access from the exact same companies that you’re going to compete with directly (for Consumer Cellular that’s AT&T and, as of last year, T-Mobile).
Finding the 50-plus niche
So how has Consumer Cellular thrived through more than two decades in this cutthroat business? Marick attributes it to a keen focus on its chosen target demographic: People 50 years old and older.
“We put a stake in the ground and targeted a niche,” he said.
To be clear though, it did take Marick and his team some time to figure out exactly where the company’s niche was. He said the company launched initially with the goal of bringing wireless service to the masses with cheaper service plans, but after 10 years Consumer Cellular only counted around 30,000 customers, 30 employees and $17 million in revenues.
“That scale wouldn’t get you anywhere today,” Marick said, adding that Consumer Cellular is privately held and self-funded, which means that it was able to “have the time to really get our systems in place, our business practices in line, a revenue stream, a customer base. And so when the national carriers really came about – when AT&T merged with Cingular and Verizon really spread its wings – we were in a position to be able to take advantage of that.”
Indeed, it was around 2007 that Marick and his team made the decision to solely target the elderly because that’s where they were seeing the most traction. Around that same time Consumer Cellular wisely inked a revenue-sharing partnership agreement with AARP that essentially allows the company to advertise to AARP members (Consumer Cellular materials are included in AARP’s new-member welcome packet). The company’s services and devices are also available in Sears and Target as well as through the Consumer Cellular phone service and website.
As Consumer Cellular narrowed its focus on the 50-plus market, the company worked to make its services as simple as possible to use. For example, it works with Swedish phone maker Doro to build custom feature phones – and more recently an Android smartphone – designed to be easy to use for the elderly.
But the primary element of Consumer Cellular’s business strategy in targeting its chosen niche is its customer service operation.
“Absolutely the time that our customers spend with our call centers is longer than other call centers, but in some ways that has also worked to our benefit because we’re willing to devote that time to helping our customers,” Marick said. “So maybe you’ve tried another carrier and you had a bad experience or you didn’t get through to a call center. But we’ve got our number on everything, we’re more than happy to talk to you and do whatever it takes to make you comfortable.”
Consumer Cellular operates four call centers, two in Phoenix and two in Oregon, and employs roughly 1,000 total call center customer service representatives.
“We just want to make sure there’s no reason that a customer would want to leave our service,” Marick said, adding the company’s churn is below 2 percent and falling.
The booming smartphone market of 2016
Now, here’s the interesting part of Consumer Cellular’s growth story: The company’s customers are essentially five to 10 years behind the average wireless user, which means that the MVNO is in the midst of the smartphone boom that AT&T, Verizon and other players have already passed through. Today, roughly 60-65 percent of the phones Consumer Cellular activates are smartphones, and “almost monthly [that number] kind of chunks up a little bit,” Marick said.
In comparison, 90 percent or more of the phones Verizon, AT&T and other carriers activate are smartphones, a figure that likely won’t grow much.
“Particularly with our focus on the senior population, we don’t necessarily need to be the early adopter or innovator in the crowd,” Marick said. “Our customers definitely take advantage of technology, but they usually kind of follow the rest of the industry.”
(Consumer Cellular has been selling the iPhone and other top smartphones for several years, as well as equipment installment plans that the company finances itself.)
To be clear, Consumer Cellular faces its share of challenges. The company will need to keep pace with pricing and promotions from the nation’s larger carriers, and will need to wend through technology evolutions like the move to VoLTE. But in a market that is as competitive as wireless, and in a segment as challenging as the MVNO space, it’s worth at least acknowledging a company that appears to have mastered the basics.
“It just seems like you need to get to a big enough level where you can buy direct from the equipment manufacturers and you can negotiate decent rates and be able to compete, because everybody else has gotten bigger too,” Marick said, adding: “It seems like no matter where you get, the bar keeps getting higher.” --Mike | @mikeddano