David vs. Goliath? How one rural network operator is using an MVNO to battle AT&T and Verizon

Mike Dano

NASHVILLE -- There's no doubt that competition in the wireless industry is heating up: A market that once held dozens of major regional wireless carriers like Alltel and Leap Wireless now only counts a few. Meantime, nationwide carriers like AT&T and Verizon continue to gobble up most of the high-value wireless customers in the country with the promise of near-ubiquitous coverage and a huge array of smartphones and other devices.

Thus, it's no surprise that, during the past few years, FierceWireless has covered the acquisition or outright shutdown of a notable number of smaller and rural carriers, from Alltel, Leap Wireless, Clearwire and MetroPCS to Cincinnati Bell Wireless, Revol Wireless and others.

That's why Terry Addington's MobileNation, and its Twigby MVNO, is so interesting.

But let's start at the beginning. Like many of the executives here at the Competitive Carrier Association's Mobile Carriers Show, Addington is a longtime wireless player. He helped found First Cellular of Southern Illinois in the 1990s and grew it into a successful regional carrier with roughly 100,000 subscribers, and eventually guided the operator into a profitable sale to Alltel in 2006. After the buyout, Addington seemed finished in a wireless industry that was quickly consolidating (Verizon acquired Alltel in 2009).

But the half-dozen wireline operators in Illinois that helped finance Addington's First Cellular had other ideas. After their sale of First Cellular to Alltel, they came back to Addington and explained that their wireline businesses were slowing and they believed they needed to get back into the wireless game. They helped Addington and his team cobble together the financing and spectrum necessary to launch another regional wireless network -- essentially asking Addington to start another wireless carrier business from scratch in an industry that is, today, dramatically more competitive than it was in cellular's pioneering heyday of the 1990s.

"It's been a very difficult road to find a niche and compete against AT&T and Verizon," he told me.

Addington launched MobileNation in 2011 with 1900 MHz spectrum licenses in areas of Tennessee and Kentucky, largely with the help of a roaming partnership with Sprint (MobileNation is one of around 30 carriers participating in Sprint's Rural Roaming Preferred Provider). Today, MobileNation covers roughly 500,000 POPs with LTE and EV-DO services via roughly 200 leased towers. The company targets the customers who can't meet AT&T and Verizon's credit requirements, and it currently counts around 30,000 subscribers and 15 retail stores -- and, importantly, Addington said the company is now EBITDA positive.

But because the company needs to make a return on the recent investment it made to build out its network, Addington said MobileNation isn't in the same position as other established smaller and rural carriers that long ago paid off their launch costs. As a result, Addington said he and his team have more of an incentive to hustle than some of his peers here at the CCA show.

"We have an imperative to look at different things," he said. "I'm just trying to find ways to survive."

Enter Twigby: MobileNation's MVNO through Sprint. Twigby gives Addington's team the chance to test out the MVNO market and, hopefully, create a new revenue stream to supplement its existing MobileNation business of owning and operating a rural wireless network.

"That's a work in progress," Addington said of Twigby, noting that many of the younger members of his team are working on the effort. "We're experimenting."

Launched in December, Twigby is very much in the early, testing stages. Addington declined to disclose the number of customers Twigby counts, but it's likely not very many. He said the company's subscriber acquisition efforts have so far only centered on Internet advertising, and the only connection between Twigby and MobileNation's existing business is a billing system and employees tasked with growing both operations.

"We're still defining the market for Twigby," he said.

Moreover, MobileNation's Twigby is one of close to 200 MVNOs in the U.S. wireless market, many of which also run their operations over Sprint's network. As Addington explained, the only way to stand out in the business is to target a clearly-defined and uncrowded niche, something Twigby is still working on.

But Addington's efforts stand as a notable strategic gambit in an industry that is conspicuously lacking in them. It's clear that the executives leading AT&T and Verizon know that growth in the traditional postpaid wireless market is slowing, and as a result are turning their attention to opportunities like the Internet of Things. That's leaving smaller, rural wireless network operators without many opportunities. Addington's Twigby is definitely the underdog here, but that's why the David vs. Goliath parable is so compelling. --Mike | @mikeddano

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