Sprint (NYSE: S) in February changed its rules for devices that customers want to take to other carriers and MVNOs, which is having a negative impact on some Sprint MVNOs that offer Bring Your Own Device (BYOD) programs, including Tucows' Ting Mobile service. However, Sprint and the MVNOs say they are working together to resolve any issues.
On Feb. 15, Sprint instituted a "Financial Eligibility Date (FED)" validation on its devices, which was part of the carrier's commitment to unlock its devices, the carrier said. Sprint is using the FED system to make sure that customers who activate their Sprint device on another carrier or service provider, such as an MVNO, have paid for their device.
"Our previous process had some limitations that allowed ineligible devices to slip through the activation process," Sprint spokesman John Votava told FierceWireless. "The addition of the FED validation closes those holes and ultimately provides an increase in the volume of available devices for Sprint MVNOs. Like any business, Sprint requires that financial obligation for any purchases (devices or service) be met by customers. The inclusion of FED closes the door on devices that previously may have slipped through the system."
Thus, customers who still owe money on their devices can't activate them elsewhere. However, that change has affected some companies like Ting.
Tucows CEO Elliot Noss said during the company's first-quarter earnings conference call yesterday that "while we were told that the change was coming, neither we nor our customers were given visibility to which devices or how many devices would be rejected until the moment the change went live." Tucows is the parent company of Ting, which is a Sprint MVNO.
"When it did, an alarming 70% of devices that people were trying to activate on Ting Mobile were rejected, including many devices that were perfectly eligible by all stated criteria," Noss continued. "We worked hard with Sprint over the next several weeks to identify errors in the process and correct them, leading to the number of rejections falling to 30%. There are still a couple of outstanding issues and we continue to work with sprint to address them."
The changes had a "rippling effect" on Ting's ability to acquire customers, Noss said, adding that "customers were frustrated about wasted purchases and confused about how to find an eligible device going forward. Our support team, already handling the welcome spike in Ting interests since the Consumer Reports survey became overwhelmed. We quickly moved to procure both temporary and permanent to address the volume. We quietly launched our GSM service on March 1 to give customers another option to activate devices."
Ting shut down all marketing and promotional activities until it could "give every prospect and customer that reaches out to us the outstanding level of services that has defined the Ting brand as this continues to be how we expect to win long term, both in mobile and fixed Internet," Noss said.
Currently, Ting is "just getting back to those acceptable service levels and back to acceptable conversion rates on our activation process and we are cautiously just starting to trumpet the Ting Mobile service again, and there was plenty to trumpet about our service and our business. Our GSM offering has made it more appealing, affordable and convenient than ever to give Ting Mobile a try."
In an interview with FierceWireless, Noss said that Sprint's rule change was designed to expand the number of devices its MVNOs could activate. He said Sprint's concern was "completely appropriate" and that both Sprint and Ting do not want customers taking advantage of buying subsidized devices from Sprint and then trying to bring them to Ting or other carriers.
"We have always been clear we don't want people doing that," he said.
When the issues were discovered, Noss said, Sprint "reacted very quickly." However, Ting is still waiting for automated fixes and is responding to issues with device activations manually, which he said is frustrating.
"Like any business process, it will be continually improved over time," Noss said. He added that it might be better for Sprint to not worry too much about customers who owe the carrier a small amount money from a long time ago if they can move to a Sprint MVNO--and Sprint can then still get wholesale revenue from them.
Ting, Noss said, has not been happy with the technical implementation of some of the fixes, but is happy with how serious the company's concerns have been addressed by Sprint.
"Making sure our MVNOs are successful is a priority for Sprint," Votava said. "Sprint worked closely with Ting to quickly identify and resolve any unintended impacts with the FED validation. We continue to monitor all device activations."
Ting Mobile added more than 9,000 accounts and almost 16,000 devices in the first quarter, bringing it to 103,000 active accounts and 163,000 active devices. While that represented 10 percent growth in its subscriber base, it was lower than the 10,000 to 12,000 accounts and 16,000 to 18,000 devices the company had added over each of the past several quarters.
Stephen Stokols, CEO of Sprint MVNO FreedomPop, told FierceWireless that the company is "not as impacted here." He noted that FreedomPop procures, holds and sells devices to most new subscribers, and accordingly, the company has not been that impacted by changes to Sprint's BYOD and device certification programs. He said it is probably costing FreedomPop around 2,000 subscribers per month--but he said the company's growth has more than offset those losses.
"Ultimately Sprint needs to adjust its rules to be less stringent here," he said.
Votava noted that FED is used in evaluating device eligibility for all Sprint MVNOs, and that a handful of MVNOs reliant on the BYOD program were the most impacted by the changes.
"The program is working as designed, preventing activation of ineligible and fraudulent devices," he said. "With the addition of FED, Sprint now also allows devices previously prohibited for activation, including recently launched devices, Boost, Virgin Mobile, Assurance Wireless and Sprint Prepaid branded devices and active devices."
- see this Seeking Alpha transcript
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