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Thu 10 Jan 2008 04:00 AM

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Connecting with the customer

Dean Douglas, CEO of US network specialist LCC, looks at the key challenges facing incumbent operators in the Middle East, and how they can benefit from the emergence of MVNOs.

Dean Douglas, CEO of US network specialist LCC, looks at the key challenges facing incumbent operators in the Middle East, and how they can benefit from the emergence of MVNOs.

How can incumbent operators address growing competition?

There is an interesting challenge with being an incumbent, but with the appropriate vision incumbents have an extraordinary advantage. An incumbent provider has the opportunity through either technology or economics, or sometimes both, to maintain a client base and even increase it in a competitive environment. But all too often, those faced with competition don't leverage both of those pieces - they leverage one or the other in order to address the market place.

For example, look at how important wireless is to just about every individual in this region. Many people in this region have multiple cell phones from multiple carriers. Operators can create a strong connection with their customer from both a delivery standpoint and a value standpoint, such as by making it economically attractive to add on other services. The more services the customer buys from the carrier the more complex the relationship becomes, and therefore the more difficult it is for that consumer to move to other places.

Leveraging that economic and incumbency is very important. It seems to me that leveraging those two pieces, no matter what technical business you're in, is very compelling for your end-user customers.

You have mentioned that incumbent operators can benefit from the MVNO model. How?

There are a number of services that can be layered on top of an operator's offering through MVNOs, so incumbent operators have to start thinking about the ability to bring in differentiated MVNOs that help provide services or focus that can appeal to different groups of customers.

The traditional thought was that MVNOs were a set of activities to be avoided. But I think they allow the carrier to offer a more robust offering. Some carriers have started to have their own branded MVNOs that they layer on top of their own network.

It is interesting that you don't see the true luxury brands really looking at being an MVNO and yet it would seem to me that companies such as LVMH, with the set of luxury brands that they have, could create whole new profitable revenue stream as an MVNO. The unfortunate thing is that up until very recently wireless has not been sufficiently robust that luxury goods companies would want to attach their brands to an MVNO.

Do you think this will change?

I think the carriers are getting savvy about the desire of customers for a very high quality product. I think at some point there will be a number of different MVNOs that we are not contemplating today, that will become real channels and in certain cases they will underscore the high quality of the network.

Where the MVNO really works is in the 3G network environment, either 3G or WiMAX, because at that point they can layer on services, be they access or other capabilities that wouldn't be provided to the other network users at large, so they have a differentiated model.

There was an interesting study done in the UK where they actually tested the perceived quality of the network across a number of different network operators as well as MVNOs. What was interesting was one of the MVNO's - Virgin - came out top, and yet the underlying network that Virgin sits on was toward the lower part of the league table, and so here we have a perception in the market place that Virgin is a terrific network. Part of that is customer service and customer experience outside the network, it is just a perception of the brand.

Do you think the MVNO concept has much of a future in the Middle East?

Yes. I think it has a very robust future in the Middle East, because people look at themselves as communities of users. You begin to get real services, content services and other community services around an MVNO that can become a very powerful model, much as social networks have become a powerful model. We're starting to see in the US, and I expect we're going to see in the rest of the world, that the social networks are really devolving across very specific user communities.

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