Could the demise of MVNO Amp’d Mobile spell trouble for content-focused service providers?

Even after declaring Chapter 11 bankruptcy on June 1, the recent decision of Amp’d Wireless’s management to pull the plug and cease operations surely came as a sobering fact to many industry observers. After all, the entertainment content and data features generally associated with the Amp’d brand are widely anticipated to provide much of the industry’s growth in coming years. With backing to the tune of more than $360 million from investors that included entertainment giants MTV Networks and Universal Music Group, the youth culture-oriented MVNO was expected to be a rip-roaring success. Obviously, that didn’t happen and, along with the earlier demise of the sports-oriented ESPN Wireless network, the Amp’d debacle raises serious questions about business and technical models for content-focused wireless services. Why is this a technology issue? Because just about everything in the competitive wireless industry is technology dependent, and the difference between success and failure for wireless enterprises hinge largely upon how well those technology factors are addressed.

You would think that by letting their network service suppliers build and operate the wireless networks, MVNOs would be faced with a greatly reduced set of technology issues. That’s certainly true with respect to engineering, building and maintaining multibillion-dollar infrastructure systems, but being relieved of that burden is a 2-edged sword. If you are an MVNO, the edge that can hurt is the lack of control over how well the network performs and what capabilities it can provide for your customers. For Amp’d, this became critical because the performance of even the best wireless networks in delivering certain types of content and data features can be uneven.

Improving the user experience for myriad new content and data services is an ongoing struggle for both network operators and applications vendors. In a sense, their problems are related to the highly refined performance of voice services. The relatively new data networks and the services they support are comparatively raw, and their performance and usability often show it. The majority of wireless customers who use their cell phones primarily for voice communications or simple text messaging seem to tolerate a certain amount of frustration in using these newer data-intensive services. But Amp’d Mobile pushed a service offering that focused on entertainment content, with voice and text almost as commodity afterthoughts – kind of like the AM receiver on a state-of-the-art car stereo system. To be successful with this marketing strategy, Amp’d would have to deliver more satisfaction than frustrations with operation and use of cutting-edge services, all the while having limited control over the network that delivered them. Reportedly, when Amp’d filed bankruptcy, it had around 80,000 delinquent accounts out of a total of 200,000 subscribers, suggesting that customer satisfaction wasn’t exactly setting records.

If the technical problems facing Amp’d were limited to wireless network performance, even given their lack of control as an MVNO, they quite possibly could have survived. Unfortunately, the realities of the wireless content delivery business extend much further. For example, take cost of sales. Even with hundreds of millions of dollars in backing, Amp’d wasn’t in a position to open many of its own retail outlets. Instead, it had to rely mostly on “big box” stores like Best Buy. I have nothing against such retailers, but for the most part their staffs are not highly trained on the subtleties of wireless technology. That’s not a huge handicap when you are selling voice service – pretty much everybody these days understands the basics of using a cell phone. But when the primary draw of a competitive wireless offering is in advanced features, it takes a bit more point-of-sale involvement to assure a happy customer. Furthermore, frustrated and unhappy subscribers are far more likely to tie up customer service hotlines, a backoffice technical challenge and expense for which Amp’d was apparently unprepared.

Left unanswered by the failure of Amp’d is the question of whether wireless services focused on content and data features rather than traditional communications can be viable. In particular, the Amp’d offerings really didn’t do much to address serious usability issues, mainly with the limited user interfaces found on basic handsets, so it’s hard to determine to what extent poor user experience contributed to its demise. The new Apple iPhone addresses the user interface challenge head-on with a highly refined touchscreen system, but its air interface limitations introduce other feature usability issues. In any event, at its current high price and low production volumes, the iPhone is probably not a practical vehicle for a mass-market, content-focused wireless service offering. A number of usability-enhancing software platforms are slowly making their way into the low-end handsets carried by most people, and as they are refined and their penetration rates increase, we may finally learn whether Amp’d failed because of poor business and technical practices or because there simply isn’t that much of a business in wireless beyond communications and general Internet access.

Drucker is president of Drucker Associates.
He may be contacted at edrucker@drucker-associates.com