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In September 2006, Walt Disney Co. announced it is shutting down its mobile ESPN wireless telephone service and is licensing it instead to existing mobile providers. This development spotlights the complexities of the market for branded cell phone services offered by mobile virtual network operators (MVNOs)—mobile operators that typically do not own wireless spectrum or network facilities—and has raised a series of questions among industry observers surrounding the financial outlook for MVNOs.

In this article from Phone+, NERA Vice President Christian Dippon argues that to answer these questions, one needs to understand the relationship between MVNOs and their critical partners, mobile network operators, which are the established, facilities-based companies that provide the wireless services that MVNOs rent and resell to consumers. Mr. Dippon notes that the long-term prospects of MVNOs will depend on how effectively the industry can move beyond a cost-based market strategy and exploit opportunities with mobile commerce, global positioning system applications, personal databases, and other offerings. With prices at or near marginal cost, future MVNO success stories will not be based on further discounting but rather on value-added positioning.