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Best Buy to become mobile virtual network operator: CTIA keynote

ORLANDO, FL ? During his keynote address at CTIA Wireless 2011, the top executive of LightSquared announced that retail giant Best Buy will be partnering with his company to enter the wireless industry by becoming a mobile virtual network operator selling mobile broadband access.

The new MVNO will be branded Best Buy Connect. It will sell access to LightSquared?s network that combines mobile satellite spectrum and terrestrial 4G LTE mobile broadband.

?I am pleased to announce LightSquared?s relationship with Best Buy Connect, an agreement with Best Buy for its recently launched MVNO that will be able to launch 4G connectivity,? said Sanjiv Ahuja, chairman/CEO of LightSquared, Reston, VA. ?We are targeting a major trial in early 2012.

?Over the next few weeks, we will provide a lot more details about this,? he said.

In addition, Leap Wireless? Cricket Communications has entered into a 4G roaming agreement with LightSquared. Cricket can now supplement its LTE coverage and offer a wide range of 4G coverage, including via satellite.

Mr. Ahuja also announced that OpenRange will lease LightSquared 4G broadband and satellite service in the rural communities it serves nationwide.

Best move?
The retailer launched a dedicated portal for Best Buy Connect at that explains and touts the benefits of mobile broadband.

The site outlines a tiered pricing model with various options: a two-year contract, a one-year contract or no contract. Based on which option consumers choose, there is different pricing for plan options, monthly retail price, overage cost per MB and, if application, early termination fee.

Currently Best Buy is only offering two laptops that are compatible with the Best Buy Connect service, one from HP and another from Toshiba. Those devices are subsidized for those consumers who sign a one- or two-year contract.

However, Best Buy Connect will no doubt eventually target users of netbooks, tablets, smartphones and other connected devices.

The site features an ad for the BlackBerry PlayBook, Research In Motion?s new tablet that is available for preorder.

While launching as an MVNO could provide a substantial additional revenue stream for Best Buy if executed properly, it forces the retailer to walk a tightrope.

Best Buy has strong relationships with wireless carriers, as it sells mobile devices from a range of manufacturers. It has the chain of Best Buy Mobile stores that is dependent on a good working relationship with the manufacturers and carriers.

If Best Buy Connect is perceived as competing directly with the retailer?s current set of partners, it could spell trouble.

?The success or failure of Best Buy Connect is still to be determined?it depends what the offering is, what the price points are and how are they going to resolve the conflict with other OEMs and carriers,? said Chetan Sharma, founder and president of Chetan Sharma Consulting, Issaquah, WA. ?How is Best Buy going to segment the MVNO operations as separate from the retail distribution?

?If they are competing head-to-head, then that creates conflict,? he said. ?It remains to be seen how they will execute.?

Mobile data shortage
While LightSquared?s Mr. Ahuja did not offer much in the way of details about his company?s partnership with Best Buy Connect, he did have much to say about the state of the wireless industry and the boom in mobile data consumption.

The demand for data continues to surge, and the problem of digital overload continues to grow, per LightSquared.

Where the wireless industry go from here? Mr. Ahuja said that it has to address the problems of digital overload and lack of connectivity in some regions of the U.S.

?It seems like our industry is changing faster than the speed of light,? Mr. Ahuja said. ?The wireless industry is impacting each and everyone one of us in ways we could never have imagined.

?Think about the explosion of broadband demand just in the last three years?the networks are not keeping pace with demand,? he said. ?We have dramatically increased the speed at which information is shared, which has a tremendous impact on productivity around the world.

?We just cannot work without it.?

Mobile data is dominating the conversation, driven by consumers? growing desire for information, communication and entertainment.

Innovation and economic success are contingent upon access to information, per Mr. Ahuja. He said that given the recent innovations of mobile technology and the surge of mobile Web and apps consumption, the U.S. should be the global leader in delivering wireless broadband.

LightSquared projects that U.S. wireless data usage will grow 4,000 times over the next four years.

Live video streaming via mobile increase 600 percent from 2009 to 2010.

Facebook has 200 million active mobile users and counting.

All of that involves heavy mobile data consumption.

LightSquared noted that consumers? appetite for mobile data is expected to grow 50 times over the next five years.

?The current wireless spectrum in the U.S. is severely limited,? Mr. Ahuja said. ?The perfect storm of booming demand, an onslaught of new data devices and the mobile apps revolution has left this industry at an absolutely critical turning point.

?Faced with network capacity constraints that will limit users? ability to access fast, reliable wireless Internet access, the information superhighway is heading for a traffic jam,? he said. ?We are delivering spectrum capacity to the industry via both terrestrial and satellite services.?

?We are injecting critical capacity into the market.?

LightSquared?s business model is providing network access on a wholesale-only basis.

?We will have no retail overhead, so our core expenses support building, operating and deploying the most advanced and reliable 4G wireless network,? Mr. Ahuja said. ?We sell to national and regional distribution partners, which will resell it to their consumers.?

?The traditional wireless business model, the top players are not only operating their own networks, they are offering their own content and services and doing their own retail sales,? he said. ?LightSquared is changing this and will revolutionize the distribution model for mobile broadband.?

Mr. Ahuja

Yang Jie, executive vice president at China Telecom, Beijing

Hans Vestberg, president/CEO of Ericsson, Stockholm, Sweden

Patrick Soon-Shiong, M.D., chairman/CEO of the Institute for Advanced Health, San Mateo, CA

Steve Largent, CEO of CTIA-The Wireless Association, Washington

Final Take
Ericsson's Mr. Vestberg