Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Freelance Technology Journalist Kate O’Flaherty explores how AppVNOs are taking the market by storm. What are the opportunities and challenges in this area?

A new type of MVNO is entering the market. Known as the ‘AppVNO’, its unique selling point is the ability to make calls and send texts via an app using an additional mobile number. In a similar way to Skype, appVNOs can be used for free because they mostly take advantage of Wi-Fi rather than the cellular network.

A number of new appVNOs are emerging as use cases become apparent. For example, appVNOs are increasingly appearing as an app on business smartphones, as part of a ‘bring your own device’ (BYOD) policy.

Meanwhile, in the consumer space, appVNOs are being used by those wishing to call relatives overseas free of charge via a local number in their chosen country.

Among the advantages, the app-based infrastructure used by appVNOs allows users to make calls and send texts across multiple devices, such as iPads, according to Shanks Kulam, Co-Founder, X-Mobility. This helps to target a wider demographic, he says, adding that 40% of consumer appVNO customers aren’t using the service on their phone.

One of the advantages of being an appVNO is the ability to easily customise content to a specific target demographic, says Tristan Huntington, SVP of Business Development, TextNow. “So, for example, a company focused on providing long distance calling to a specific country could easily provide a full MVNO solution, but customise the content, language, or delivery and provide some services over Wi-Fi to minimise the cost for customers”.

Chris Michael is CEO of Swytch UK, an appVNO that has been operating for five years and targets businesses. “We are trying to get rid of the need to carry a second work phone, or for employees to have to use their personal number for work purposes. A company can sign up and within a few minutes, they will have an account. Employees download the app and gain access to up to five mobile numbers”.

In addition, it is easy to add and remove numbers when employees join or leave the business, he says.

Market opportunities

There are clear use cases emerging, especially on the enterprise side. But the area also has the potential to expand further, into industries such as utilities which can offer an appVNO service to customers to increase loyalty.

For example, Shanks says there is the chance to enter the communications as a service space (CaaS) and layer telecoms services “even if you are not a telco”.

He explains: “We are currently seeing utility and fibre companies starting to set up appVNOs. They already have millions of subscribers and want to use telecoms as a new revenue stream and to reduce churn.

“For example, a green energy company could offer users a number of minutes and texts for free. An appVNO is perfect for that”.

At the same time, it is easy for consumers to use an appVNO in addition to their mobile contract. Because this type of service is offered via an app, there is no need for users to remove their current Sim card.

Of course, there are advantages to such an approach, so should every MVNO also look to become an appVNO? Not necessarily, Huntington says. “Many MVNOs just take existing carrier services and resell to a particular niche based on how they can market to them.  There isn’t always a need for an app to improve the delivery of that, depending on the customer’s needs”.

But on the other hand, Huntington adds: “If their customers want a more feature-rich solution, or the company involved wants to have control over management of the service for customers, as well as to offer features such as cloud-based messaging, they should be an appVNO”.

And what are mobile operators doing in the appVNO market? One service, T-Mobile’s DIGITS, which launched last year, allows the mobile operator’s customers to use a single number across multiple devices, including smartwatches, for free.

Other examples are few and far between. Many mobile operators offer apps to track calls and data use, but their capabilities are limited. Indeed, Huntington thinks these apps “are cumbersome for customers as they are slapped on a phone after the fact, rather than being well thought out and deeply integrated into the experience”.

Challenges

Despite the opportunities, there are obstacles ahead for appVNOs and their relationship with the wider industry, including mobile operators. Overall, Huntington says setting up an appVNO can be very challenging, “especially if you want to be a full virtual number operator over the top of a carrier network”.

Indeed, appVNOs could be viewed by mobile operators as a threat, says James Gray, Director at Graystone Strategy. He points out that the larger providers might see appVNOs as “eating their lunch and eroding their revenue”. However, at the same time, he says: “It’s also a business opportunity as a market for virtual numbers and tie ups with other organisations, as well as the increased data from these apps”.

According to Michael, another challenge for appVNOs is keeping up with changes in technology moving forward – such as different devices and operating systems (OSs). “Every service needs to be constantly maintained for new devices, as well as older handsets and OSs”.

AppVNOs could also face difficulties in gaining consumers’ trust, says Gray. “AppVNOs are likely to be less well-governed than a regulated telecoms operator”.

For example, he points out, the regulator in Canada has recently placed Wi-Fi-first appVNOs under the spotlight and it is likely others will do the same as the market expands. Gray explains: “You are effectively putting data across an app, so it has the potential to not be as secure as a fully-fledged mobile network.

“We have also seen how data can be harvested from devices with the recent Cambridge Analytica and Facebook news. This is an important consideration because consumers need to be dealing with a supplier they are comfortable with”.

Taking this into account, what does the future look like for the appVNO market? There are challenges ahead, but Kulam thinks the area has not yet realised its full potential. “I think in the short term it’s about gaining multiple numbers and low cost international calling. In the medium term it will encompass a lot more”.

Meet with Dime, Amivox, Swytch UK, X-Mobility and many others appVNOs at this year’s MVNOs World Congress, which takes place in Madrid, 23 – 26 April.