Boost founder bucks waves, fights new MVNO battle

It was 20 years ago this month that Boost Mobile launched in Australia and 19 years since it was unleashed on U.S. soil. Back then, Boost founder Peter Adderton was inspired by surfers who had been “boosting” some cool waves. They were catching air in Australia around the same time he contemplated launching a prepaid business that would be affordable for that very demographic.    

“Everything we did about Boost was about getting you in the air, which is basically what we sold,” he said. “We basically sold air. You can’t see it, but it’s in the air. I thought OK, if we can boost the phone into the air… that’s a pretty good term. So that’s why we went after it.”

Boost Mobile employed hip-hop artists like Ludacris, Kanye West and The Game in ads before it was trendy. Skateboard superstars like Tony Hawk appeared for Boost at trade shows. Celebrities, including Hulk Hogan and Dave Chapelle, hobnobbed at Boost parties.

Those were the days, and Adderton hasn’t forgot. But now, as in years past, he’s on a crusade to keep the MVNO business a competitive one. If that means being a thorn in the side of regulators when they consider Verizon’s proposed acquisition of Tracfone, so be it. Verizon recently announced plans to acquire Tracfone from Mexico-based América Móvil in a deal worth up to $6.9 billion.

Tracfone is the largest wireless reseller in the U.S., with about 21 million subscribers and prepaid brands including Straight Talk and Simple Mobile. Verizon points out that 13 million of those subs already are on Verizon’s network through its MVNO arrangement with the company; Tracfone also uses the networks of AT&T and T-Mobile under separate MVNO arrangements.

One of the big advantages for MVNOs historically is the ability to negotiate terms with more than one facilities-based operator. Sprint for years served as a network partner for entrepreneurs wanting to offer a wireless service without building their own network. Without Sprint in the picture, they’re left with only three from which to choose, lessening their bargaining power.

That’s a problem, according to Adderton. Tracfone itself is owned by a facilities-based operator based in Mexico. Dish Network, through the government’s approval of Sprint merging with T-Mobile, is operating Boost as an MVNO for a term of up to seven years using T-Mobile’s network while it builds its own Standalone (SA) 5G network.

“Without conditions and some form of divestiture by Verizon, we’ve now really basically gone back to three,” he said. “Dish is not going to be an MVNO” for the long term. “That’s not Dish’s strategy. Dish’s strategy is to build a network.”

A longtime critic of how the U.S. treats MVNOs compared to other countries, Adderton wants to see regulations that require facilities-based operators offer fair, reasonable access to wholesalers that want to offer services to consumers. "There has to be some level of protection and some level of regulation for MVNOs," he said.

Verizon and Tracfone need to explain how their merger is going to be good for consumers, he added. “People can’t look at this as a traditional MVNO, this is a large mobile operator selling it to another large mobile operator,” he said. “I think it’s going to be a lot harder to get this thing approved than anyone is giving it credit for.”

Other national carriers bought into the prepaid space in a big way years ago. AT&T closed its acquisition of Leap Wireless International and its Cricket brand in 2014. T-Mobile acquired MetroPCS about seven years ago; it’s now known as Metro by T-Mobile, and many dealers are not happy with changes afoot since T-Mobile’s merger with Sprint, which was widely known as an MVNO-friendly carrier.

RELATED: Metro dealers accuse T-Mobile of trying to poach customers

The big carriers are using what’s known as flanker brands, which are separate but run alongside their flagship names, according to William Ho, principal analyst at 556 Ventures. Most consumers on the street aren’t aware that the flanker brands are using the host brand’s network – Cricket in the case of AT&T and Visible and Yahoo Mobile in the case of Verizon.

Other MVNO players, including cable

Tracfone accounts for a majority of MVNO lines in the U.S., so Verizon’s acquisition would mark a sea change for the MVNO space, according to Jeff Moore, principal of Wave7 Research, which closely tracks the postpaid and prepaid retail sectors.

After Tracfone, the next largest MVNO is Consumer Cellular, which has about 3.75 million subscribers and specializes in the over 50 demographic. After that, H2O Wireless has about 1 million, “so there are no carriers out there similar in size to Tracfone,” Moore said. “True, there are 2.39M Xfinity Mobile subscribers and 1.69M Spectrum Mobile subscribers, but they compete in the postpaid space.”

The cable companies Comcast and Charter, which have MVNO deals with Verizon, were propped up as part of the competition during arguments for the T-Mobile/Sprint transaction. Former T-Mobile CEO John Legere specifically pointed out during Senate hearings that the combined entity would compete against big cable. (It’s worth noting that Tracfone came out in support of the merger.)

RELATED: Nation’s largest MVNO comes out in support of Sprint/T-Mobile merger

But analysts note that cable companies historically have not been looking to woo individual customers in stores like Walmart the way a player like Tracfone does. Cable companies today predominately use wireless as part of their bundles to keep customers from switching. It’s harder for a customer to jump ship when all their services are tied to one service provider.

Moore said he expects Verizon’s acquisition of Tracfone will be approved by regulators as prepaid competition is not scrutinized as closely as postpaid competition. “I have yet to hear significant opposition to the deal from politicians of either political party,” he added.

However, he believes the impact to competition at national retail will be severe. In all, Tracfone sells six brands at Walmart – Straight Talk, Walmart Family Mobile, Total Wireless, TracFone, Simple Mobile (Simple is not at all Walmarts), and Net10 Wireless – and Verizon prepaid is already sold there, he said. The only remaining prepaid competition at Walmart would be two AT&T brands – AT&T Prepaid and Cricket – and Boost Mobile. There would also be a decline of competition at Best Buy, where Boost is not sold and neither T-Mobile prepaid nor Metro by T-Mobile sells phones at Best Buy, he added.

RELATED: Verizon's Shammo: TracFone is 'our prepaid product'

“The impact to competition in the multi-carrier dealer channel also would be severe, as Simple Mobile is the top brand in this channel, with other Tracfone brands – Total Wireless, GoSmart Mobile, PagePlus Wireless, Total Wireless, Net10 and Tracfone – also available,” Moore said. “That said, this would create an opportunity for independent prepaid MVNOs – such as H2O Wireless, Ultra Mobile, and Red Pocket Mobile – to gain share.”

Sporadic history for MVNOs

The MVNO business never has exactly been an easy one. Fifteen years ago, Disney-backed ESPN tried to appeal to sports fans through a Sprint-backed MVNO. Disney itself attempted to draw families into an MVNO service. Even those big brands weren’t able to make it stick and ended up folding.

After Boost's founders sold the business to Sprint Nextel more than a decade ago, Adderton's own stint with the entertainment-oriented, Verizon-backed MVNO Amp'd Mobile fizzled. More recently, Adderton has been fighting for dealers affected by changes T-Mobile is making at its Metro prepaid business. He sees himself not as an agitator but as a voice of reason speaking up for dealers, employees and consumers.

“I’ve got faith” the FCC and Department of Justice (DoJ) will put in place regulations to protect MVNOs. “I do this because I absolutely love this. I didn’t start Boost because I had an idea that I’d make all this money and then I’d just retire,” he said. “I’m going to be pushing hard for regulation to protect MVNOs.”