• Red Herring, Tuesday, December 18, 2007 11 AM

Cell phone networks are headed toward an open future, which means companies that once depended on the closed-door environment provided by the cellular carriers could soon be forced out of business. One analyst says mobile virtual network operators like Helio could be in danger, especially as Google and others fight to free the mobile Web.

MVNOs like Helio largely depend on their brands and exclusive content relationships to sell subscriptions. They license spectrum from carriers like Verizon Wireless and AT&T, tack on some kind of content arrangement, and then sell slightly more expensive subscriptions. If Google succeeds in wresting control of the mobile Web from network providers and putting power in the hands of software developers, it could lessen demand for exclusive content.

An open market would also drive down the cost of cell phones, putting makers of high-end phones--like Apple--under pressure, says Alex Besen, President of Besen Group, a consulting firm. Besen says that the January 24 spectrum auction will mark a new era for the wireless industry, since several auction participants, including Google, plan to create open networks if their bids are successful. "The mobile world will evolve into three groups--carriers that provide the pipes, application providers and device providers," says Moe Tanabian, a partner with IBB Consulting. Which means the MVNO business, which incorporates all three elements, would have to adapt to survive.

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