The Wonderful World of Wal-Mart Wireless

For all the talk of iPhone and BlackBerry growth in recent weeks, there is still a relatively large group of people that want a basic phone with fixed monthly service costs on a non-contract basis in North America.

People of this wireless persuasion are typically more price sensitive or feel less inclined to use the features of a smartphone or a high-end feature phone. They may be new Americans or Canadians, teens or senior citizens.

Mobile virtual network operators, or MVNOs to industry types, have been created in recent years to sell subscriptions to those without wireless. MVNOs resell air time, bought from facilities-based providers, under a different brand name. They typically target a specific customer segment.

The model, which is typically carries high upfront costs with it, has been anything but an unmitigated success. There have been a series of high-profile flameouts including Amp’d Mobile. Boost Mobile, Sprint Nextel’s MVNO in the U.S., and others continue to struggle.

Wal-Mart’s new unlimited cellphone plans, announced last week, could very well be an exception to the MVNO rule in the U.S. where service providers are struggling to find new post-paid customer prospects. Wal-Mart already has the retail points of presence, the scale and relationships with customers, many of whom deem price to be criteria numero uno. This fact may help eliminate many of the start-up costs that have doomed many an MVNO from the beginning.

By the way, TracFone, a lesser known U.S. wireless service provider brand owned by America Movil, supplies the air time to Wal-Mart. The prepaid plans start at US$30 a month and stretch up to the still very low price of $45 a month for unlimited minutes, text messages, and data.

This isn’t the end of AT&T or Verizon by any stretch. Wal-Mart, despite its obvious advantages, has failed miserably on the DVD rental and social networking front.  

There are obvious downsides to the Wal-Mart/TracFone wireless initiative as well, namely handset selection. Unlimited data users will find out quickly you get what you pay for in life assuming they try to access the mobile Web with the help of a Motorola Razr, one of the few phones that will be sold by the world’s largest retailer.

Will it work in Canada (where I reside)? The barriers for a retailer may be greater. The Canadian addressable market is smaller than that of the U.S. which presumably makes the opportunity less attractive for the likes of Wal-Mart. Its costs would be higher. Historical precedent isn’t great either.

Canadian Tire, one of the country’s largest retailers, tried to sell prepaid service in past with little success.

Nonetheless, expect Wal-Mart to help drive wireless voice prices in the U.S., a trend that’s already in full swing.