At 29 Apr 2008 18:30:53 -0700 SMS wrote:
> How do you figure that? Of course there are acquisition costs. The
> prepaid phones are sold at below cost, and there are still marketing
> and advertising expenses.
All of which are bourne by the MVNO- not the underlying carrier. The MVNO
buys airtime "in bulk" at wholesale cost. Given that the airtime itself
has essentially no cost (since the infrastructure is already in place and
does no one any good when idle) it's essentially pure profit.
Arguably, the only way MVNOs "hurt" the carrier, is if the MVNO offers a
good enough deal to cannibalize a monthly/contract customer, which for
AT&T's MVNOs is unlikely- any cannibalization that exists is probably
spread equally among carriers.
> I probably should have said "lower profit" not "low profit." Sure you
> might have a few prepaid customers using massive amounts of air time,
> and ending up providing more revenue than a post paid customer, but
> it's not common.
True, but the alternative is no revenue at all from that customer (again,
assuming the MVNO customer is not choosing that particular MVNO over an
AT&T contract plan.) The fact that a large percentage of AT&T's customers
are wholesale yet AT&T's ARPU is only a buck less than Verizon's either
means AT&T's wholesale customers are relatively high profit, or AT&T's
retail customer ARPU is MUCH higher than Verizon's.
> > far lower billing costs and no credit or collections costs associated
with them.
>
> But the carriers have been driving down these costs with eBills and
> electronic payments, either debit or credit. It also costs money to
> market the airtime cards.
Again, that's the MVNO's problem, and even with AT&T's own GoPhone system,
the bulk of replenishment card sales and marketing (outside of it's
corporate stores and online system) is handled by 3rd parties (e.g. Fastcard,
etc.)
> I don't love any company. I have no idea why Verizon has eschewed
> making a serious effort in prepaid.
Because the ONLY marketing advantage Verizon has is "The Network." It
sells their overpriced crippled handsets on their overpriced service for
them. The minute another company can claim to have the same network,
Verizon's marketing advantage disappears. (You'll notice even their MVNO,
Page Plus, doesn't get to brag about what network they use.)
> Well actually I do have an idea. I'd say that they're worried that a
> decent prepaid offering would cannibalize into the more profitable
> postpaid sales,
Which is only a danger if your postpaid service is overpriced. If you're
offering a competitive value, prepaid doesn't cannibalize postpaid, as T-
Mobile shows us- they offer the best carrier-prepaid (non-MVNO) value, yet
they still have healthy postpaid net adds, because they also offer a good
value in retail wireless. Alternatively, if you make your own prepaid
rates unattractive (e.g. Verizon's InPulse, AT&T GoPhone) you can also
avoid cannibalization that way.
> given that many customers consider only Verizon when
> looking for wireless service
AT&T and Verizon have been around for two decades now- if "many customers"
only considered Verizon, they'd have a clear dominance in wireless. Sure
they have slightly better ARPU and churn than AT&T, but it's very much a
two-horse race, which would NOT be the case if either service were clearly
superior.
> (due to the much higher ratings that Verizon
> receives for coverage and quality).
Or due to Verizon's relentless marketing of the notion that their network
is somehow vastly superior. AT&T controls roughly the same amount of
spectrum, is established as a legacy 800MHz carrier in roughly the same
number of markets, and covers roughly the same percentage of the
population. Sprint's coverage is essentially a superset of Verizon's,
given the amount of Verizon roaming Sprint allows, yet Verizon is still
synonymous with "coverage" in the public's mind.
> In my area (Northern California) it's often a choice between Verizon or
> "no coverage." The cheapest carrier-prepaid is from T-Mobile, which
> has terrible coverage in this area.
And yet my T-Mobile service performed perfectly adequately on my last trip
there, but admittedly I mostly stuck to cities and highways (like many
cellular customers do!) And T-Mobile clearly hasn't been driven out of
business in your neck of the woods, either, demonstrating that at least a
significant segment of the market finds them, the carrier with the weakest
coverage,an adequate value.
Interestingly, although I bought a Page Plus (Verizon) phone as a backup
for my T-Mobile service last fall (previously I used the now-defunct Beyond
Wireless TDMA service as a backup) I haven't needed to make a single voice
call on Page Plus yet. The only time I've actually used it (other than
playing around) was for e-mail. One of T-Mo's two-bit roaming partners
here in Colorado (Union Telephone) doesn't support GPRS/EDGE data (and why
should they? It's only the 21st Century, after all!), so I opted for Page
Plus' free QNC data loophole for e-mail rather than waste my T-Mo airtime
minutes using CSD.
So, although Verizon's network is superior to T-Mo's, the extra few
percentage points of geographical coverage Verizon gets to brag about is
used by such a small percentage of calls it seems to be a negligable
advantage for a number of people (just as, for example, AT&T's/T-Mo's GSM
"world compatibility" is no advantage for those who do not travel overseas.)
You tread dangerously close to being the "Bizzaro Navas" with some of these
Fanboy-esque Verizon diatribes, sir...
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