Re: Contracts. Why?

At 09 Jan 2008 05:52:47 -0600 clifto wrote:

> > T-Mo offers 1000 minutes for $40- a more attractive plan for heavy
users- a
> > 700 min./month postpaid user, for example, pays $40/month instead of
$70 on
> > prepaid.
>
> The problem with that is that the user can't depend on the 700 minutes.
> After he hits the limit, the plan has a price more like $280 per month
> ($0.40 per minute).

Right- that's why I used 700 as my example- the plan actually includes
1000, but it's unrealistic to assume anyone would use all of their minutes
each month. My hypothetical customer leaves 300 minutes "on the table"
every month.

> So he's going to waste some finite number of minutes
> every month to avoid hitting the limit. I suppose it's a matter of skill
> or luck as to how few minutes get wasted.


Maybe- the point was that as long as his average minute cost is _less_ than
$0.10, it's a better deal (for him) than prepaid. That happens when he
hits 400 minutes on the $40 for 1000 minute plan.

At 08 Jan 2008 21:32:21 -0800 Jack Hamilton wrote:

> >But they don't. They give you a $150 phone for free.
>
> That's like saying "I charged it, so it was free." They have signed
> to a contract that guarantees them a future revenue stream, and that
> future revenue stream has a present value.


True, but the use of the phone requires service anyway. As long as the EFT
is equal or less than the subsidy, why not? You aren't really stuck with "
$1000" worth of service (2 years at $40/month), you're stuck with paying
the EFT to cancel- roughly the price of the discount.

> >They give you a $300
> >phone for $150 ...
>
> Assuming that it really cost them $300, which I doubt.

It doesn't matter what it costs to manufacture or procure- nothing else you
buy is sold for "cost" either. What matters is the difference between what
it will cost you to buy it with or without the contract. (And not
necessarily from the carrier- i.e. if you can get the same phone on eBay,
or a local dealer without contract cheaper.)

> Probably some
> phones are sold for close to the carriers's retail price, but almost
> certainly not all of them. If they weren't making money on the
> process, they'd stop doing it.

True- but they're making money either way; whether you pay the full
unsubsidized price, or re-up for two years. Again, the point is, if the
"Uberfone 5000", or whatever model you really want can be obtained $150-200
cheaper with a contract, why not? If circumstances change and you need to
break the contract, you pay the $150-200 EFT and no harm done- it was the
amount of the discount anyway.

Otherwise, two years later with the same carrier, that full price phone
without contract was $200 more, and you still spent two years with the
carrier- just without a contractual obligation.

In alt.cellular.verizon Paul Miner <pminer@elrancho.invalid> wrote:
>
> I was under the impression that the cost to acquire a new customer
> included more than just the cost of the equipment subsidy.
>

Same goes for walmart ... you don't sign a contract with them when you walk in
the door saying that you will pay them $X every month or pay $XXX to quit
paying.

The ETF is connected to the reduction in phone price. Any other money spent,
whether it be advertising or paying for good reviews, is not money they have a
right to recoup via a contract.

As far as the cost of activation goes ... they already charge you activate an
account, so no contract needed for that.

> Just curious, does anyone know when they stopped calling themselves
> Sprint PCS? Was it around the time of the Nextel merger, or before
> that? It seems odd to refer to them as Sprint PCS this many years
> later.
>

Sprint split off Sprint PCS years ago so there was a tracking stock and the
main stock. Then, Sprint merged with Nextel and Sprint PCS was rolled back
into the fold leaving Sprint Nextel. As far as when, well, it should be
obvious from the name, eh? :-)

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon Elmo P. Shagnasty <elmop@nastydesigns.com> wrote:
>
> If you want the ability to switch out phones as a fashion statement, and
> have several phones to choose from depending on what mood you're in,
> then realistically in the US your choice is GSM and the SIM
> card--excepting the iPhone, of course.
>

Actually, you can switch out your phones on Verizon all that you want too [but
currently, you are limitted to Verizon supported phones]. That doesn't
affect your ability to get a discount on a new phone in one or two years and
it doesn't affect your contract term.

With Sprint PCS, and perhaps only with Sprint PCS, if you change phones, your
discount on a new phone is reset to two years out. They trigger the discount
on two years from your last ESN switch. That is absolutely ridiculous and is
a sign of just how poor the programmers who set that system up were (or still
are!). In fact, it is this reason alone [and the customer service that
followed the flaw] that led me to leave Sprint PCS after about five years.

> What you give up, frankly, is network availability and call quality.
>

Verizon has a GREAT network and their plans have excellent coverage [including
roaming] for post pay customers. I won't go into the reasons why I think CDMA
is a better technology for voice than GSM (but let's say multipath is
particular beneficial in downtown areas) but I think there are many with
relatively fewer benefits going to GSM. I often hear my coworkers who use
T-Mobile and AT&T complain that the person on the other end can't hear them
.... or the other way around. I don't think that has ever happened to me on a
CDMA phone. Since I hate Sprint PCS now [for good reasons enumerated hear
more than a year ago], Verizon is my only real option here unless I decide to
tolerate AT&T and live with what AT&T offers, which is GSM and higher prices
:-(

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon CozmicDebris <isheforreal> wrote:
>
> Except that it gives them a healthy loss to write off every quarter for
> equipment subsudies.And I'll gurantee that neither the IRS or SEC woudl
> allow them to either make up or artificially inflate that number.
>

They better not be writing it off as a loss ... it clearly is NOT. It is an
investment [I don't get to write off my investments ... in fact, I have to pay
taxes on the earnings when I get them]. They "invest" $150 in your phone so
that the phone is cheaper for you, and in return, they over charge you by a
certain amount for one or two years to make up that money ... and if you quit
early, they charge you more than the $150 the initially invested in you, so
they still get a profit.

That is why I say it shouldn't be legal. Plan prices should be lower if a
person is not on contract and they should be able to activate a non-subsidized
phone, whether new or used, without a contract and without paying the rates
created for "subsidy recovery". The best deal in the world for these
companies is somebody coming in with a used phone, activating it on a new plan
and charging them the same monthly rate that they charge others who are paying
off their subsidy AND creating a profit for the carrier. In short, these
people are probably the most profitable ... yet, they don't allow it in a lot
of cases ... or want to charge you MORE per month to start a phone on a new
plan without a contract [I think Sprint used to charge $10 / month for this].

Someday, it will be all wireless data, and you can pick your VoIP provider and
phone ... then we will be complaining about data contracts instead of these
blasted subsidy rip-offs.

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon Todd Allcock <elecconnec@americaonline.com> wrote:
>
> True- but they're making money either way; whether you pay the full
> unsubsidized price, or re-up for two years. Again, the point is, if the
> "Uberfone 5000", or whatever model you really want can be obtained $150-200
> cheaper with a contract, why not? If circumstances change and you need to
> break the contract, you pay the $150-200 EFT and no harm done- it was the
> amount of the discount anyway.
>

This is precisely what I was trying to say, except that their EFT is usually
MORE than the subsidy, so the carrier comes out ahead ... and they don't lower
the price of your monthly plan when the subsidy is paid up ... which means you
should threaten churn to keep your money, as otherwise it is pure profit for
them ... a greedy model.

I would rather have the option to buy a phone that is not locked to any
carrier and buy that phone at full price. Then I should be able to activate
it with any carrier and not pay the plan price that subsidized buyers pay.

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon Elmo P. Shagnasty <elmop@nastydesigns.com> wrote:
>
> My point was, Verizon can expect very little annuity stream from these
> phones. If they were sold at a "subsidized" price, with Verizon
> expecting a suitable amount of income from my using them in order to
> offset the cheap price they sold for, then Verizon is in for a surprise.
>

Obviously Verizon did not sell the phone with contractual commitment, you
would have heard from them by now. You bought their excess inventory and
they are probably very glad you paid retail price for it rather than them
having to write it off and give them to charity or sell them in bulk to Ebay
sellers ;-)

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon Elmo P. Shagnasty <elmop@nastydesigns.com> wrote:
> In article <5uhdtoF1hna38U2@mid.individual.net>,
> "Thomas T. Veldhouse" <veldy71@yahoo.com> wrote:
>
>> > Oh, but I do do business with PagePlus....at a rate of about
>> > $30/year.....so even if I do end up using the Verizon network, it's not
>> > for very much at all.
>> >
>>
>> Ever notice that if you go to the Verizon or any traditional mobile phone
>> company that does both pre-pay and post-pay that the same phone is more
>> expensive for pre-pay customers? Well, you see why; they are under no
>> commitment.
>
> Ummm...that was my point. Did you not get the whole thing? I am under
> no commitment to pay any usage charges at any level for these phones,
> therefore if the phones are subsidized based on Verizon expecting that
> I'm going to use them and Verizon will realize income from them, then
> Verizon is in for a surprise.
>
>
>
>> I think "pre-pay" is an invalid term for these customers, as even "post-pay"
>> customers pre-pay. They only post pay any monthly overage or feature changes
>
> Nope. Not with Cingular/AT&T, anyway. I paid AFTER the fact, for
> everything. I never paid anything up front. Two years ago I walked
> away with a couple of free phones and a contract that said I would pay
> so much for service, and my service was available immediately. The bill
> for that service was not generated until one month later.
>
> You're wrong about the bills being pre-pay even for contract customers.
>

Prepaid phones are NOT subsidized. You bought a prepay phone, otherwise known
as commitment free. If you had bought it on a subsidized contract, the phone
would probably have been free. You just helped them unload excess inventory.
Feel good that you got what you consider a fair price. You won't be finding a
Motorola Q anytime soon at Walmart for a similar price without commitment ...
and you know why.

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon Joel Koltner <zapwireDASHgroups@yahoo.com> wrote:
>
> The pay-as-you-go phones tend to make significantly more money on a "per
> minute of usage" basis than "regular" (contract) phones, so the marketing idea
> there is that it doesn't take nearly as long for the manufacturer to re-coop
> the "discount" they gave you on the phone, so even if you lose or throw away
> or otherwise stop using the phone (and go get another one for $50) there's a
> decent chance they'll have already made some money off of you overall.
>

And what I have been saying is they don't really discount those prepaid phones
at all ... or very rarely. Most are phones that were high volume sellers and
became excess inventory, so they sell those as prepaid [or offer them as
"free" to subsidized customers]. Clearing excess inventory that they would
otherwise write off because they need room for newer more profitable models
makes a lot of sense ... and thus, the prepaid companies tend to be
subsideries or completely different companies altogether that got to buy these
phones on clearance. I bet buying one of those $30 prepaid phones provided
a net revenue of $15 for the carrier offering the pre-paid phone, even if it
is never activated ... because the phone is not worth $30 to them, but, in teh
case of my example, only $15.

BTW ... it is such inventory price depreciation that they write off, not the
subsidies ... just referencing another part of the thread.

They didn't lose money on that Sanyo phone the sold this guy because the phone
isn't worth to them as much as he paid for it in the first place [hence they
made a profit]. That is why the cheap comittment free pre-paid phones are
older models [or some current models where inventory is well in excess of what
it should be], the phone is now worth less to them, so they sell them for
less. The goal is to not have to write off any losses at all and that is what
these phones do for the carriers; they take a loss due to depreciation not due
to some pre-paid guy buying the phone and using it on another carrier ... the
goal was to get rid of the phone, not whether it was activated or not.

To the guy who bought the Samsung at Walmart ... did you ever price that phone
to what is available on Ebay as new for the same model? I bet the price was
similar or even higher at Walmart.

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon clifto <clifto@gmail.com> wrote:
>> there is that it doesn't take nearly as long for the manufacturer to re-coop
>> the "discount" they gave you on the phone, so even if you lose or throw away
>> or otherwise stop using the phone (and go get another one for $50) there's a
>> decent chance they'll have already made some money off of you overall.
>
> That's hard for me to see, considering T-Mobile wants $30 for 300 minutes
> post-pay (use 'em or lose 'em in a month), vs. $100 for 1,000 minutes
> pre-pay (use 'em any time in a year).
>

You get roaming for free on the post-pay plan ... there is no roaming on
pre-pay plans. Thus, you get less coverage for the $1. You probably don't
get unlimitted nights and weekends either ... or free mobile to mobile, etc.

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

In alt.cellular.verizon CozmicDebris <isheforreal> wrote:
>
> Correct me if I'm wrong, but doesn't T-Mo prepaid only work on their
> network, while postpaid does roam? That would seem to make the comparison
> apples-to-oranges.

you are absolutely correct. And there are mobile-mobile minutes, nights and
weekends, etc.

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

At 09 Jan 2008 18:23:25 +0000 Thomas T. Veldhouse wrote:


>

> Prepaid phones are NOT subsidized.

Sure they are. We're probably splitting hairs, but the carriers subsidize
prepaid handsets to spur signups in a sort of "giveaway the razor to sell
the blades" fashion. Tracfone offers handsets for $15 and Virgin for $20;
the included batteries and chargers cost more than that!

> You bought a prepay phone,
> otherwise known as commitment free.

"Committment" and "subsidy" aren't necessarily related...

At 09 Jan 2008 13:55:43 -0500 Elmo P. Shagnasty wrote:

> > You get roaming for free on the post-pay plan ... there is no roaming on
> > pre-pay plans. Thus, you get less coverage for the $1. You probably
don't
> > get unlimitted nights and weekends either ... or free mobile to mobile,
etc.
>
> The no roaming and less coverage is exactly why the T-Mo pay as you go
> plan sucks.

There IS roaming on T-Mo's prepaid plans. A couple of slightly more
expensive (to T-Mo) carriers are not available to prepaid users (mostly in
the midwest) but T-Mo prepaid and contract users have virtually identical
coverage. (This hasn't always been the case however- prepaid roaming was
added two or three years ago.)

In alt.cellular.sprintpcs Paul Miner <pminer@elrancho.invalid> wrote:
>
> Ok, so mid-2005. Then why do you still call them Sprint PCS?
>

Because I feel like it ... it is the name of this group isn't it?

--
Thomas T. Veldhouse

America is the country where you buy a lifetime
supply of aspirin for one dollar, and use it up in two weeks.

At 09 Jan 2008 18:44:13 +0000 Thomas T. Veldhouse wrote:

> And what I have been saying is they don't really discount those prepaid
phones
> at all ... or very rarely.

I strongly disagree. Often the prepaid models are the same current models
the carriers offer to contract customers (although typically low-end,
understandably- there's little point offering mobile TV enabled phones to
customers who can't buy the TV service on prepaid plans!)

> Most are phones that were high volume sellers and
> became excess inventory, so they sell those as prepaid [or offer them as
> "free" to subsidized customers]. Clearing excess inventory that they
would
> otherwise write off because they need room for newer more profitable
models
> makes a lot of sense ... and thus, the prepaid companies tend to be
> subsideries or completely different companies altogether that got to buy
these
> phones on clearance.

Look at Virgin's or Tracfone's offerings- these are handsets that were
never sold by the underlying carrier, and have custom UIs to support the
MVNO. There's no way Tracfone is buying those $15 retail Motos for less
than the $10 they sell them to Target or Walmart for. According to the
trade papers, the lowest end phones currently manufactured wholesale for
$30-40US, and these are featureless monochromatic-display models you and I
will never see at WalMart- they're built for carriers in emerging nations.

> I bet buying one of those $30 prepaid phones provided
> a net revenue of $15 for the carrier offering the pre-paid phone, even if
it
> is never activated ...

Unlikely- an MSRP $30-40 prepaid phone probably is sold to the mass market
retailer for 60-70% of that (Walmart wants to make a buck as well!) T
ere's no accounting depreciation trickery that can make it profitable to
sell a new handset to WalMart for $20 without the expectation of future
airtime purchases.

> because the phone is not worth $30 to them, but, in teh
> case of my example, only $15.


Not a chance.

> BTW ... it is such inventory price depreciation that they write off, not
the
> subsidies ... just referencing another part of the thread.


I'm not so sure. Customer acquisition cost, including a subsidy, is a
legitimate cost of doing business, not a capital invenstment, and could be
written off- not as a depreciation, but as a loss- it's not a lease- it's a
sale. (At least that's how I did it when I was a cellular dealer- I sold
the "free" phone at a $200 loss, which was offset by the $300 commission
from my carrier, resulting in a $100 profit.)


> They didn't lose money on that Sanyo phone the sold this guy because the
phone
> isn't worth to them as much as he paid for it in the first place [hence
they
> made a profit]. That is why the cheap comittment free pre-paid phones are
> older models [or some current models where inventory is well in excess of
what
> it should be], the phone is now worth less to them, so they sell them for
> less.

You're overthinking this- prepaid phones (at least those sold outside a
carrier's own corporate stores) are packaged in different retail packaging,
with different manuals ad inserts, often with different (fewer) included
accessories- they aren't excess inventory reboxed in blister packs to sell
at Walmart- these particular phones were always intended to be sold as
prepaid models.

> The goal is to not have to write off any losses at all and that is what
> these phones do for the carriers; they take a loss due to depreciation
not due
> to some pre-paid guy buying the phone and using it on another carrier ...
the
> goal was to get rid of the phone, not whether it was activated or not.


Not true, particularly in the case of a carrier like Verizon with
"exclusive" models. Look at Verizon's low-end- twenty virtually indentical
sub-$50 retail (subsidized) flip phones from a variety of manufacturers
with virtually identical (lack of) features. These phones' mothers
couldn't tell them apart. Now look t Verizon's retail prepaid low-end
(sub $50) one blister-packed model in "Verizon InPulse" packaging- a
Samsung (or is it Starcom, I forget?) recently replaced a Nokia 26-
something that held the niche for a year. If your theory was correct, we'd
see a steady rotation of discontinued or overstock product as the low-end
prepaid model du jour, but we don't- the prepaid lineup is stable, and
bears little relation to the current postpaid lineup.


> To the guy who bought the Samsung at Walmart ... did you ever price that
phone
> to what is available on Ebay as new for the same model? I bet the price
was
> similar or even higher at Walmart.

Actually I found the opposite- when I wanted to buy a low-end Verizon phone
to use on PagePlus prepaid) eBay's prices were similar or higher than
Walmart's. Luckily I stumbled upon a good deal on an old Samsung WinMo
smartphone on eBay, since PagePlus (and Verizon, I suspect) are offering
free 1X data on prepaid (most likely by accident) which allows me
Contacts/Calendar sync with my Exchange server and IMAP e-mail access,
which the low-end prepaid phones wouldn't.

To summarize, prepaid handsets ARE subsidized, but to a lesser extent than
postpaid obviously. Rather than using a contract to "enforce" recouping
the subsidy, Verizon relies on "incompatibility" with other carriers (Sprint,
Virgin, etc. won't activate Verizon handsets, AT&T and T-Mo can't), and GSM
carriers use SIM locks to enforce use of prepaid handsets on the "right"
network. Undoubtedly, some handsets end up on the "wrong" network,
resulting in the "loss" of the subsidy, but this represents a small number.

What will be interesting is how the prepaid landscape changes in this new
supposed era of "open" networks (which I'll believe when I actually see it!)
I suspect prepaid models will become far more crippled than their
postpaid counterparts (i.e. data capabilities disabled) to discourage use
on other networks. For example, some T-Mo prepaid phones have the ability
to edit the GPRS access point disabled, so even if SIM-unlocked, would work
for voice only if used on AT&T or overseas, greatly limiting their appeal
if used off-network.