Contracts. Why?

In alt.cellular.verizon Todd Allcock <[email protected]> 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.

---

› See More: Contracts. Why?

In alt.cellular.verizon Elmo P. Shagnasty <[email protected]> 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 <[email protected]> wrote:
> In article <[email protected]>,
> "Thomas T. Veldhouse" <[email protected]> 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 <[email protected]> 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 <[email protected]> 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 <[email protected]> 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.

At 09 Jan 2008 18:16:52 +0000 Thomas T. Veldhouse 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 ...

I guess that depends on your POV. I find the subsidy and EFT are in each
other's ballpark, at least.

> 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.


You also are no longer under contract, either. I liken it to a magazine
subscription- a subscription is cheaper per issue than the "no committment"
newsstand price. Instead of a service discount for your two-year
"subscription" you get a phone subsidy.

> 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.

I agree fully. On the other hand, it's probably better for the free market
to eventually come to that conclusion that through forced regulation.

Plus, you never know what you as an individual can negotiate. When T-Mo
was out of stock on a particular handset I wanted in April 2006, (my
current WinMo phone,) I convinced them to apply a $200 "subsidy" directly
to my account in exchange for a one-year committment so I could buy the
handset I wanted from an independent dealer who had it in stock. It took a
bit of convincing, but I managed to get them to do it. (I did have to fax
them a receipt to "prove" I bought the handset before they applied the $200
credit.)

While I agree with your previous post that CDMA offers certain
technological advantages over GSM, GSM offers certain practical advantages-
namely it's not used by Verizon or Sprint, so GSM users aren't bound by
those carrier's oppressive handset policies! ;-)

"Thomas T. Veldhouse" <[email protected]> wrote in
news:[email protected]:

> 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.
>

It is clearly a loss. The monthly charge paid to the company is for
services rendered to use the phone, not equipment subsidized. This is
clearly stated in every service agreement.

In any event, every carrier reports the loss as a seperate line item on
their quarterly financials, and has done so for years. The government
(specifically the IRS and SEC) do not share your opinion. Grocery stores
and other big box stores get to right off the loss on their loss leaders
(products sold below cost to generate traffic)- this is no different.

On Tue, 08 Jan 2008 20:50:32 -0700, Todd Allcock <[email protected]> wrote:
> Having said that, unlike most carriers who seem to offer prepaid as a "last
> resort" for credit-challenged consumers, and at a price designed not to
> cannibalize their bread-n-butter postpaid biz, T-Mo aggressively pursues
> the pre-paid market, seeming to assume that anyone their prepaid offering
> lures from pstpaid is likely a high enough volume user that it'll be worth
> it. That seems to work for them, considering that their prepaid ARPU is
> (relatively) high, and their total ARPU is also relatively high considering
> their high percentage of prepaid customers compared to other carriers.

The cost to T-Mo for a prepaid customer is probably a lot lower than
their cost per post-paid customer. There is a customer support
organization for both, but all the freebies, billing, billing support,
payment processing, collections, etc. are only for post-paid.

The only ongoing costs for a "glove box" phone on prepaid are the
minutes that are actually used, and a tiny bit of the amortized
infrastructure necessary to deliver service (from the cell tower to
providing a means to refill the minutes). Probably the most expensive
(costly) t-mo prepaid customer is the one that buys a phone, uses the
allotted minutes just before they expire, then replaces the phone.

sdb
--
What's seen on your screen? http://PcScreenWatch.com
sdbuse1 on mailhost bigfoot.com

In alt.cellular.sprintpcs CozmicDebris <isheforreal> wrote:
>
> It is clearly a loss. The monthly charge paid to the company is for
> services rendered to use the phone, not equipment subsidized. This is
> clearly stated in every service agreement.
>

You know very well that a subsidy is not a loss on the balance sheet; it is an
expense. To make a profit, they have to earn more revenue than they put out
in expenses [which include the subsidy, labor, infrastructure and other fixed
costs]. A loss is only if they fail to net a profit. Another write off [or
loss] is depreciation, and that clearly is a category that a subsidy does NOT
fall into [although it is a category their inventory of phones can fall into].


> In any event, every carrier reports the loss as a seperate line item on
> their quarterly financials, and has done so for years. The government
> (specifically the IRS and SEC) do not share your opinion. Grocery stores
> and other big box stores get to right off the loss on their loss leaders
> (products sold below cost to generate traffic)- this is no different.
>

Yes, it is for depreciation of depreciable assets. Company vehicles,
depritiating inventory, even infrastructure all allow for that kind of loss.
A subsidy, however, is NOT a loss, it is an expense.

--
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.sprintpcs Todd Allcock <[email protected]> wrote:
>
> I guess that depends on your POV. I find the subsidy and EFT are in each
> other's ballpark, at least.
>

It really depends. Some of the phones they give away for "free" when you sign
up, are often old inventory that they want to clear for newer models and are
perhaps worth $30 to them on the balance sheet. So, you get a free phone that
is worth perhaps $30 to the carrier, but to quit you owe them $175, well, that
is quite a deal for the carrier no matter how you look at it. Basically, if
you buy new high end models in demand, then you are probably closer to that
equitable case where ETF is close to the subsidy.

> You also are no longer under contract, either. I liken it to a magazine
> subscription- a subscription is cheaper per issue than the "no committment"
> newsstand price. Instead of a service discount for your two-year
> "subscription" you get a phone subsidy.

It is really a source of revenue to the carrier ... they really hope users
keep the same phone for years or upgrade hardware, plans and re-contract.

It is this reason why the retention department is usually able to accomodate
you, because they know that it is free revenue anyway.

--
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.