At 11 Jan 2008 13:23:44 +0000 Thomas T. Veldhouse wrote:
> > Go to the website of any major carrier, and compare the prices of their
> > prepaid phones to the same models unsubsidized without contract. The
> > prepaid version is less- usually far less.
> OK ... Let's use T-Mobile as an example as they are one that does their
own
> pre and post paid (unlike Verizon or Sprint who use subsideraries and
> partners).
Actually only Sprint, of the major carriers, relies solely on MVNOs- Verizon,
et al, does their own prepaid (as well as use MVNOs.)
> Nokia 2610: Pre=$29.99 Post=Free
> Motorola V195: Pre=$39.99 Post=19.99
> Samsung t219: Pre=$49.99 Post=Free
>
> I just went to the prepaid list and took the first three phones I saw and
then
> checked the price for post paid customers.
I'd forgotten that T-Mo doesn't sell no-contract phones on their website to
non-T-Mo customers, so I logged in to check the no-contract-extension price
of phones. For your three examples, the prices were $69.99, $89.99, and
$99.99 respectively- all $40-50 higher than prepaid, putting the prepaid
subsidy at about $50.
> Need I say more?
I'm not sure- the goalposts keep moving. I thought we were discussing
whether prepaid was subsidized. The amount of post-paid subsidy was a side
issue at this point! ;-)
> I will, that means that the subsidy for T-Mobile for these phones is no
more
> than $50 and yet, the ETF is much higher than that, so they get something
> other than a subsidy rebate from the ETF, but that is for another
discussion.
Again, you're using the prepaid price as a baseline, not the no-contract
price. The NC price puts the low end contract subsidy at $70-100, but yes,
it's less than their current $200 EFT. Higher end phones' subsidies, like
Blackberries, and WinMo phones are closer ($150-200.)
> > Verizon recently instituted a policy (at corporate
> > stores) when you can buy any Verizon phone at the one-year contract
price
> > (not the lower two-year) if you activate it prepaid on the spot. If
that's
> > not a direct subsidy, what is?
> >
>
> Depends upon any terms associated with it, I am not aware of the terms
except
> one is already obvious, activation. Like I already agreed, I didn't say
there
> are no subsidies, I said it is not the standard business model,
But that's my point- prepaid subsides, while less that their post-paid
counterparts ARE the standard business model due to competitive pressure
from other carriers.
> and in
> particular, I have mentioned it is not the standard business model for
> commitmentless phones. I believe I have been very consistant on that
point.
If you recall my original response, I did say I was "splitting hairs"- I
said prepaid and no-committment weren't necessarily the same thing. No-
committment phones are indeed unsubsidized. Prepaid phones sold at retail,
are. You seemed to disagree because of the "risks" involved in selling
below cost without a committment.
<snip pile of Tracfones in a Van/car story>
I recalled the story as a van instead of a car as well- there's apparently
multiple similar instances:
http://www.msnbc.msn.com/id/14347754/ seems to be the story we remember and
references similar others.
I also recall the reason the buyers gave for the bulk purchase was for
resale. If these phones weren't heavily subsidized, why would bulk
purchase at full retain be preferable to a wholesale purchase? The low-end
$15 Tracfone (a Moto C139, IIRC) wholesales to dealers for about $60 (in a
non-Tracfone customized version of course.)
> > If selling these handsets at $15-40 was so lucrative, why would
companies
> > care if I bought 50 and stored them in my garage? Could it be that
they'd
> > actually incur a loss?
>
> No, actually, they won't. If the phone was only worth $10 to them in
> inventory and you paid $15 for it, then they got to keep the difference
and at
> least got some profit on their depreciated inventory.
That's nonsense. How is a relatively NEW phone, like a Nokia 2610 or
Samsung Stripe "depreciated" by a manufacturer, carrier or dealer? The
phones debuted as postpaid and prepaid at the same time.
> The loss is the
> depreciation, not the sale to you for $15.
And why is one loss preferable to the other? You're entire argument seems
predicated on the idea that inventory depreciation is ok, or actually
desirable. Again, prepaid is big business. Carriers can't count on
leftovers and overstocks to fuel prepaid sales, and they don't.
> In this example, they would
> potentially pay taxes on $5 in profit and would write off depreciation
losses
> whatever they happened to be. They get to write off the depreciation
losses
> no matter whether you buy the phone or not.
Again, cellular is far too mature for me to belive that tens or hundreds of
thousands of a particular model are sitting around wareghouses depreciating
into $10 phones, while Nokia and Motorola are beating their heads against
the wall trying to hit the $30 price point for Indian and Chinese carriers.
Hundreds of thousands of prepaid phones are hanging on peghooks at big-box
electronics retailers, drugstores, convenience stores, grocery stores, etc,
all over this country, and they aren't a pile of random overstocks and
leftovers- they're a calculated, pre-planned group of phones packaged
specifically for retail prepaid sales.
> I cut all the rest because all the content was supported by your comments
> which were refuted above.
Your entire theory is based on the fact the depreciation write-offs make
under-cost sales somehow "profitable," and therefore desirable. The
depreciation itself is undesirable and would rather be avoided. Prepaid is
too important a side business for carriers to rely on continual accidental
overstocks as the source for equipment. You've not addressed any of my
main points:
* Retail prepaid phones are often (but admittedly not always) the same
models available for contract use, and often introduced at the same time
(rather than closeout/overstock.)
* Wholesale cost of the dirt cheapest cellphones (not even the better low-
end phones we're discussing! is between $30-40 (source RCR Wireless News'
constant articles about emerging nations wireless.) So a "profitable" $15
sale is simply impossible.
* Depreciation shuffles money around the books from one column to another,
but any depreciation expense is still an expense, and doesn't make selling
below cost desirable in order to rack up more depreciation expense!
The bottom line is that prepaid phones are subsidized by carriers, and this
IS the standard prepaid business model. However, the prepaid phones are
subsidized to a lesser extent than contract phones are, obviously.
And, frankly, I don't find your theories and arguments surprising- over a
decade of availability of "free" phones tend to blind us to what these
little marvels actually cost to manufacture, package and distribute.
Contracts. Why?
Linear Mode
