Re: Verizon Wireless doubles early termination fee


"Carl" <crothman@xxxxxxxxxxxxxxxxxxx> wrote in message
news:4af9a9e6$0$4995$607ed4bc@xxxxxxxxx
Dennis Ferguson wrote:
On 2009-11-09, Carl <crothman@xxxxxxxxxxxxxxxxxxx> wrote:
Dennis Ferguson wrote:
Actually, mobile companies in many (most?) other countries run their
business exactly like that. Plans which aren't paying for a phone
are cheaper than equivalent plans which came with a phone. Even in
the US T-Mobile gives you a $10/month break on their contract-free,
no-phone-subsidy plans now.

Unfortunately the market in the US doesn't seem to be as intensely
price-competitive as other places so the carriers can mostly get
away with taking higher margins from out-of-contract customers.


You may have a point there. But what we (the layman-consumer) don't
know is if that $40/month basic plan (for one example) has a large
enough profit margin in it to cover both the service AND the cost of
a phone within only 24 months.

Perhaps Verizon (and others in the U.S.) work on a sort of
'capitation' system: that is, they depend on people continuing the
service without taking a new phone to defray the costs of the people
who do take phones; sort of an 'averaging out' system.

The only difference between your suggestion and mine seems to be
that your suggestion sees Verizon as eking out a living with bare
margins while mine has Verizon getting rich with fat ones.

But even we, the layman-consumer, can google up Verizon's 10-Q and
read it. VZW's postpaid retail ARPU is $51.20, so they apparently
have lots of customers (likely at least half) whose bill is about $40
per phone, yet VZW's operating margin is 28.4% in an industry where,
world-wide, a carrier managing to make a 10% margin is considered
fairly successful. And note that AT&T's operating margin last quarter
was 24.6%, while T-Mobile's from a couple of quarters ago was a
whopping 34%. The comparison with other countries shows up clearly
in the 2009 OECD survey of mobile service in 30 developed countries
which found that the US market was the most expensive of the 30, on a
PPP basis, for "low" and "medium" users, and 6th most expensive for
"high" users.

These are not companies squeezing down to razor-thin margins to
compete on price, in fact they don't compete on price at all. They
are big, fat cash cows, with high ARPUs and wide margins, generating
profits that
are unmatched in their industry just about anywhere else on the planet
and keeping their prices high to maintain them.

So I think it is highly unlikely that Verizon makes all its money from
out-of-contract customers who don't buy a new phone. They just make
even more money than normal.

Dennis Ferguson


Thank you for the most intelligent, well-informed and informational
response to date. These facts and figures give bite to your argument.

The ONLY point I can make now, in the light of your very factual
presentation, is that we need to decide if we like living in a
capitalistic society or want to move more toward socialism. Whenever
people question the right of a private company (as opposed to a "public
utility", not "private" as in "not-traded") to make the profit they can, I
wonder what they're thinking. Part of the point of a free-enterprise
system is that consumers should regulate the prices of a company by making
different shopping choices. If they choose to continue with a company that
charges more, that's their choice, and does not mitigate the right of a
free-enterprise company to make the profit it can, and might speak well of
the company's service compared to its competitors. When I want a
Mercedes, I don't expect them to charge the same as a Toyota. If Vz is
too expensive, leave them and go elsewhere if price is your overriding
factor. It really is as simple as that. I guess this bothers me because I
see it as consumers wanting the best of everything and the lowest price
too, sort of like they have grown up to believe that they should be
protected by someone from all evils. Yes, they have a right to complain,
and perhaps a right to change the system, but sometimes complaining sounds
a lot more like whining.



As an American, shouldn't I be getting the service, I deserve? LOL . I
believe in capitalism, and that's why I'm willing to pay Verizon over all
competitors for a service, price ratio that best suits my needs. I still
have the right to have a few pet peeves


.

Relevant Pages

  • Re: Verizon Wireless doubles early termination fee
    ... are cheaper than equivalent plans which came with a phone. ... away with taking higher margins from out-of-contract customers. ... that your suggestion sees Verizon as eking out a living with bare ... compete on price, in fact they don't compete on price at all. ...
    (alt.cellular.verizon)
  • Re: Verizon Wireless doubles early termination fee
    ... Plans which aren't paying for ... enough profit margin in it to cover both the service AND the cost ... that your suggestion sees Verizon as eking out a living with bare ... compete on price, in fact they don't compete on price at all. ...
    (alt.cellular.verizon)
  • Re: Verizon Wireless doubles early termination fee
    ... cheaper than equivalent plans which came with a phone. ... away with taking higher margins from out-of-contract customers. ... margins while mine has Verizon getting rich with fat ones. ... on price, in fact they don't compete on price at all. ...
    (alt.cellular.verizon)
  • Re: Verizon to kill grandfathered unlimited data plans this summer
    ... capacity while not crashing the price for users that are willing to pay ... unwilling to pay their asking price. ... contract plans, and a second set of cheaper "value plans" that cost about ...
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    ... Does the price of oil actually make much difference to the shareholders' ... WA banana growers loved it when Qld lost ... 13 - someone's margins went up by factors of much more than 13. ... Won't find too many bunnyhuggers in .au. ...
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