Hi Ralph, thanks for going through it all carefully.
I agree with what you wrote and even the last part might be right:
<On the other hand, with wireless companies, I suspect that "Cat's Eye" pricing is not going to be worth the trouble. I personally would think of it as a "marketing gimmick" just like the 1 minute vs. 6 second billing and no montly charge vs. monthly charge on long distance companies. The value added to the customer is likely to be very small while the costs or implementing the gimmick will be real (IMHO). I personally would not go to cat's eye price plans as I want to make the calls I want to make when I want to make them, and I KNOW the wireless company has a better database to get their revenues from me one way or another than I do to beat them at that game. >
It comes down to how much subscribers value call quality, being able to make a call whenever they like, having a solid coverage service without cell shrinkage and dropped calls and how much money they are worried about wasting.
In the current markets for cellphones, those are still very important aspects of systems. Service providers are failing to satisfy their subscribers in those respects.
Your comment that 6 second calling instead of 1 minute timing is a gimmick. To you it is, but not to me. I pay NZ$1.34 a minute during working days for cellphone calls [about US70c]. I try to get calls finished before one minute is up and I only make calls if I really have to. I do a mental calculation of how valuable the purpose of the call is and whether it would be better just to wait until later or not make the call at all.
In New Zealand, most people are very price-sensitive and are very, very aware that when they use or call a cellphone, they are gushing cash and it worries them about as much as gushing blood because both are essential ingredients for continued life.
The current prices of cellphone calls, which have been relatively stable for years now, are a major impediment to use of cellphones, so it is not true that pricing is now so low that subscribers are indifferent to pricing. That's why people have caused fraud to be a problem for Leap - they are trying to save some money and Leap's service is too expensive for them to just pay the price and get on with it. They are willing to take risks of punishment to save some money!
So, price is proven to be still one of the dominant ingredients in cellphone usage.
My opinion is that a service costing a third of the current cost would be very popular. You say it would not be more popular. That's one difference in our views.
Another is the question of being make a call whenever you want to. Right now, you can't! So you are already unsatisfied. With Cat's Eyes pricing, you could always make a call.
Right now, cellphone services [and cyberspace] are subject to epileptic fits and there is quite a similarity. Epilepsy is an electrical overload as circuitry goes haywire. When something like the WTC attack happens, people light up their cellphones. Systems are overloaded. Most people are denied service. Noise levels rise to a cacophony as people hit redial constantly in a vain attempt to make a call. Some people get through.
Those times just happen to be the very times when you really, really MUST get through, because that's when dramatic stuff is happening and you need to know what to do, where somebody is, call for help or something or other. You can't make a call at those times on your current service.
With Cat's Eyes pricing, you could ALWAYS get through. Service would ALWAYS be available. That point seems to have eluded you. It's like a tomato auction. At the markets, you can ALWAYS buy tomatoes, even when the crops have failed, blight has ruined 99% of the crop, demand is high and bidding is frantic. You just have to pay $100 a tomato, or maybe $1000. There is a price at which you will be able to buy a tomato.
The USSR system was that prices were fixed at 10c a tomato, always. There were queues for the very few tomatoes which made it to market, bribes were necessary to get some. Tomato aficianados went without while others who didn't really want them were the lucky ones and figured that if they could get them, they might as well since they were apparently so popular. Waste was edemic.
The USSR Kremlin Central Planning universal standard price and quality approach to markets which Leap uses is not a successful way of life when competitors offer the free market way of life.
Epilepsy stinks! Brain failure is bad. Subscribers who can't get through get very frustrated and angry. Watch them on the street, cursing and muttering. As you say, you want to be able to make calls any time you like. You can't with your current service. But you'll only find that's true when you really, really, really need to make a call. The solution is Cat's Eyes pricing. It's cheaper, it's better and everybody's happy.
What it comes down to is how much subscribers value being able to make urgent calls even in peak times, how much they want to save $20 a month, how much they care about constant coverage and minimal cell suffocation due to loading variation, how much they care about dropped calls, how much they value voice quality.
You say they don't want improvements in those things. I say they do. They have wired phones because they are cheaper, not so that people can't easily steal the phone [they just unplug anyway]. They avoid making cellphone calls because they cost too much. They curse when calls drop. They mutter when there's no coverage and wave their phone around in the air looking for a signal. They hate being unable to hear the scrambled voice coming through the phone. They do not want to be the one having epileptic fits.
I used the airline example to show the importance of loading. As you point out, airlines have high marginal costs. That's why it's even more important for near-zero marginal cost cellphone service providers to keep their systems fully-loaded.
Very high marginal cost businesses, where 99% of the cost is marginal, can run at 2% capacity or 98% capacity and they can still succeed in business. Businesses with zero marginal cost for another unit of service have to run full.
That's why the vast telecosmic failure took place wiping trillions off world market capitalisations. They tried to run a capital intensive business like a gormet hamburger bar. Globalstar is a fine example of such failed concept. A global network was built which they tried to run at 1% of capacity. Global Crossing was another such example.
They didn't understand that loading was vital. They didn't understand that perishable goods have to be sold that day. Globalstar has had 20 billion minutes rot in space, unsold. At 1c a minute, that would have been $200 million, which is a lot more than they got. When loaded, they could then move the price up to what the market would bear.
Billions are still being wiped off telecom market caps. Interestingly, the cyberspace revolution failed because the cyberspace companies understood the mechanism of zero marginal cost of production and started at zero pricing, hoping to get eyeballs and then raise prices, but there wasn't really any demand for their products [most of them anyway]. Yahoo! Amazon and many others will succeed because they got the combination of cheap service to start and good product just right.
Mqurice |
