Skeeter, I had the same weird experience. I was all for a knock down drag out price war, take all the analogue, GSM, TDMA and fixed line customers and make more money.
The reluctance to have a price war is mostly marketing philosophy. Price wars, "selling on price" and avoiding expensive fancy-pants customer loyalty programmes is anathema to MBAs who are full of fancy marketing ideas and need to have fancy programmes to justify exorbitant salaries. "Any idiot can cut price" is their mantra and they are NOT idiots.
In fairness, there are other aspects of a product's marketing and they have to be in balance. Staff training, customer queries and complaints, network maturity and coverage. But almost universally, price wars are considered totally uncool in marketing circles. Price destruction is a real bogeyman - they believe that prices can only go down; things must be premium priced to extract the last bit of juice and avoid as much consumer surplus as possible. That's why WalMart and Southwest Airlines can do so well. The competition is fat, dumb and happy.
What a load of crap. Whack the price down, stack it high and sell it cheap. Fire all the hangers-on doing irrelevant things such as managing customer airline points. It's a phone company, not a bloody airline.
The premium-priced, special packaging and marketing of individual minutes, as though each minute is a precious jewel, killed Globalstar and destroyed $4bn in capital and $10bn in market capitalisation and $30bn in value to customers. They got paid quite highly to achieve such dismal results.
The cost of each minute is less than 1c for both GSM and CDMA. So the rest of the price is to cover marketing flim flam and Big Corporate overheads, such as exorbitant salaries, stock options and featherbedding.
With average minute prices at about 20c a minute with all charges included, the 0.1c air interface component of the price the subscriber sees is too small to have a price war over. The price war would have to be in aspects of the other 19c. Which means the MBA's salaries and tricky-dicky marketing programmes. Which isn't going to be welcomed as an idea by those who'll have their salaries cut.
If there is a price war, and prices go down to 1c a minute, where they belong, it'll be a cold day in hell before a company will be able to provide "added value" such as airpoints, fancy shops, silly advertizing campaigns and big corporate overheads. A lazy competitor will simply leave their prices low and that'll be the end of the line for the corporate riches. Shareholders of the CDMA companies would make more money, but that's not necessarily the aim of management. The aim is to maximize their incomes and fun.
We [son and I] were about to start a stack-it-high and sell-it-cheap service in Auckland and a few other cities in New Zealand. The Telecommunications Commissioner has just given a decision that CallPlus has to only pay NZ1.1c [US half a cent] for interconnection. At that price, we could have provided 30 hours [1800 minutes] a month for NZ$20 a month at which price we would have got half the mobile users in Auckland and many fixed line users. An hour a day is pretty good.
It all got too hard and we were facing 3c a minute interconnection, which would have meant about $50 a month, which would have meant we'd get too few customers [probably]. So we have the comfortable, wasteful, overpriced Telecom-Vodafone duopoly in mobile phones.
They won't want a price war any time soon. Telecom has CDMA and Vodafone GSM. Telecom doesn't want to cut prices.
It's not really weird.
CDMA really is that much more efficient in the real world. But the CDMA efficiency is a small part of the overall deal, though it's gaining in importance. When cyberspace demand gets going, it'll be game over for the other technologies which simply can't deliver fast enough or cheap enough.
I aim to smash into them with RoamAD Subject 53383 - which can do megabytes for $10 a month and 20c a megabyte instead of Telecom's slow motion $8/megabyte and Vodafone's slower-still motion $10/megabyte [plus whatever other charges they have].
Mqurice |
