<When you have spoken to the SP's and the Distribs who sell the G* service and argue your pricing theories, what kind of response have you received? I mean, how in the world can a collective $600 billion in market value, decades and decades of experience and hundreds upon hundreds of millions of dollars invested get it wrong? One more thing, when I call GMPCS and ask about the pricing and give them a mini-rant, their response has consistently been G* is basically right on the mark with their pricing. This coming from the largest seller of G* phones in the world, guys who eat, live, breathe Sat telephony. >
Thomas, I have no idea why GMPCS says Globalstar is right on the money with their pricing. As a distributor, they should want the cheapest pricing they can get from the wholesaler.
GMPCS has got no idea what pricing Globalstar should use to balance handset production, gateway and software rollout, minute availability and marketing development to maximize NPV. That's information that Globalstar LP and Vodafone might have some idea about in discussion with QUALCOMM, Telit and L M Ericsson.
Why should GMPCS not want the handset and minute prices cheaper to them and the subscribers? It doesn't make sense.
I have only had direct comment from Vodafone and Globalstar and hearsay from Gregg Powers. Globalstar has commented over and over, in public comment, that they have market research backing their pricing and demand. That matches what I've heard in person [at Telecom99 and during a visit in June99].
When I suggested, in person, a better way of developing the market and getting to the sweet spot, they more or less 'humoured me', a bit like they might try explaining to the village idiot that they know what they are doing and not to worry my pretty head.
Readware used to take the same approach. It's common to people who are so certain of their position and important place in society that they don't even need to think, let alone listen to somebody else and then answer the person in rational terms which convince the person with the weird idea that they have in fact got a bad idea.
I suppose I should have sold my shares because I realized they would go to market with their wacky ideas but without Wacky Wireless and it would take about a year for them to be knocked into shape by subscriber lack of response. Being a bit more humble than they are, I considered that I could be wrong so decided at $15 to not risk letting it get away if they were right. So I bought heaps. I guessed the price would go to $10 and possibly as low as $6, but I had no idea they really would take a full year to do something serious about their marketing mess and come to understand that their pricing really was too high for normal humans to adopt in the numbers required. I didn't want to miss a rise to $100s waiting for $10 or if very lucky, $6, because I could have been wrong and missed a bargain price.
But notice, the Mexican service provider did halve their minute price a few weeks ago. So they are starting to respond to the facts of life, as all of us must [or die].
There were other lowerings of price during Y2K, which shows that they were WRONG about their pricing plans and now KNOW they were wrong. If they were NOT wrong, they would not have lowered their prices. They were plain wrong and I am so smug about being right, and it's worth being bankrupt for the pleasure of being right! [Just kidding...]
I'm used to big, dumb, multinational corporations, having worked in BP Oil International for quite a while and dealt with literally hundreds of other corporations and government agencies. It's quite amazing because they are full of highly intelligent individuals, but somehow the individuals are subsumed in a dinosaur mind-set. So I wasn't really surprised that Globalstar [including Vodafone and co] evinced the same behaviour patterns.
So, how can $600 billion in market value and decades of experience and all the market research and MBA power available get it so wrong? Easy peasy!
For a start, they DON'T have decades of experience. The individuals are just people, who have husbands, wives, headaches, mortgages and hopefully some related knowledge which might help them make Globalstar work. Many only joined in the past 5 years. Before that, they might have worked in related fields.
But remember that until recent years, telecommunications was a government monopoly and is still heavily regulated. So their experience doesn't generally include the concept of consumer surplus and is very unlikely to include the idea of customers as the defining force for the company. They think THEY are the centre and customers are like sheep, to be fleeced.
The corporation doesn't have memory. The individuals do. So, when they hire the mathematician Marketing and Operations Manager, they get somebody with their own collection of neurons which might or might not be patterned in the right way for Globalstar to succeed. The individual's decades of experience might be irrelevant or counterproductive. Anyway, brain function beats experience any day. If you can get both, that's best. Great experience and dumb ideas is not as good as little experience and great ideas.
So the experience is of limited extent and value. A government telecoms monopolist probably won't be good at persuading customers to buy in the right numbers.
The $600bn is irrelevant. More money than sense is almost guaranteed in such a situation. People with heaps of dosh are far less particular about its expenditure than somebody on a tight budget. We used to hear how there wasn't a cost which Bernie liked. Well, we have had ALL costs and no income, so the ratio is pretty ugly right now.
Money has a thermodynamic entropy equivalent = whenever money is spent, there are losses and inefficiencies. It's impossible to get the best effect for every dollar. When one person has to spend a LOT of money, their expenditure efficiency goes down because they don't have the brain space to handle each dollar with the care and attention which they could give to a little bit of money.
Market Research is always hopeless. I haven't seen what I'd call good market research yet. Market researchers are not scientific - they mostly test verbal behaviour and don't seem to know about confounding variables, which epidemiologists pay attention to. Epidemiology is a similar business now that I think about it.
I doubt that they have done real market research which would involve selling thousands of phones and heaps of minutes to real people. The company will of course keep their actual market research secret. They'll say it's for commercial reasons but really it will be because it is so embarrassingly useless - they will have asked stupid questions such as "Would you like a phone you can use anywhere?" Well, duh! I would bet you $100 that nobody from Globalstar contacts me after somebody reads this and gives me a copy to scrutinize. I'll give you ten to one odds if you agree. They could put it on their website [so that everyone could have equal access to important information]. Fat chance. They don't even know how many minutes they have used each day and won't put that on their web site if they did know it. So they certainly won't publish embarrassing nonsense.
I also heard from one Globalstar person [3 months ago] that 'cutting the price so much would make it look as though we are panicking'. Which suggests that they realize it might be a good idea to cut prices to heat things up. So, you can deduce from that comment that saving face is important to them. Which is funny, because at under $1 a share and with almost no sales, they were obviously about as wrong as they can be.
It's funny how Westerners talk about Asians wanting to 'save face'. The syndrome is alive and well in Globalstar too!
But don't panic. All big companies are made up of people and I haven't seen anything to say that Globalstar is worse than average. The individuals are all decent enough from what I've seen. In fact, I quite like them.
The good part is that they own an amazing bunch of New Paradigm technology with a wide open technological and commercial pathway to 2010. They will get it right - hopefully in time. Sure, they have egg all over their face and I was right and they were wrong. Nyah, nyah, nyah, as Jon would say.
They are also juggling the exclusivity agreements which would be affected by wholesale price cuts which could affect Globalstar LP profitability, so there are some serious effects to be careful of. It's not a simple matter to jump prices around all over the place if there are contractual terms controlling that. I don't know what those contractual terms are, but there are sure to be plenty.
If I remember rightly, Gregg Powers has also been told that Vodafone was comfortable with their pricing [a few months ago now]. Bernie said they haven't asked for discounts. They haven't made major changes. $2 to $1 a minute is a significant move but was not a major move - that's typical Mexican negotiation; cutting the price of something from $100 to $20 when $5 would be expensive, but they act as though $50 is a bargain. We'll soon see how right they are.
Mqurice |
