Time For Palm To Drop WebOS And Embrace Android

from the the-time-has-come dept

It appears that Wall Street is giving up on Palm after sales of the Pre have been massively disappointing, and Sprint (their only US partner) appears to be focusing more and more on HTC Android-powered phones these days. At the same time, developers are recognizing that if they're creating mobile apps, they need to decide which platforms to work on, and the markets for the iPhone and Android smartphones look a lot more exciting.

This is, in large part, due to poor planning on the part of Palm and Sprint. First, Palm was way too slow in really opening up its developer program. By the time it finally got around to it, more and more Android phones were hitting the market, with much more of a marketing push. Developers, given the choice, will go for the platform that actually has users. That's why I still say it was a huge mistake for Palm and Sprint not to have figured out a way to give away the Palm Pre for free. The thing that Pre needed more than anything else was market share. With market share it could attract developers and a loyal following. Without that, Palm is dead and everyone knows it. Having failed at that, and now thrown away its head start over the rush of Android-powered devices hitting the market, Palm is quickly looking like an afterthought, just months after the Pre was released.

I actually stopped by a Sprint store earlier this week, because I was interested in seeing its recent Android-powered phones in person. I played around with them, and then picked up the Palm Pre as well -- and I have to admit that the hardware on the Pre is really nice. It's just a much nicer overall package than the HTC Hero (an Android-powered phone) -- more compact, had a more solid feel, and the slide out keyboard is actually quite nice (if a bit small). But, after seeing all the developer support moving towards Android, I have no interest in betting on a dying OS. And that's when I wondered why Palm didn't just release an Android-powered Pre as well. I recognize that it's got a lot invested in webOS, but it's a sunk cost and a losing strategy.

A few years back, after years supporting its own Palm operating system, the company started offering Treo's that supported Windows Mobile. It's time to do that again, but for Android, letting the company actually make use of a much larger, committed developer community, rather than trying to keep the whole thing in-house.

49 Comments | Leave a Comment..

Sprint Offers Palm Pre For $100 For A Month, Maybe Two... Then, Oops, Not At All

from the great-moments-in-marketing dept

I recently explained why I thought Sprint made a rather large strategic marketing error in pricing the Palm Pre at the equivalent price of an iPhone: $199 (after annoying mail-in rebate that turns many buyers off). In fact, I argued why it would make a lot more sense to further subsidize the phone all the way to free, and make up the money on the backend with more subscriptions. Given how heavily invested Sprint was in the Pre, and how pathetic the sales have been to date, it really makes very little sense to keep the price so high. So, at the very least, I thought it was a good first step this morning when it was "announced" that Sprint was offering the Pre at $99. Of course, there were some silly things about this promotion as well. First, it only applied to new customers, transferring numbers over from other carriers. What better way to mock your loyal customers than to offer others a better deal? Second, they didn't just discount the phone, but gave you a "credit" that was split over the first three bills (better than a mail-in rebate, but still annoying). However, what was even stranger was that Sprint didn't even seem to understand the promotion itself. John Paczkowski noted that in some places on Sprint's website it said the promotion ran until October 10th. In others it said October 31st.

Apparently, the confusion at Sprint headquarters went well beyond that, because as the company attempted to sort out the confusion, it announced that it was doing away with the special promotion entirely. And yet, even after announcing it, the offer page remained on Sprint's site. It's not at all clear what happened here, other than Sprint seems somewhat clueless in how to do basic promotions, pricing and marketing. Obviously, the company intended to offer the phone for $99 -- it's on the company's own site. And yet, now it's suddenly claiming that it was a mistake? I can already see the business school case study on how not to launch an innovative smart phone.

19 Comments | Leave a Comment..

Why Sprint Should Be Giving Away The Palm Pre For Free

from the just-get-that-sucker-out-there dept

There was plenty of hype around the launch of the Palm Pre, which by all accounts is a pretty damn good phone (I've played around with it, and like it). However, Palm and Sprint made two huge mistakes in marketing it. First, they didn't have a really well-developed developer community building apps for it, so the app store is pretty weak. Apple did this with the iPhone when it launched (and we dinged them at the time as well), but Apple got away with it for two reasons: Apple is leading the field in such smartphones, and it's Apple, who seems able to bring developers to the table with cultish enthusiasm and loyalty.

Palm doesn't quite have that.

If the problem was that the SDK wasn't ready, Sprint and Palm should have waited. Launching before the phone was really ready was a mistake, and the company may be paying for it with rather weak sales after an initial burst. However, one analyst has a suggestion that I think makes a lot of sense, saying that Sprint should drop the price of the Palm Pre to $0.99. Basically, let Sprint subsidize more of the phone -- which it would easily make back in service fees (since the phone requires a two year contract with its most expensive data plan). Pricing the phone at $199 makes it a direct comparison to the iPhone, and that's the last thing that Palm or Sprint should want. But dropping the price to $1 (or, hell, give the damn phone away for free with a two year plan), would get it a lot of attention, and give people a real reason to switch away from other carriers or other phones, and give the Pre a shot. Trying to compete with the iPhone by just saying "but we're better" doesn't work. Rather than spending tons of money on creepy TV commercials that make no sense, why not use that ad budget to subsidize the phone in a way that really builds up a lot of attention and serious buyers? If Sprint did that, I'd go sign up for a Palm Pre that very day.

65 Comments | Leave a Comment..

Sprint Still Looking To Connected Devices For A Boost

from the where-are-the-products? dept

For quite some time, mobile operators have been talking about how they want to get mobile connections in all sorts of consumer electronics as a way to grow their businesses. For instance, Verizon Wireless got a ton of press in November 2007 when it announced it was "opening" its network -- but the pledge hasn't yet really delivered much in the way of new devices or services. The Amazon Kindle remains about the only moderately successful example of the concept in practice, though there have been a few other products. The WSJ is reporting, though, that Sprint is still looking towards connected devices as a big part of its future growth. The Kindle's data connection, supplied by Sprint's EV-DO network, works well both technically and in terms of its business model, which is invisible to the end user, so Sprint should have a decent idea of how the system can work. But if this market is really as promising as the operators have been saying for a few years now, it's time to get some more devices available to consumers.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

12 Comments | Leave a Comment..

Sprint Wants Its Government Handout, Too

from the brother-can-you-spare-$2-billion dept

Sprint has sent a letter to the incoming Obama administration making a pitch for a $2 billion emergency communications network (via Phone Scoop) for first responders. Sprint's plan calls for satellite-equipped trucks (that sound like mobile base stations on wheels) and up to 100,000 handsets and other gear to be stockpiled around the country so that it could be delivered anywhere in the US within four hours. Sprint wants the plan included in the economic stimulus plan working its way through Congress -- and it's just coincidence, of course, that Sprint would be a huge beneficiary of such legislation, and $2 billion would give its struggling business a big boost. Without a doubt, public-safety communications are in need of a serious overhaul, and this is an area that the FCC and other parties have been looking at for some time. It's a complex situation -- one that deserves a more thorough investigation and solution, rather than a piece of government pork.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

19 Comments | Leave a Comment..

Mixed Messages From Sprint On EVDO Bandwidth

from the this-doesn't-quite-make-sense dept

Earlier this year, Sprint followed Verizon in tacking on a 5GB cap on its EVDO wireless broadband offering for computers (for either datacard or phone-as-modem users). Because of that, I find Sprint EVDO a lot less useful, and am actively looking for alternatives. Unfortunately, for now there aren't many, though I hope that will change. Either way, I end up using Sprint a lot less, and would be a lot more open to competitors. One of the reasons I stuck with Sprint for so long was the unlimited nature of the EVDO. Even if I don't use up 5GB, not worrying about reaching a limit used to be a huge benefit. Now, when I use EVDO, I feel like I need to carefully track what's happening -- since Sprint might cut off my service if my usage is deemed abusive.

Now, to make matters even more ridiculous, it appears that Sprint has signed a deal "valued at $500 million" to stream live football games over EVDO to its mobile phones. (Half a billion sounds like a big deal, but it doesn't actually mean $500 million was paid out -- it's likely much of it involves trades of promotion and services.) Now, the tricky part is that the 5GB cap on EVDO does not count towards content viewed just on phones, so Sprint is sending a very mixed message. First Sprint says that there isn't enough bandwidth on its network to support really unlimited usage for PC users, but then it's also coming up with ways to increase the amount of bandwidth its customers are using on phones. Does that mean Sprint doesn't care about PC users on its network -- and datacard users will be further squeezed as Sprint prefers its phone customers to use up the wireless bandwidth? Shouldn't Sprint focus on improving its network so that the bandwidth limits for PC users doesn't get worse rather than buying into deals to increase the bandwidth burden?

22 Comments | Leave a Comment..

FCC Just Couldn't Stop Voting

from the election-day-festivities dept

Well, it's election day and apparently the FCC commissioners liked voting so much they took votes on just about everything. Amazingly, it looks like they even made some good decisions. The big one, of course, and the one that will get the most press, is the unanimous vote to free up television "white space" spectrum. While the NAB made a last ditch effort to stop this, the FCC made the right call here. This spectrum can be put to much better use, which can have a huge impact on increasing innovation and wireless technologies. This is a big win. The FCC also approved Sprint and Clearwire's deal to set up a joint venture for their WiMax operations, as well as allowing Verizon to buy Alltel. Both of those deals make sense as well, so it's good to see them approved.

Other than that, the FCC said that it's going to start looking into the pricing policies of cable companies... and Verizon. Who's missing? FCC boss Kevin Martin's best friends over at AT&T. To be honest, while it's quite likely that the cable companies and the telcos (yes, including AT&T) are abusing their oligopoly position, the answer shouldn't be having the FCC act as a watchdog over pricing policies, but for a better system to be set up that encourages real competition. In the meantime, though, can someone explain why AT&T was left out of the bunch?

7 Comments | Leave a Comment..

Cox To Enter The Mobile Phone Business... For Real

from the didn't-expect-that dept

It's no secret that the various cable companies have been interested in offering some sort of mobile phone service. A few years ago, the biggest cable companies (Comcast, Time Warner Cable and Cox) teamed up with Sprint to offer mobile phone service under their own brands, building on Sprint's experience in allowing others to offer their own branded mobile phone service (known in the business as being a mobile virtual network operator -- or MVNO). Of course, since then, a ton of MVNO efforts have failed (remember ESPN's own mobile phone service?) and the cable companies never actually moved forward with offering service on Sprint's network. There was some thought that the cable companies were still interested in something in the mobile space, and Comcast and Time Warner are a part of Sprint's WiMax offering, but clearly Cox had decided to go its own way by that point.

Even so, it's quite surprising to find out that Cox is entering the mobile phone business for real -- as in building its own network. The company has apparently been acquiring spectrum to serve its market, and negotiating with handset providers. The article is a little unclear, but it sounds like there may still be a roaming agreement with Sprint, since the article claims the phones will work on both Cox's network and Sprint's -- suggesting Cox is working on an EVDO network. However, the company also claims that it's looking at using LTE as its "4G" technology. LTE is the technology chosen by pretty much everyone else in the US but Sprint, which is betting on WiMax.

Cox claims that its mobile service will be highly integrated with the other aspects of its business, including letting people watch TV on their handsets, control their DVRs from the handsets and automatically synchronize phone address books with home computer address books. It's good to see them thinking about real integration between services, because that's still pretty rare, but those services are all going to need to work pretty well together to make it really convincing for most people. Either way, you could see this as the epilogue to the death of MVNOs. While we've already seen that most MVNO plans went nowhere, it's quite a statement when a company is now choosing to build its own damn network rather than just piggybacking on someone else's.

12 Comments | Leave a Comment..

WiMax Finally Available... In 2008... In Baltimore

from the took-'em-long-enough dept

For years and years we used to make fun of the press and analysts for either saying that WiMax existed when it did not or for predicting huge uptake before the tech was even ready. Plenty of companies offered wireless broadband, but it was not WiMax, no matter what they (or the press) called it. Back in 2003, we even made a pretty clear prediction: WiMax would not be ready for prime time until 2008, going against plenty of analysts who insisted it would be the big thing in 2004. And 2005. And 2006. And 2007. So, it's nice to see Sprint squeeze in the launch of its WiMax Xohm service before the end of 2008, and make our prediction accurate. Of course, those analysts who predicted huge WiMax success stories in 2004 have moved on and have already declared WiMax dead, and now LTE is the huge success story to watch out for. Let's wait and see on that one as well. There's just something about wireless technologies that make the press and analysts assume that what is being talked about at the tech level will take the world by storm immediately. These things take time.

3 Comments | Leave a Comment..

Court Makes Sprint Pay $73 Million Early Termination Fee

from the see-how-that-feels? dept

You know that awful feeling you get when your mobile operator tells you there's a huge "early termination fee" for canceling your contract early? Yeah, that's probably about how Sprint executives feel now that Sprint may need to pay $73 million for its ETFs. A closer look at the details shows that it really would just be refunding $18.25 million and then reversing charges on another $54.75 million in ETFs that hadn't been paid. People absolutely hate ETFs, and even Sprint acknowledged this last year when it noted that its eventual WiMAX network won't have ETFs.

However, there is a reason why such ETFs exist: it's basically to recoup the subsidy that mobile operators pay to give you your super cheap mobile phones. And, those ETFs were in the contracts offered to customers, so it's difficult to see why such things are really a problem. The actual ruling sheds some light on this, as it notes that in 80% of the ETFs, it was actually Sprint terminating the contract and then still charging the ETF -- which, as the ruling points out, is basically Sprint trying to get "liquidated damages." Then, the problem is that it does so in violation of a specific California law that requires a more accurate calculation of liquidated damages, beyond "the ETF is $200 no matter what." So, this isn't the end of ETFs by any means, but might mean that they need to be a bit more fair going forward.

42 Comments | Leave a Comment..

AT&T Wants To Throw Some FCC Roadblocks Into Sprint, Clearwire Joint Venture

from the good-luck-with-that dept

In a move that is clearly designed to just piss off and waste the resources of a competitor, AT&T has filed papers with the FCC opposing Sprint and Clearwire's plan to merge their WiMax divisions, which was announced a few months ago (found via Broadband Reports. Of course, AT&T has a chummy relationship with the FCC, who has allowed it to merge with telco after telco without many real conditions (and even telling it that it can ignore some of the conditions it agreed to to get those mergers approved).

In this case, AT&T claims that it isn't really opposed to the merger, but it's filing opposition papers because it feels that Sprint and Clearwire aren't receiving the same level of scrutiny that AT&T received in its mergers, specifically with regards to it spectrum holdings. This seems like grasping at straws by AT&T just to throw some sort of extra paperwork roadblock in the path of the new Clearwire, which is an obvious competitor.

4 Comments | Leave a Comment..

Before Getting Bought By Verizon Wireless, Alltel Tried To Buy Sprint, T-Mobile And AT&T Wireless

from the merger-mania dept

After being rumored for years, Verizon Wireless finally bought Alltel earlier this month. However, Alltel's CEO has now admitted that the company wasn't just looking to be acquired these past few years. It had, itself, aggressively looked into buying Sprint, T-Mobile or even AT&T Wireless at times. In fact, it tried to buy Sprint three separate times. The other two certainly seem like longshots. Deutsche Telekom appears to have no real interest in getting rid of T-Mobile, and depending on which version of AT&T Wireless you're talking about, it would have been difficult to convince the various parent companies involved that a sale to Alltel made sense. And that, of course, ignores the fact that T-Mobile and AT&T Wireless were from the GSM camp, rather than the CDMA camp. Still, it is interesting to see that the smaller Alltel was looking at buying its way up the food chain.

19 Comments | Leave a Comment..

The Meaningless WiMax Patent Pool

from the somebody's-missing.... dept

There are some folks who believe that the solution to patent problems is to just have everyone who claims to have a patent on a certain technology throw it into a "patent pool" and then those who use the technology pay up a fee that gets divided up among pool members. It sounds nice, but in practice, it almost never works. Setting up a patent pool actually encourages the wrong behavior: it encourages plenty of other patent holders to claim they deserve to be a part of the pool, and if they're not included, they start suing like crazy. Also, it encourages companies to try to get any kind of patent that might get them included in a pool, leading to all sorts of crazy claims. It's the exact opposite of the type of behavior that should be encouraged.

So, don't read too much into the fact that a bunch of companies in the WiMax space have agreed to put together a patent pool under the amusingly inaccurately named "Open Patent Alliance." The companies involved, Cisco, Intel, Samsung, Sprint, Alcatel-Lucent, and Clearwire are all betting big on WiMax deployments, so they know it's in their best interest to get the licensing out of the way. But you'll notice that there are a lot of companies missing -- including Wi-LAN who has been claiming that it owns all the key patents over WiMax technology for years. The patent pool sounds nice, but it's certainly not going to diminish the number of patent lawsuits that arise over WiMax technology. If anything, it's just going to make all those other companies even angrier.

4 Comments | Leave a Comment..

EVDO Isn't A Third Pipe: Sprint Follows Verizon Wireless With 5GB Caps

from the thanks-for-nothing dept

Well, this is unfortunate. Every time people want to pretend that there's "real" competition in the broadband market beyond DSL and cable, you hear them talk about 3G wireless services like Sprint and Verizon Wireless' EVDO. Of course, Verizon Wireless caps its EVDO service at 5GB/month -- go over that and it will cut you off. Sprint, however, remained customer friendly and having sold people "unlimited" plans, stuck to that plan and let folks use EVDO as much as they wanted to. I'm one of those customers, and have been a big fan of the service. When I travel, I use it constantly. It's convenient, reliable and more secure than WiFi. While it's not often, on heavy travel months, I almost certainly pass that 5GB barrier. Yet, now, according to Gizmodo and Phonescoop, Sprint is implementing its own 5GB cap. You can make all sorts of arguments about why it needs to do this -- or point to the fact that (eventually) it will have a WiMax network available (though, not for a while). But, in the meantime, a bunch of us were told that we were buying "unlimited" service. 5GB is hardly unlimited, and it's rather ridiculous to go back and change the deal after the company had already sold it to us. Either way, any time someone suggests that EVDO is a "third pipe" competitor to DSL or cable, remind them that it's an extremely limited third pipe with rules that change with almost no notice.

21 Comments | Leave a Comment..

Sprint And Affiliate Sue Each Other Over Legality Of New WiMax Effort

from the bad-blood dept

In certain markets, Sprint has always used affiliates to sell its service, rather than building out its own efforts. Some of those affiliate relationships caused problems back in 2004/2005 when Sprint merged with Nextel -- as Nextel's service existed in some of those markets, potentially "competing" with the Sprint affiliates who had agreements that Sprint would not compete directly. So, with the new WiMax joint venture with Clearwire, Sprint knew that the big affiliate iPCS would be upset. In fact, last week, Sprint sued iPCS in Delaware seeking a declaratory judgment that the new joint venture did not break their agreement with iPCS. That lawsuit appears to have been filed slightly before iPCS filed its own lawsuit in Illinois against Sprint. Chances are the two suits will be combined in some manner, but it's yet another hurdle that Sprint needs to clear before it can get this new WiMax offering off the ground. Sprint may have a decent claim here -- as the agreement with iPCS is focused only on 1.9GHz spectrum, whereas the WiMax network is on 2.5GHz spectrum. Either way, it seems like these affiliate relationships may be a lot more pain than they're worth.

2 Comments | Leave a Comment..

Intel, Google, Cable Co's Give US WiMax A New Lease On Life (In The Form Of $3.2 Billion)

from the let's-try-this-again dept

A bunch of the worst kept secrets in the wireless broadband world have finally come together. No one ever really believed that Sprint and Clearwire would fully break off their WiMax agreement. It simply made too much sense for them to get back together. At the same time, everyone also knew that Comcast and Time Warner were talking to Sprint to help fund WiMax in order to get a wireless pipe with which to compete with the telcos. And... oh yeah, given how much money Intel had pumped into WiMax to make everyone think it just had to be the next generation wireless system, there was no way it was going to let Sprint and Clearwire's WiMax plans collapse. Finally, toss in the fact that Google was known to be interested in Sprint's WiMax plans, and it's not hard to figure out what is actually happening...

Yes, indeed, Intel, Google, Comcast and Time Warner are teaming up to pump $3.2 billion into a joint venture that would merge Sprint and Clearwire's WiMax operations under the Clearwire brand name. This is certainly no surprise given all the earlier stories, but given how many problems have surrounded WiMax as well as earlier attempts for the cable companies to offer wireless services, don't expect this new venture to go smoothly right from the beginning. That doesn't mean it's not the right thing to do. Most of the companies involved didn't really have much of a choice but to do this. Of course, in all this mess, Sprint and Clearwire squandered a portion of the lead they held over AT&T and Verizon. While it will still take a while for AT&T and Verizon to get LTE plans into motion, all this futzing by Sprint and Clearwire took away some of the huge lead it should have had.

5 Comments | Leave a Comment..

So Many Reasons Why Deutsche Telekom Won't Buy Sprint

from the pin-drop dept

There's a rumor going around that Deutsche Telekom is thinking about buying Sprint. This is a bad idea for any number of reasons. Deutsche Telekom owns T-Mobile, which competes with Sprint, and which has certainly fallen way behind AT&T, Verizon Wireless and Sprint in terms of coverage and next generation network deployments. At the same time Sprint has definitely faced some tough times recently that have weighed heavily on the stock. So, you could see why Deutsche might initially think about it. T-Mobile is behind in the game, and merging with Sprint could (emphasis on could) jumpstart the business a bit. Plus, it's reasonable to think that Sprint may be undervalued these days. But... it's still a bad idea. T-Mobile and Sprint use totally different network technologies. Sprint is still dealing with the mess of trying to integrate Nextel's iDen system into its own CDMA-based system (which is part of the reason the company has been in trouble lately), and dumping a third totally incompatible technology into the mix doesn't seem wise. You could (again, emphasis on could) argue that Sprint now has some experience merging totally incompatible networks, but so far it's not exactly good experience. All in all, this seems like someone tossing out a suggestion. It's hard to see this as a legitimate possibility.

14 Comments | Leave a Comment..

Dumb Sprint 'Security' Questions Make It Easier To Hijack Accounts

from the with-security-like-that... dept

In the last year or so, there's been a disturbing trend of companies to start adding absolutely ridiculous and counterproductive "security" questions on various sites. Most of these do absolutely nothing good in terms of security. In fact, it seems the more ridiculous these features are, the less secure a site actually is. I've been collecting some examples of the more bizarre "security" features I've been seeing lately, with the really ridiculous "security questions" being quite popular. This is when the site gives you a bunch of questions to choose from -- but often those questions are not the sort that have a single answer, or an answer that's easily memorable. For example, I just saw one that asked "What's a place you'd like to visit someday?" Well, there are a few, but I doubt I could remember the one I picked. And what happens if I do visit that place before the next time I need to answer that question?

I was recently discussing this with a colleague who told me that if I wanted to see the most ridiculous example, I should look at Sprint's system, as it had a bunch of security questions where it tried to pull information on you. Before I had a chance to check it out, it looks like the folks over at Consumerist decided to take on Sprint, and discovered not just how ridiculous the questions are but noticed some patterns that make it quite easy to get control of any Sprint user's account.

The way it works is Sprint asks you a series of "security" questions that it thinks only you would know the answer to. Things like "what type of car has been registered at your address?" and "which of the following people has lived at your address?" It sounds like some data collection company probably convinced Sprint to purchase access to their data to set up these questions in the name of "security." The problem is that if you know just a little about certain people, you can easily guess the answers. Even worse, a former Sprint employee notes that, mostly to avoid "accidentally" having two right answers, it's usually quite easy to figure out the actual answers. For example, on the automobile question, the incorrect answers are usually expensive luxury vehicles.

This isn't "security." It's barely security theater. It's a huge security hole. Hopefully with a little attention Sprint gets rid of it and puts something more reasonable in place. I just hope it doesn't involve asking me where I hope to travel some day.

44 Comments | Leave a Comment..

Cable Companies Looking To Buddy Up With Sprint Once Again To Save WiMax

from the let's-see-how-this-works... dept

Remember a couple years ago when all the big cable companies teamed up with Sprint with plenty of fanfare to provide mobile phone service and to compete against Verizon and AT&T? Whatever happened to that? Oh, right, it went nowhere. So, perhaps don't get too worked up over the news today that cable companies Comcast and Time Warner might be teaming up with Sprint and Clearwire to fund their troubled WiMax efforts. If you recall, Sprint and Clearwire had a huge deal (with hundreds of millions in backing from Intel) to WiMax the nation, and that deal also fell apart though everyone knows they've been seeing each other on the sly. They know they can't do it alone, so certainly having some support from Comcast and Time Warner could help move this project forward, but there have been so many false starts and stumbles that you can bet this isn't going to go as smoothly as all the players are about to suggest.

4 Comments | Leave a Comment..

Why The Wireless Industry Is Moving To Flat-Rate Pricing

from the lower-transaction-costs dept

One of the recurring trends in high-tech markets is that as information goods get cheaper, they're increasingly sold as all-you-can-eat bundles rather than as individual units. This has been true of land-line telephone service for decades. In the late 1990s, we saw the same transition occur in Internet access. In this decade, we've seen the explosive growth of Netflix, which is an all-you-can-eat plan for video. Now it appears that cell phone companies are inching in that direction too, as Mike discussed last week. For $99/month, Verizon Wireless, AT&T, and T-Mobile will let you talk on your cell phone as much as you want. Sprint is apparently considering adopting a similar plan. This isn't actually all that new.

There are two fundamental economic forces at work here. First, metering imposes costs, both on consumers and on carriers. For carriers, there are the obvious expenses of keeping track of billing information, as well as the attendant support costs when an angry customer calls to complain about unexpected charges. For the customer, metering imposes the mental overhead of having to keep track of whether it's currently "peak" or "off peak" time, how many minutes are in his plan, whether he's currently "roaming," etc. A lot of customers are happy to pay a little bit extra for the peace of mind of knowing exactly how much they're going to pay each month without having to keep track of their calling activity. Second, the wireless market, like the phone, Internet, and DVD markets, is capital-intensive. Unless the network is already fully loaded, the marginal user costs wireless carriers close to nothing. As a result, metered pricing often causes under-utilization of the network because minutes are priced far above their marginal cost. Switching to a flat-rate plan can be economically efficient because it encourages greater utilization of the network without undermining the carriers' ability to recover their fixed costs. That has always been the rationale behind the free night and weekend minutes offered by a lot of cell phone companies over the last few years. They're just expanding it so it applies 24/7.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

26 Comments | Leave a Comment..