Cell phones and contracts

[David Farber <dave () farber net>]

Begin forwarded message:

From: Andrew Seybold <andy () 4mobility com>
Date: October 10, 2005 4:58:56 PM EDT
To: dave () farber net
Subject: For IP if appropriate


Dave—the comments on IP about cell phones and contracts are  
interesting, here is some information that put things in focus.



The “cost” to acquire a new wireless customer today, in the United  
States is about $250. This includes the buy-down on the phone, and  
marketing and sales costs. The buy-down on phones has been going on  
for a long time. As we approach +60% penetration of wireless phones  
in the US (as compared to 90-over 100% in many countries), the cost  
of acquiring a customer continues to climb.



As more MVNO’s (Mobile virtual Network Operators) come into the  
market, along with those who are already in the market such as Virgin  
Mobile, we will start to see a shift away from phones that are  
subsidized, and more options when it comes to contract offerings.



In the pre-paid world of the likes of Virgin, there is no phone  
discount because there is no long term contract, and the cost per  
minute is higher than under the terms of a contract.



So we have lots of choices, the best, and most affordable of which is  
still the two-year contract with a buy-down on a high-end phone. The  
wireless phone service, on an average per minute basis in the US is  
much cheaper than in Europe and Asia, and it shows since the average  
customer in the United States uses over 600 Minutes of voice services  
every month—as compared to the second highest, which is Hong Kong at  
just under 400 minutes per month.



Best regards



Andy











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