Tuesday, August 11. 2009Is There Any Such Thing As A "Pre-Paid" Market?John Linton It may well be that I am simply mentally exhausted and physically even more run down than I have ever been but it is taking me a lot longer than usual to do some pretty basic 'administrative' things at the moment. I suppose many people feel this way as a long overdue vacation approaches but it seems a little more noticeable to me this year. I'm having a great deal of trouble understanding why I have not been able to work out what is going to happen in the pre-paid mobile data marketplace and what sort of people/marketplaces are going to prefer a prepaid offering to a post paid offering and is there actually any difference. The ABS gives some information but as it's derived from input from the carriers it is not all that useful. I read this article earlier this morning: and while it applies to mobile telephony and is about the US market it gave some sort of views that seemed as contradictory as all of the other views I have read and listened to. On the one hand I understand that some sections of the market for mobile telephony (parents buying mobile phones for children and wanting to protect themselves from huge bills I suppose is the prime example) but I can't see ANY such rationale for mobile data. I think this statement from the article sums up what is lost (at least by the vendor) when offering pre-paid: "Obviously postpaid offers annuity streams. It offers the ability to discount iconic handsets and put smart phones into people’s hands" and I have watched for twenty years while mobile carriers have made the give away of expensive handsets and long contracts of rip off call charges the cornerstone of consumer mobile services (and not to pull punches - the cornerstone of business mobile services). So why are these same carriers pushing pre-paid mobile telephone and now pre-paid data services so hard in some areas when there are virtually no benefits, if any at all, that I can see for them? Exetel's first HSPA offerings were based on a 'no contract/pay for your own modem' set of plans and they still account for over 70% of our sales. If there is no contract what's the value of a "pre-Paid"? None that I can see other than various permutations of pricing and 'special conditions' designed to deceive the customer and hide the true costs of the service being offered - a mirror image of the tried and true mobile telephony marketing deceptions. By removing any contract period Exetel, and others that do it, recognise that the ultra bargain hungers who therefore won't get a 'free' modem will choose another carrier/plan but really the mobile data product is not aimed at the cheapskate buyer (although it may very well develop into that if download charges reduce in the not so distant future). So Vodafone in the USA has delivered a better financial result while reducing the number of overall customers and increasing the number of pre-paid customers. Bad for market share but good for future viability because it seems to me to be a pitiful amount of money to have made in any case.($US17.2 million on $US307.6 million though significantly better than it made in the previous year which was truly woeful). It seems obvious if you stop giving away handsets you will make more money but that has been the case since the inception of that peculiar practice so it should elicit the comments that it did. This is cited as the reason Sprint bought the business from Vodafone - because of the contribution of the pre-paid offerings. Presumably Vodafone didn't have the same view and was happy to sell. Exetel have put in place some pre-paid HSPA plans and they have gone exactly as I predicted - they have generated almost no interest. I can't see a reason why anyone would buy them and that seems to be the view of the people who come across them who may be in the market for wireless data services. The only potential buyer for a prepaid mobile data service that I can see is the business person who travels a day or so a month and wants internet access for an hour or so each month and is too cheap to buy a $5.00 per month plan with a payu very low cost per megabyte used. What have I missed or what has my poor tired brain been unable to grasp? Trackbacks
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Your grasp on pre-paid wireless broadband seems pretty accurate.
I'm not entirely sure of the full scope of people who use it, but here's a few examples: 1. People who have Internet access at work and rarely use the Internet at home (may go for a month without access, saving money). 90 day and 365 day plans wouldn't appeal to such users. 2. People who need temporary mobile internet access (and already have the hardware). I'm curious if a 7 day plan (unwired) might appeal to such customers. 3. It offers the security of not being able to pay more than $x/month in (excess) usage fees. It perhaps has the ability to be lower-cost than post-paid offerings - Assuming low-usage, let's compare "3 Mobile"'s 365-day prepaid to Exetel's 90 day plan (x4) and PAYU: PAYU: 333MB/m for $10/m ($60-120+/yr) 90 d: 667MB/m for $10/m ($120/yr) 3Mob: 1 GB/m for $13/m ($149/yr) Naturally, this isn't a fair comparison as 3's coverage and network quality differs. Virgin Mobile and other providers still don't offer a yearly pre-paid service. Not having used Exetel's prepaid service - Once you have a sim card, are you able to login on an expired account and purchase additional pre-paid credit? Comment (1)
I read yesterday Telstra has started (is soon to start) offering beundled Acer netbooks and laptops with a 3G SIM. I expect the true cost of the plans will not be captured in the 30+30 (approx plan + hardware) headline rate.
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I have been watching the development of note books with inbuilt 3G sim slots for over 18 months.
Virtually all note books made will have that capability by early 2010 if not before that - just as all note books have Ethernet connections and used to have dial up modems in the past. Buying in bulk and using the theoretical retail margin to 'give away' some parts of the service is just another version of the 'free handset' scam. Comment (1)
Hi John,
As you know only Exetel and a small handful of Optus wholesalers sell HSPA with reasonable over usages, both Optus and Vodafones 3G over usage charges are excessive, and I think they are excess so the carrier can play the "customer a favour game" and give them "half off" their over usages bill when the over charging is disputed as a once off, this is their business model, get them the second time on a long 24 month contract. Exetel's over usages are 5c/mb vs Optus' 15c/mb. The point is that the major carriers are charging $150+ for a gigabyte over usage on a HSPA service (whereas Exetel is $50). These massive over usage charges are funding the massive marketing campaigns from the likes of Optus, Vodafone and Telstra. For normal folks this over usage fee is just far too outrageous for them to afford (with carriers usage meters always delayed 1-3 days or their online billing/account management facility being down). Not many service providers send their customers an automated email when they've used a certain percentage of their included quota. I think quite a few consumers understand this after reading articles on news.com.au or in the traditional media that someone's kid download some MP3s on iTunes, etc and ran up a $600 internet bill on their 1GB quota 3G service which was not appropriate for their needs in the first place but was recommended by the sales rep where ever. If as a consumer you take the prepaid approach you can either stop using it when it runs out, or top it up when needed YOU control your cost and budget. I personally think prepaid offerings will get more interesting in the new year as consumers get annoyed with over usages from the big 3. Hell I have a $15 - 1GB data pack added to my Virgin Mobile account so I avoid a $2000/gb overusage fee as a just incase. Comment (1)
People with poor credit history, ex-bankrupts, etc would find prepaid HSPA useful.
Another note, in the 'convenience age' it is more 'convenient' and more 'instant' to run down to the local shopping centre and pick up a readily available wireless pre-paid HSPA starter pack. Comment (1)
John
have you remembered to send copies of your new plans out as a Press Release so you can get the free publicity that all the other ISPs seem to enjoy? "Let us spread the Good News to all the world." Comment (1)
I have a hspa customer who was concerned about his son breaking the 5gb limit. I advised hem he could purchase a pre-paid sim & swap it with the post paid sim if he reached his monthly limit. Then new month, swap back to post paid sim.
An easy way of controlling excess usage. Perhaps you could offer prepaid topups to the post paid accounts Comment (1)
I think that cost control is the biggest factor. Having a set limit means absolute control. Having to exit a month by month (non contract) still requires effort and if you forget one month, you still have to pay. Credit history as mentioned is also important.
For some providers, its more about having an offer out there. Completing a set of products so that your shelf looks fuller rather than emptier. It also gives you something to market and talk about. Brand building. Comment (1)
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