Friday, May 15. 2009HSPA Modem Pricing - A True Curse In Australia...John Linton ....but not in the majority of the rest of the world. I read this article earlier this morning: and apart from noting the trend of providing in-built HSPA modems in an ever widening array of notebooks and desktop computers was particularly irritated by this comment: "The Acer lacks the built-in cellular modem, but you can buy that from Verizon in plug-in form for $30" One of the MAJOR problems (at least for Exetel) is the cost to us of the HSPA modem 'stick' which from our carrier is around $A160.00 for the 7.2 mbps version and still over $A100.00 for the 3.6 mbps version - compared to this US pricing of less than $A40.00 to an END USER via a retail shop! It makes a very big difference in the 'attractiveness' of the HSPA service when, in Australia, the entry cost is so high. An ADSL modem costs less than $A30.00 (for a low end, but fully functional unit) and can be sold and delivered to an end user for $A40.00 without the service provider incurring a loss - and that is around the price point that we think it needs to be sold at - and that the reference to Verizon's US pricing seems to confirm. Of course an end user will be prepared to pay more for a 'magic box' (wireless router, including inbuilt HSPA and a couple of ATA ports for VoIP and 'standard telephones') but not for just connectivity. The widening of the range of new lap tops and even some desk tops with inbuilt HSPA modem SIM slots will address this issue over time but not for the majority of people who already have their computer set up at home. That scenario is at least two or three years away - particularly if financial circumstances in Australia become more difficult over the next 24 months. Of course, Exetel, like every other provider, 'has' to offer a zero cost modem price for a 24 month contract (a disincentive in itself) but that doesn't change the fact that we have to find a way of recovering the modem cost in the service pricing - and as far as I can see that just isn't possible right now so the HSPA service sold with a 'free' modem will never return a profit to the seller of Layer 2 services though I have little doubt that the 'subsidies' offered by the carriers on their retail pricing makes that possible for resellers of the services. The only solution for us, at least at the moment, is to go to the PRC and get HSPA modems direct from one of the manufacturers and make the volume commitments required to get a price that will allow us to sell the service at a price more widely accepted by end users and also stay in business. Currently we might be able to do that but even then our 'landed cost' is going to be around double what the US retail cost to end users is. Over time that may well change (and the recent rise in the $A has already helped from six months ago) but it is all 'relative' to the end user's expectation that all service providers must really want their personal business and offer everything for nothing. The user expectation of 'free' is so endemic now that it is difficult to actually offer 'true' pricing. So it remains a problem to be solved along with finding the rural/regional agents and the 'magic box'. The 'magic box' will, at least partially, solve the problem completely because it will have the HSPA modem function built in via a chip set but that product remains elusive at the price we want to pay though that has now become simply a matter of time rather than beating our heads against a brick wall convincing manufacturers that the spec we want is sensible to build. We are getting closer to the right price but it is taking much longer than I expected. Right now the cost of a 7.2mbps modem, sim, activation and shipping/insurance is three times the cost we estimate will allow the service to really 'take off'. This can be dealt with via the service supplier (us in this case) simply giving the modem away for free until we can deliver the 'magic box' but that can't be done by us for any volume as the cost is beyond our capacity to absorb and while our fundamental principle of being in business is to provide any service we offer at the lowest possible price to the end user that doesn't include us providing products at up front losses of $200.00 on services that make very little monthly profit. It, yet again, raises the question of why Australian carrier's retail marketing personnel only seem to be able to come up with the same 'go to market' strategy every single time there is a new product/service to be released - they always want to give it away smothered in the word "FREE!!!" multiple times on any print, radio or TV ad. It seems to indicate that Australian buyers are completely stupid and are so 'over marketed to' that if a product or service isn't "FREE!!!" they won't "buy" it. As no manufactured 'box' could ever me "free" what is it about consumer buyers that allows them to switch off what ever intelligence they might possess and 'accept' that commercial organisations are never going to provide anything for "FREE!!!"? However, on the positive side, the price that Verizon is charging via a retail store means that there are HSPA modems being manufactured, right now, at costs that we need to buy at over the coming months to make an HSPA service more widely acceptable by the sectors of the marketplace we wish to address. It seems to me that you have to work unreasonably hard to look at any sort of aspect of 'marketing' consumer communications services in Australia to find anything positive. So articles like the one cited make me feel pretty helpless which is a poor way of starting the day and also conveys negative feelings towards other issues to be dealt with. Perhaps the solution is to stop reading the overseas technical media? Trackbacks
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When introducing Exetel to my "friends and family", I have always emphasized the annual cost of the service (at their particular usage pattern.
Its amazing how this invariably leads them to saying: .... if I am going to save that much money, maybe I should get a new/better modem now too! Regards, Harry. Comment (1)
Verizon uses CDMA EV-DO Rev.A technology not HSPA.
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http://au.billion.com/product/3g.php
But an expensive option... Comment (1)
You're quite right - there are products available but not at the prices that will address the issue.
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The Billion products still require a 3G/HSDPA modem to be purchased on top of the cost of the Billion gateway.
This is not the answer to John's dilemma. * Note: Requires an additional 3G USB modem. The 3G/HSDPA data rate is dependent on your local service provider and your 3G/HSDPA modem. Comment (1)
Whilst they only pay $30USD for the modem, they're also locked into Verizon with a two year contract.
Have you looked into the possibilities of "borrowing" the money and charging 12 or 24 monthly repayments of $5 on top of the Exetel bill as modem repayments? Most people would happily pay this for the year or two necessary and you would be able to have less padding in your service pricing. I think this would be more in line with your fairly open disclosure policy and also be fairer than retrieving the monies from people that already own/brought/bought outright their own modem. Comment (1)
We keep looking at different ways of addressing the current issues - borrowing is not an option to the way we run the business though....which is cash up front for all purchases/no leasing/no borrowing.
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On a property out west (Cunnamulla) the Telstra Map has "External Antenna" needed like right on the corner of the property. You can get reception on a phone(Telstra) standing on a hill… possibly make a call. While on your maps it’s not even on the Car Kit, Future Broadband 900Mhz*(it’s like a few KM off it actually). I’m just curious why the Optus coverage map doesn’t go as far as the Telstra one does? I assume their equipment would be similar. The question I’m leading too is. Would it be possible to get reception once the upgrade is done with an external Antenna? When does Optus plan to do the upgrades?
Just so you know what I’m talking about this is what the maps look like. http://img40.imageshack.us/img40/8210/59985869.jpg Telstra for mobile phone is the only choice. I’d like to avoid satellite and relying on the Australian Broadband Guarantee for internet. Rural agents might be easier to find than you think. A lot of independent companies involved in Ag technologies/solutions. With people doing away with the UHF in favour of Mobile Phones (Large Acres, Private and Secure) there is voip potential as well. Things like school holidays data bonuses is something worth considering as well. Because for the rest of the year it will simply be a business connection. Comment (1)
I have had success in areas not shown to be covered, but within 30 kms of the nearest tower by using an external antenna.
This can boost the signal from zero reception to over 3 out of 5 bars, depending of the rating of the antenna. With 3 bars signal, have achieved download speeds over 2mbs. Comment (1)
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