An Attempt at Economically Rational Pricing: Time Warner Trial

Sun Jan 20 17:35:15 UTC 2008

On Jan 20, 2008, at 12:06 PM, Joe Greco wrote:

>
>>> However, if you look, all the prepaid plans that I've seen look
>>> suspiciously
>>> like predatory pricing.  The price per minute is substantially
>>> higher than
>>> an equivalent minute on a conventional plan.  Picking on AT&T, for a
>>> minute,
>>> here, look at their monthly GoPhone prepaid plan, $39.99/300
>>> anytime, vs
>>> $39.99/450 minutes for the normal.  If anything, the phone company
>>> is not
>>> extending you any credit, and has actually collected your cash in
>>> advance,
>>> so the prepaid minutes ought to be /cheaper/.
>>
>> I disagree.  Ever heard of volume discounts?
>>
>> Picking on at&t again, a typical iPhone user signs up for 24  
>> months @ ~
>> $100/month, _after_ a credit check to prove they are good for it or
>> plunking down a hefty deposit.
>>
>> Compare that $2.4 kilo-bux to the $40-one-time payment by a pre-paid
>> user.  Or, to be more far, how about $960 ($40/month for voice only)
>> compared to $40 one-time?
>>
>> Hell yes I expect more minutes per dollar on my long-term contract.
>>
>> Hrmm, wonder if someone will offer pay-as-you-go broadband @ $XXX (or
>> $0.XXX) per gigabyte?
>
> Actually, I was fairly careful, and I picked monthly recurring  
> plans in
> both cases.  The typical prepaid user is NOT going to pay a "$40-one-
> time" payment, because the initial cost of the phone is going to be a
> deterrent from simply ditching the phone after $40 is spent.
>
> The lock-in of contracts is typically done to guarantee that the cell
> phone which they make you buy is paid for, and it is perfectly  
> possible
> (though somewhat roundabout) to get the cheaper postpaid plan  
> without a
> long contract - assuming you meet their "creditworthiness" guidelines.
> Even without that, once you've gone past your one or two year  
> commitment,
> you continue at that same rate, so we can still note that the  
> economics
> are interesting.
>
> The iPhone seems to be some sort of odd case, where we're not quite  
> sure
> whether there's money going back and forth between AT&T and Apple  
> behind
> the scenes to subsidize the cost of the phones (or I may have  
> missed the
> news).  So talking about your iPhone is pretty much like comparing  
> Apples
> and oranges, and yes, you set yourself up for that one.
>

According to a reverse engineering of the Apple Financial Statements,  
it's
$ 18 / month (on average) - see

http://bits.blogs.nytimes.com/2007/10/25/the-831-iphone/

Regards
Marshall

> To put it another way, they do not give you a better price per  
> minute if
> you go and deposit $2400 in your prepaid account.  You can use your  
> volume
> discount argument once you come up with a compelling explanation  
> for that.
> ;-)
>
> ... JG
> -- 
> Joe Greco - sol.net Network Services - Milwaukee, WI - http:// 
> www.sol.net
> "We call it the 'one bite at the apple' rule. Give me one chance  
> [and] then I
> won't contact you again." - Direct Marketing Ass'n position on e- 
> mail spam(CNN)
> With 24 million small businesses in the US alone, that's way too  
> many apples.