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Verizon Responds to FCC On ETFs and Data Fees

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Sorry...but those numbers don't add up

rob_vzw

Dec 18, 2009, 10:00 PM
So here's to hoping the FCC calls VZW out on their sloppy math. VZW reports that its average revenue per customer is around $50 with an average expense per subscriber of around $30--so they're pulling an average profit of $20 per subscriber per month. Even if VZW's average cost of acquisition is $250, that equals a 12 1/2 month break even point. This isn't even taking into consideration that an 'advanced' device customer will be required to have a $29.99 data plan. The bottom line is that advanced device customers are more profitable then average and therefore have an even shorter break even period. There is no way VZW maintains its 'industry leading profitability' by following a business model that allows it to potentially lose money in the...
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info411

Dec 18, 2009, 10:02 PM
Sneaky wording and lawyers. That's where there money is going to also 😳
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Butthead007

Dec 18, 2009, 10:34 PM
Verizon is a very well run company. They are a for profit business, not a welfare provider.

There are plenty of expenses that go toward running the business that you have not taken into consideration such as network upgrades, personnel for tech, customer care, back end systems to run the business.

I mean seriously, there is no fuzzy math here, only a lack of business acumen.
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rob_vzw

Dec 18, 2009, 10:43 PM
Try again--all of those costs are factored into to VZW's average cost per subscriber (network, advertising, etc). If they didn't factor those costs into their average cost per customer, then their quarterly reporting would have some major accuracy issues--you can't report your average expense per customer as only 'part of the expenses' per customer. If VZW is a very well run company--how could they possibly employ a business model that put their break even point at 23 months? They might try that strategy if they were a welfare provider because they'd never be profitable doing it like that.
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waldorfsalad

Dec 18, 2009, 11:44 PM
Sounds to me like you've done some homework. Now, lets see if you're right. The FCC is investigating... lets see what they find. However... if Verizon is vindicated, and I will confess to expectations they will, start a stop watch and time the seconds before AT&T follows suit. 😉
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texaswireless

Dec 19, 2009, 12:07 AM
Sir you are the one with bad figures. The costs per month do not include the aquisition costs. The costs per month do not include capital investments.

You cannot apply the average cost of something to the highest cost portion of the model.
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SprintCC

Dec 19, 2009, 10:42 AM
Advertising is not a cost per customer- but it would be considered part of the aquisition cost for new subscribers. You could cook the books and not include network upgrades in your cost per sub figures, but that would probably not fly with the SEC for too long.

In reality the only fuzzy math is the break even point. Sprint gives the same discount on most devices, has a lower price plan point, and lower ETF for those nearing the end of contracts (or on advanced devices now) and the break even point is far before the 23rd month- and as we all know Sprint isn't exactly the most profitable wireless company out.
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Menno

Dec 19, 2009, 1:48 PM
Typically higher end devices are cheaper on Verizon (sometimes by a hundred dollars or more) than they are on Sprint. Sprint also doesn't own towers anymore, a good chunk of their coverage is off of roaming, which lowers their costs considerably. Also, until recently, weren't most sprint call centers outsourced? Sprint's break even point is earlier, but I'd be willing to bet that their operating costs are also significantly lower.
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ExploderBlade

Dec 19, 2009, 6:58 PM
Actually, Sprint owns most of the digital towers in the USA, that's why with Verizon phones, you have two bars of service, one pointing out the phone radio and one pointing out the EVDO, which is ussually off of Sprint towers. Sprint built most of their digital network from the ground up and Verizon actually cuts a check to Sprint every month to use their towers. Here is a link to all of Sprint's current digital towers. I tried to find one for Verizon, but the didn't have one I could easily find.

http://www.sprint.com/pcsbusiness/coverage/towermaps ... »
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Menno

Dec 19, 2009, 10:14 PM
No, they have 2 signals because evdo is for. Data. 1x is voice. All verizon coverage is evdo. it clearly lists on the. verizon website where they roam on evdo (its not much) you might want to check your sources
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dshearn

Dec 19, 2009, 10:31 AM
Yea they pay extra for data

but every one has to go back and pay Blackberry for the BIS crap.

So the 29 bucks has 17 of it going right back out to blackberry PER DEVICE

Not to mention how FREAKEN expensive the actual phones are.


Its VERY easy to belive that there are cases were they do not break even at 23 months once you factor in HOW MUCH of a time SINK Advance devices are for the Employee base.
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rob_vzw

Dec 20, 2009, 6:16 PM
So if its very easy to believe that it takes 23 months to break even, why does VZW teach its employees in their own business acumen classes that the average break even point per customer is 7-9 months? Nice try...
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Overmann

Dec 21, 2009, 10:28 AM
Because the average customer uses a Samsung u340 or similar cheap feature phone and never comes near to their minute usage.
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Slammer

Dec 19, 2009, 11:40 AM
We should hope that the FCC does their homework to the fullest extent or Verizon will prevail. Every Nook and Cranny needs to be looked at. The carriers(mainly Verizon and AT&T), did not get this big by breaking even(or little bit above). And does anyone really believe carriers are paying full 600-800 dollars for devices from manufacturers? I would guess they are only paying 50-60 percent of that(if not less).

Also, when carriers order premier devices, they very rarely pay within a 30 day invoice period. Try more like 90-120 days. So when a sub pays an initial amount on a device, that money sits in an account for 3-4 months collecting interest. Then you equate the MIR into this, and the device has practically paid for itself. The bulk of ...
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SPCSVZWJeff

Dec 19, 2009, 12:05 PM
Sorry to tell you this but they do pay that much for the devices. The reason T-mobile and AT&T's advanced devices have a lower price point is because the devices are similar to other devices marketed worldwide and so they enjoy an economy of scale that VZW and Sprint don't. Every CDMA device that is sold to a carrier in the U.S. is pretty much designed from the ground up with the carriers's needs in mind.
While I believe that Verizon uses fuzzy facts in advertising I am on their side with this one. Why should someone get a device that cost VZW $500.00 for $50.00 after discounts and then disconnect their service and sell it for $350.00 on EBay, pay the $175.00 disconnect fee and make $125.00 profit on the phone?
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Azeron

Dec 19, 2009, 2:26 PM
Because if Verizon goes bankrupt tomorrow the parasites who do this will port to another carrier without a second thought. Everyone wants something for nothing it seems and have no conscience about picking someone else's carcass to get it.
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Versed

Dec 21, 2009, 8:52 PM
That is if you buy into the fact that the phone cost VZW $500 which I don't. The Droid and Blackberry's outside of the radios are not that dissimilar outside of the radio. To their GSM counterparts.
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bp3dots1

Dec 21, 2009, 9:45 PM
"That is if you buy into the fact that the phone cost VZW $500 which I don't."

They assumption you are making about the carrier's handset cost is your problem. There are multiple people on these forums who do have access to this info and have repeatedly confirmed that the cost of handsets is very near to what they sell for outright. (Yes, I realize that people on the internet arent always honest)

Would it be reasonable to infer from the above quote that if you could verify handset cost you would not be so against this EFT issue?
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dshearn

Dec 19, 2009, 12:29 PM
I see the invoices.....

Companys pay a TON for the devices.

The price on the phones does not tell the whole story.

If a carrier wants a certian Device , lets say a Motorola.....

Moto will FORCE them to buy 3 other devices to get The Device they actually want.

When the Other Devices DONT sell , they are left with the Money they have to EAT on that device just to move it.

Not to mention that data Phones age FASTER then Cars.

So the Window to PUSH that device out at a Top profit level is SLIM.

Every Carrier out there Wants to you Buy a phone and USE IT for 5 years.

Every single time you upgrade it COST the carrier Money.
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Slammer

Dec 19, 2009, 2:01 PM
As a consumer NOT being tied to any carrier, I respectfully find your reply hard to understand. If you are correct in your post, then the industry is seriously fragmemted beyond initial speculation and government has every right to look into shady matters. This also means that the carriers should be initiating investigations into the device manufactures practices rather than trying to conform to "Forcing" issues. And instead of waiting for a saturated market of consumers flocking to the government for answers. This in my eyes could mean 2 things:

1) Either you are incorrect in your post or
2) The carriers just don't care because they simply just pass the buck to the Subs.

Aside from this, Verizon chose to offer premier devices at bone...
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Menno

Dec 19, 2009, 2:06 PM
Verizon (and other companies) offer the prices they do on advanced devices because consumers expect it. When I worked for VZW, it was REALLY hard to sell a dumb phone for anything over 100 because "I can go to att and get a 3g for 99" People expect phones to be cheap. They want flipphones to be free, or close to it. Messaging phones should only ever be 100, and smartphones should only be 200. If a company comes out with a phone that they are selling at 300, how many people you think will buy it? not many because they expect phones to be cheaper, they'll "wait till it goes on sale." Look at some of the reactions to the Droid, people saying 199 was too much to pay for a phone so they were going to wait until it goes down in price.

CU...
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Slammer

Dec 20, 2009, 11:58 AM
It is true that customers expect low prices. My bone is that if it is true that carriers pay full price on devices, then carriers do not go far enough with bargaining chips. Carriers to simply OK a price from the handset makers and work as the most beneficial portal to sell the product and then pass the cost to subs is wearing down the limits of the consumers. There needs to be a stand.

Your comment on hearing consumers say they are not willing to pay more than 200 dollars for the Droid, resonates and only further validates my point in the pricing issue. Either Verizon is trying to use fancy footwork or they are not exercising their buying control to full extent. Motorola is in no position to make pricing demands and Verizon should recog...
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bp3dots1

Dec 20, 2009, 11:14 PM
"My bone is that if it is true that carriers pay full price on devices, then carriers do not go far enough with bargaining chips."

Sorry, there's going to be a price for everything. Big Red (or any other carrier) can only work their cost for handsets down so far. They don't pay full retail exactly, but it's not much less. When there's not much margin in a product, you will have to pay enough to cover that basic cost to the supplier. It's not a matter of barganing.

"Motorola is in no position to make pricing demands and Verizon should recognize what their subs are asking; thus creating a better pricing."

When Motorola is building a flagship quality device specifically for your network, then yes, they absolutly are in a position to c...
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SprintCC

Dec 21, 2009, 12:04 PM
I agree with almost all of this. But really, I don't think many people in Eurpoe or Asia really care about how Americans deal with ETF's on cell contracts.
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bp3dots1

Dec 21, 2009, 9:41 PM
I was referring to the more general opinion of Americans, not our cellphone issues.
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DonM

Dec 22, 2009, 3:07 PM
If Motorola is building a flagship device specifically for your network... Then where is their bargaining power? It's worthless to anyone else.
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Versed

Dec 22, 2009, 6:38 PM
DonM said:
If Motorola is building a flagship device specifically for your network... Then where is their bargaining power? It's worthless to anyone else.


Exactly, and even if someone termed and sold the device, they would still HAVE to use it on VZW. Such is the state of CDMA. So there truly is little loss.
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Azeron

Dec 19, 2009, 2:29 PM
It is not rocket science. They want to lock you in for two years. They don't want to collect the ETF. They want you to stay a customer.
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Slammer

Dec 19, 2009, 2:44 PM
Exactly! My bone of contention is with the excuses made not with the real intent. However, this does validate why I stick with a smaller carrier that still meets my requirements without high prices. 😁
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Azeron

Dec 19, 2009, 2:23 PM
Please. No one is making them sign the contract. Verizon has a Month-to-Month option available. Don't like the $350 ETF? Buy the device outright. don't worry about what the carrier pays the manufacturer. The question is if YOU buy one single phone from RIM directly...what are they going to charge? If you can buy a million from RIM, I am sure they will cut YOU a deal, too.
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Versed

Dec 21, 2009, 9:01 PM
I still see these VZW fanboi's are still sticking up for their Massa, right or wrong, I hope the FCC bitch slaps them.
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bp3dots1

Dec 21, 2009, 9:40 PM
This isn't a "fanboi" issue. I hate VZW as much as the next guy, but they have a right (and a duty to their shareholders) to protect themselves against losses. As it has been stated repeatedly, you arent forced to sign your name on the contract. If you want their service, without risk of an ETF, buy your device outright and go month to month on the plan you want.

It's really not that difficult. Consumers here have plenty of options to find something that works for them, and yet people like you still cry when a business tries to be profitable.
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Menno

Dec 19, 2009, 1:36 PM
That 50/30 number includes data take rate in it, so you can't add that to a plan.

Yes, those lines with data will make up the cost of their devices sooner, but say that is the primary line on the account and they have 4 other lines sharing the minutes with EnV3's (unl texting no data) It would MUCH longer to break even on those lines (which is why they don't get NE2 credit)

Whenever you are talking about that many subscribers, you are playing with numbers. You might actually lose money (or barely break even) on some accounts while you make you bank on others.

Take the example above. 1400 minutes, unlimited texts, and the primary line has a droid.

We have 89.99 (+30 for extra lines) for the minutes, 30 for the texts, and 30 for...
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dshearn

Dec 19, 2009, 4:35 PM
I dont like my Phone......

We have had our phones 6 Days and dont like them



Can you please Take back these 3 phones that you will NEVER be able to sell as new again....


And replace them with 3 new phones?



Now what I dont like the 3 new phones and I come back 20 times and use up your Customer Reps as they have to re-explain to me over and over the contract that i signed.
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Overmann

Dec 21, 2009, 10:39 AM
It will be a while before the break even...
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codyphobia

Dec 19, 2009, 4:36 PM
If you dont like it....take your business elsewhere...there is more than one carrier out there.

The only reason for this increase was to prevent certain fools from taking advantage of a buy one get one offer just to cancel at $175 and sell on ebay for $500
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info411

Dec 19, 2009, 7:56 PM
Like VZW is not exploiting backdoors either?!?!? It's a two way door my friend. They get mad for doing that, but than again they do alot to their customers by nickel and diming them on other things.
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Versed

Dec 21, 2009, 9:05 PM
codyphobia said:
If you dont like it....take your business elsewhere...there is more than one carrier out there.

The only reason for this increase was to prevent certain fools from taking advantage of a buy one get one offer just to cancel at $175 and sell on ebay for $500


1. I doubt they will get $500.00 but OK.

2. And if and when the person does 1. they have no other choice but to use the phone with VZW on a data plan, and they're still getting a user off the phone. So no real loss.
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