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The Wireless Outpost Newsletter Issue #17 Vol. 4
Wednesday, October 30, 2002
Another issue of the Wireless Outpost Newsletter. This newsletter
is for the soon to be educated cellular phone user community. If you know of
anyone else that may have an interest in our newsletter, make sure to forward
them a copy. Now we move forward at Mach II speed!
[Note: This newsletter is delivered Bi Weekly on Wednesday.]
OUR SINCERE APOLOGIES ON KEEPING YOU WAITING FOR THE LATEST ISSUE
We try to keep them coming at least twice a month but sometimes things get a bit hectic around here and the newsletter isn't published as scheduled. That has happened again this month but we hope to keep that to a minimum. But we are back and I will explain a little about our recent developments. Very positive developments I might add.
To start, we have been expanding over the past three months. We fully expect to grow to a point that we will be moving out of our new office that we have just scheduled to be renovated within the next 6 months to accommodate the additional staffing we will be bringing on board. The reason for all of this is that the month of October officially starts our 8th fiscal year as a business.
Our 8th anniversary was set to trigger an aggressive push for growing our International and US client base. We have initiated that with airing TV commercials nationwide in the US. We still have two more marketing campaigns using different
media to be implemented in November and another in December. Things are going to get even more interesting soon with all three of them running simultaneously.
With only three months to set off a Gattling Gun succession of marketing campaigns, it required everyone to put all of their attention into getting them launched on time. Everything should stabilize in the next month or so and we expect to be back to normal within a short time. Again, our apologies for taking so long in getting out the latest issue and we hope to be forgiven.
CELL PHONE CANCER LAWSUIT DISMISSED FOR LACK OF EVIDENCE
The class action suits filed against cellular phone manufacturers were dismissed as lacking substantial evidence in a federal court. Both sides were very active in presenting the court with studies that were to support their case. In the plaintiff's situation, the study results were not sufficient to prove a link between cellular phones and cancer. But it isn't over yet.
The plaintiffs are looking at their options including taking the lawsuits overseas,
re-filing the lawsuits with presenting different facts to the court, or appealing the current ruling. These types of lawsuits are not new and have been in the courts since 1992. Each and every lawsuit was basically dropped as lacking sufficient evidence on the links of cancer to cellular phone use.
It is unlikely that any of these lawsuits will bear fruit unless a test has been conducted that is generally accepted by the majority of the scientific community. Another interesting trend that we have noticed is that many consumers are still using analog phones and will seek to replace their current analog phones with the exact same model even with the attention brought on the possible link of cellular phones and cancer.
Either consumers are not aware of this issue or they don't care. It is our opinion that many consumers continue to use analog service because they are not completely satisfied with the coverage of digital service. Not to mention the rural communities who are basically forced to use analog service because of the lack of coverage on either analog or digital services.
Granted there are dual mode phones but the power they offer is normally not sufficient to pull and hold a wireless signal in some of these more remote areas. If ever a link were to be proven between cellular phones and cancer, my guess is that the State
Attorneys would get into the action with suing the wireless carriers for forcing their constituents to use analog services.
Personally, I don't think the excuse of "well, they didn't have to use wireless services" is going to hold up. Wireless phones have become such a integral part of our society for safety and communication purposes that using that as an excuse would probably backfire with some seriously negative publicity and attention.
Even so, I doubt that will come to pass. As of now, I have reviewed various explanations that were quite convincing in my opinion as to why cellular phones would never be proven to cause cancer. Until I am provided an explanation that is just as convincing as to why there may be a possible link to cellular phone use and cancer, I am not buying it.
I myself have always been a fan of Samsung phones because of their voice activation capabilities. But at one point, you pretty much had to go to Sprint PCS for service and I wasn't about to do that no matter how much I liked the phone. Now Cingular and Samsung have hooked up to offer a variety of cell phones to wireless phone users.
With Cingular being the number two wireless service provider, Samsung now has an opportunity to really expand their marketshare in the US far beyond what they could have hoped to gain at any other point. Cingular will probably offer a larger selection of Samsung models than the other wireless carriers currently carrying Samsung cell phones.
The latest offering from Cingular will be the Samsung N625 GSM cellular phone which will be offered exclusively through Cingular retail stores and outlets. An interesting feature to this cell phone is that it allows for incoming calls to be identified using six different colors on the LCD screen. Definitely not a necessary feature but it does have an appeal to it.
For those of you who don't know it, Samsung is an up and coming handset manufacturer. It isn't easy to find Samsung phones on the market outside of the wireless carrier distribution centers. As to the reason for Samsung's strong growth, we would have to put our bets on the fact that they are focusing more on cosmetic appeal and user friendly functions rather than advanced technological features.
By the way, I am not hyping up Samsung because we have a deal with them or because I use one. In fact, I use a Motorola V60 phone which is provided by the company. It is just that I have been following the
manufacturers for quite some time now and Samsung has really impressed me with their line of phones. They seem to have impressed many others too because they made it to the number three spot as a handset manufacturer. No easy task in the current market.
If you are a fan of Cingular Wireless or Samsung cell phones, you can now rejoice in that you will soon have more options available to you. What those options will be, my crystal ball doesn't tell me. But I am thinking there ought to be some fairly good ones coming up in the future. Let us see what good things come to those who wait.
THIS TIME IT IS T-MOBILE USA THAT GETS SUED BY A DEALER
This appears to have been a fairly large dealer out of Chicago, Illinois who has gone into bankruptcy. Skyworld Communications, Inc., recently filed for bankruptcy and in the process has laid a lawsuit on T-Mobile to the tune of 23 million dollars. As they were a minority owned business, they also filed a civil rights complaint with the Justice Department.
Details to the lawsuit are quite sketchy so we have not been able to compare this to the recent dealer lawsuit against Cingular. But we were able to determine that the company had growth plans of opening up 50 retail locations throughout the Midwest and by Sept. 2001, they had signed leases for 40 out of 50 retail locations and a data center.
Without additional facts, we cannot guess at the validity of the civil rights complaint or if it may have been a case where the company simply attempted to grow far too fast. Either way, the lawsuit could be a stumbling block to any attempt by T Mobile to merge with another carrier. Especially with Rumor circulating about Cingular and T Mobile merging operations.
Between these two lawsuits, Cingular and T Mobile combined would have a dark cloud hanging over their heads with a potential amount of nearly $50 million dollars to be awarded to the plaintiffs. It would be interesting to see if similar complaints were lodged against T Mobile as those that were filed against Cingular by one of their dealers.
However, there must be more than meets the eye to this lawsuit. I mean why would the dealer go through so much trouble to wreak havoc for T Mobile if everything was on the up and up. Not that I am accusing T Mobile of anything but neither am I discounting the dealer's actions either. This doesn't sound like a simple misunderstanding in my opinion.
In the end, both parties will be able to present their cases and the prevailing party will have been vindicated. All I can do right now is speculate and speculate some more. Let me add to that. We had a number of Cingular dealers contacting us about the article on the other dealer lawsuit. We do not have any other information available other than what we provided here on the T Mobile dealer lawsuit.
SAMSUNG WILL USE LIQUID METAL FOR FUTURE CELL PHONE DESIGNS
Since I am on a roll with Samsung, I thought I should mention a new twist to their cellular phones. They have teamed up with a company called Liquid Metal Technologies who has been producing a new kind of metal alloy that has some interesting properties. It is flexible enough to design casings yet has 2.5 times the strength of titanium alloys and 1.5 times the hardness of stainless steel.
This means that phones can be made smaller and more durable. It also has a low thermal, magnetic, and electrical conductivity making it a metal of choice for military and space applications. Cellular phone and electronics manufacturers who have been struggling with making a smaller phone that would hold up to the tensile strength of the human hand might have been handed a solution.
Samsung is rolling out the SCH-X199 cell phone in China which will use the liquid metal alloy for a super thin LCD screen frame. The Liquid Metal alloy can be molded in the same pattern plastics on a mass production basis. Reports have indicated that Samsung intends to add additional components to their cell phones that will use the Liquid Metal alloy.
Oh boy! I think I see my voice activated cell phone pen on the horizon! Anyhow, it is important that we not forget that this is the 21st Century. The advances in nanotechnology, metal alloy processing, and software functionality is going to change the future of cellular phones at a speed that will likely increase with each passing year.
Although the information we post here can give you the how and why it works, we just can't give you the when. I hear about this kind of thing and my mind just races years ahead with imagining what we may see in the future. Like maybe a taxidermy service for cellular phones! An undoubtedly useless service but there has to be somebody out there who might like to give it a try?
If you do, just don't say you heard it here first. For the rest of us with a little more sense, keep your eyes open to the little things going on out there. If you like to sleuth out mysteries, the wireless industry has to be the biggest and most complex mystery of them all. Don't forget to report back to me so I can steal your ideas or thoughts and take credit for them too.
A SURVEY ON TEENAGERS' USE OF CELLULAR PHONES AND BUYING HABITS
Here are some results on a survey conducted by Metro PCS on teenagers that may or may not surprise you. I was a little surprised by what was discovered. Enough so that I thought I would share it with those of you who may have an interest in learning more about the teenager demographics. Pay attention and you may save your company some money.
The survey contacted teenagers between the ages of 13 to 17 in various cities. Most teens spend more than five minutes on their phones but 75% of them spend less than 10 minutes on each call. Next, 8 out of 10 parents are extremely involved in a
teenager's purchasing decisions and monitor cellular phone use. Most teens say that their parents pay for a portion of their cell phone bill and 66% say that their parents pay their cell phone bill.
Most of the hype in the media points to targeting teenagers. However, what they have failed to understand is that targeting teenagers without targeting the parents as well isn't going to get them too far in their marketing efforts. It is my opinion that targeting the parents on behalf of their teenagers would be the best route. Let's step onto phones and services.
Text messaging. Six out of ten teens have the service available on their phones. Out of that Only 30% use it at least once per week and 23% don't even use it at all. Teens consider voice mail and call waiting to be more important features than text messaging when considering service. Another factor in their buying decision is the number of minutes available on the plan and the price of the plan.
In most cases, the plan rates and available minutes are more important than the phone selection, text messaging, voice mail, and call waiting features, or long distance fees. Based on the results, some teens are even punished for going over the number of allotted minutes on the calling plan. Seven out of ten teens wanted unlimited calling on a local plan.
Based on the survey results, it appears as if wireless carriers targeting features for teenagers and manufacturers targeting handset design are missing the most important buying factor of price conscious teenagers and their parents. Together they need to be pushing for low cost local calling plans and cheap handsets.
Here is the key point. Cellular phones for teenagers are electronic leashes. Parents want to be able to reach their children or have the ability of their children to reach them at any time. Since they must pay for a bucket of minutes, then the kids can use them up for calling their friends, no harm done. But parents are not going to pay big bucks for a device they consider to be more of a safety measure rather than a way for their kids to look cool for their friends. Get it? Got it? Good!
THREE MORE SURVEYS ON GENERAL CELLULAR PHONE USERS
Now that we posted a survey on teenage cellular phone users, how about three more surveys on cellular phone users in general. The surveys are from Telephia, JD Powers, and the other is from
Tracfone. Between the three of them, they will give you a fairly good snapshot picture of current cellular phone user behavior and attitudes on cellular phones.
First for the Telephia survey. Over half of the people in 44 cities now own cellular phones. Greenville, SC has a penetration rate of 68% of the population. Other cities that have over a 60% penetration rate include Raleigh, Orlando, Boston, Atlanta, St. Louis, and Washington D.C. with the lowest penetration rate at 43%
About half of the people in the survey has said they now use their cell phone at least five times a day. The number of people using their cell phones more often is up by 10% from only a year ago. Based on our own calculations and based on previous surveys, it would appear that it is the credit-challenged, teens, and elderly who are the majority that currently do not own or use a cellular phone.
The elderly would probably be the least inclined to purchase or desire a cellular phone unless it was for safety. The major complaint that we hear when it comes to the elderly is that the cellular phones are much too small and the buttons are not large enough for them to see or use. Those of you who are considering the elderly demographics as a niche market will want to take that into consideration.
Now on the study from Tracfone. In their survey, it was found that over 50% of people were thankful for having a cellular phone followed by laptops at 14%. The results also showed that 58% of females listed cellular phones as the number one item they were most thankful for having and 42% of men were most thankful for cellular phones. PDA devices took a lowly percentage at only 2%.
In reference to the JD Powers survey. It has been found that wireless phone users are now holding on to their cell phones longer. With the average length of time being 18 months despite the
carriers' incentive to upgrade to new phones with a discount. The problem as this survey reported is that carriers are trying to increase traffic by discounting older model cell phones that lack many of the latest features considered standard on the latest cellular phones.
Their study also showed Sanyo in the lead with customer satisfaction with Motorola and Samsung fighting for second, and Kyocera coming in third. For some reason, Nokia has been edged out of the top running. As a side note to that comment, I am wondering if Nokia may be on the edge of losing their title as king of the handset market. There are signs that we can see showing them slowly losing ground to Motorola and Samsung. Add in the third tier manufacturers' market gains and I smell trouble!
WHEN THE US SENATE SPEAKS, PEOPLE HAD BETTER LISTEN
Members of the Senate Communications Subcommittee have sent a letter to the FCC directing the agency to take aggressive action in enforcing the rules for implementing e911 services from wireless carriers. The notice was careful to state that consumer safety was a priority in getting e911 service established. Two wireless carriers are facing fines for non-compliance.
They are Cingular and AT&T Wireless. Federal regulators have yet to decide on that amount of the penalty. However, with the Senate putting pressure on the FCC to take action, it could end up being a fairly substantial amount. OK, I specifically drew attention to the fact that consumer protection is the reason for the pressure.
What isn't being said is that the government wants the location-based services put into place so that they can use it in the interest of "national security" and all that. I know that I joke around about the white vans parked outside my house. There are two of them out there right now. I don't believe for a minute that they are from the electric company.
But if you think the implementation of e911 was simply for the safety of consumers and to allow wireless carriers the chance at a new revenue source, then you have spent too much time in the sun. Besides, I think we have already given up too many constitutional rights in the interest of homeland security. Which leaves us in a catch 22 situation.
Does our privacy as it is outweigh the benefits of say, a 911 operator being able to locate your spouse who went off a road and nobody can see them. In that case, I would gladly trade my privacy for the safety of my wife any day. I am sure that most of you would probably feel the same way. The hard part is knowing that you must give up something that we consider to be rightfully ours but we are forced to give it up without apology or permission.
Coming back out of my paranoid schizophrenia attack and on to a related subject. We have had a few inquiries asking when the new deadline was set for the adoption of Local Number Portability by wireless carriers. That date has been delayed one year from November 24th. If that date sticks as the deadline, expect to see mucho amounts of churn by wireless phone users.
VERIZON WIRELESS OFFERS PREPAID REPLENISHMENT VIA ATM LOCATIONS
Not sure how well this is going to work, but Verizon Wireless is testing out prepaid cellular replenishment via ATMs in
Boston, the city with the highest penetration rate for wireless users in the US. The company is targeting the higher end prepaid cellular phone user who keep a prepaid cellular phone for emergency and/or casual calling needs.
The assumption behind the ATM service is that they are everywhere and they are convenient. However, the service will be limited to those who have a credit card for payment when the user is redeeming additional airtime units. Verizon Wireless has adjusted their prepaid cellular service to appeal to a larger base of prepaid cellular phone users.
It will cost a user 30 cents per minute on weekdays and 15 cents a minute on nights and weekends. Of course, nights are defined as being after 9 PM. Expiration dates on the airtime has been
set up so that the higher the value of airtime denomination, the longer the expiration date is delayed. The longest expiration date available through Verizion Wireless on a prepaid plan is 120 days.
They intend to do a national rollout of ATM replenishment service by early 2003. The question will be if people will use the service enough to warrant a national rollout or if the plug should be pulled. It is anybody's guess if prepaid wireless customers will find this service to be convenient enough to use it on a consistent basis.
The statement they made in their press release stated that this service was being made for the busy professional who used prepaid cellular services. An oxymoron if you ask me. If I am that busy and I use prepaid services, I am going to go straight to my computer and take 2 minutes to reload my airtime rather than driving to an ATM.
An argument to that would be that you could forget to replenish your airtime while out on the road. That is true, but how likely do you think that will happen if they are a "busy professional"? Wouldn't they have a day planner with notes jotted all over the pages to remind them to do this and that? I don't know about the rest of you but I am just not seeing this as going gangbusters myself.
Maybe time and history will prove me wrong but I have serious doubts about that. I like the idea itself but I can't imagine that it would be feasible as I think the wrong demographics are being targeted. In my opinion, they would have better luck with targeting those folks who have debit and check cards rather than a credit card. I know that check cards can be used like a credit card so the people with check cards should be the ones being chased.
Call me crazy but with all the advice and opinions I have spouted over the past three years in this newsletter, I have yet to have a single guru who has disputed any of my rantings whether it was related to operations, advertising, marketing, and what have you. Nor would I mind if I had been trashed for a statement because I am a student just like everyone else. Learning something new always works for me.
CHEAP WIRELESS PHONE SERVICES FIND A HOME IN THE US
The latest trend with MVNO companies. That abbreviation stands for a Mobile Virtual Network Operator. I would have to describe it as a reseller of wireless service under a private label name. Similar to what MCI Worldcom was doing when they were offering wireless services to consumers. Don't bother running to write up a business plan for this type of company just yet.
If you think that you would like to be in this business, there are a couple of factors that you need to consider.
First is the capital investment needed to make this work. Even if you were to do it on a city by city basis, you are still talking an initial investment hitting close to $500K just to get started. Second, plan on making a huge monthly airtime commitment to wireless carriers, and last but not least, the dreaded competition.
MCI Worldcom couldn't make a game of it but there are others out there who are making a play for it and they are winning. Let's take Virgin Mobile for example as one of the
MVNOs in the US. They are selling about a 1000 phones a day. That is without their fourth quarter reports. At the current rate they are growing, they will probably have about 300,000 subscribers by the end of next year.
Then we have a newcomer: Yes Wireless who has recently entered the market. They are coming out with a wireless plan of $9.99 per month on the initial month and $14.99 a month thereafter. Their service will piggy back on that AT&T Wireless network. To assist them in launching their service, they are offering a starter kit for $34.95 which includes a Nokia 5165 phone and 30 minutes of airtime which includes activation fees and a one year contract.
However, this type of program is something of a postpaid/prepaid plan mix. In this case, you get the 30 minutes of airtime but your billing is done through a credit card or check card. It appears as if they too are targeting the demographics similar to that of Verizon Wireless with their ATM replenishment service.
There is a reason why all of these companies are pushing for electronic transactions using a credit card. Cost. It requires less labor and if the consumer has a credit card, the company can reduce the risk of default and incurring a higher level of bad debt. This type of payment processing also ensures that the company can collect their money that much faster.
There are two types of customers. Premium and marginal. With marginal demographics, there are varying degrees. Penny pinchers with a credit card are the highest level of a marginal customer but less sought after than even the credit-challenged. Most companies can accumulate a higher profit on sales to the credit challenged which outweighs the bad debt that can be incurred if they do not overexpose themselves on the ratio of profit to bad debt.
The penny pinchers are also the fastest to switch to a cheaper service or product which is why they will be required to sign a contract to prevent high levels of churn. The fact that the marginal customer is now being sought after tells us that the premium customer market is nearly tapped out for revenue purposes.
I would estimate that it will take a MVNO about eight maybe nine months to recover their cost on a new subscriber, leaving the last three months as pure profit. That estimation doesn't take into consideration that a company could realize a profit in a much shorter time frame with adding a substantial volume of subscribers over a shorter period of time.
Probably the biggest problem with targeting marginal customers as a niche market is that the companies who move into this
demographic selling on price alone are not making enough of a profit to afford the back end services necessary to support their customers. Therefore, they have no choice but to cut corners as they grow. You can bet that at some point, marginal customers will become less of a focus for their business model due to a higher acquisition cost per customer.
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when you aren't looking. If you want your name to vanish from our list because our newsletter is just too boring or someone else signed you up, let us know. We will reluctantly take you off of our newsletter list. And we still reserve the right to make faces at you when you aren't looking.
