4 ms·

It's not that they haven't figured it out yet, it's that they just don't care. It's a captive market, right now consumers can choose whichever carrier they want

by phaus 14y ago

It's not that they haven't figured it out yet, it's that they just don't care. It's a captive market, right now consumers can choose whichever carrier they want, but the exorbitant prices and poor service will remain the same wherever you go. Furthermore, executives at the two most successful carriers have openly stated that they are looking for ways in which they can trick their customers into sticking around as they jack up the prices for the same service we are already getting. Tiered data and text messaging are perfect examples of this. Data costs carriers way less than a dollar per GB to provide, yet this amount costs the customer around $10. Text messaging is even worse, because it costs almost nothing for the carrier to provide it, but it costs customers $10-30 each month.

tptacek 14y ago
I agree with you that ultimately the reason Apple won't buy a carrier is that Apple occupied a much more favorable spot on the value chain than the carriers. I'm unlike virtually everyone else on HN in not being alarmed by the pricing of text messages. Prices have nothing to do with costs. Text message pricing is a way of segmenting customers by behavior and price sensitivity, nothing more.
- wh-uws 14y ago
  > Text message pricing is a way of segmenting customers by behavior and price sensitivity, nothing more. Go on.. (by that i mean can you explain your view of this. it sounds interesting and I don't understand)
  - bonzoesc 14y ago
    "Everything is worth what its purchaser will pay for it." -Publilius Syrus It's textbook price discrimination[1]. If somebody's not willing to pay much for texting, they can pay nothing and ask that it be disabled. If somebody cares very little about it, they can pay 20¢ per message[2]. If they know they'll text lots or just want to pay a flat fee and not care, they can pay $20/month[2]. The 20¢ per message is because if you're a light texter, that's about the most you're willing to pay per message. The cost of something only sets a bottom floor on a price; it's not immoral or unethical to maximize profit by setting a sale price with a large margin. 1: http://en.wikipedia.org/wiki/Price_discrimination http://en.wikipedia.org/wiki/Price_discrimination 2: http://www.wireless.att.com/cell-phone-service/cell-phone-plan-details/?q_sku=sku3830290&q_planCategory=cat1370011 http://www.wireless.att.com/cell-phone-service/cell-phone-pl...
  - larrys 14y ago
    "segmenting customers by behavior and price sensitivity" Similar to what is done by web hosting providers. Offering more disk space for more money when the average customer isn't going to come close to using the base allotment. Also, we did this with domain redemptions. We used to charge a fee and process them all at about the same speed (Which was pretty quick usually within an hour or so.) We changed the order process so that the default turn time would be 12 to 24 hours for $0 upcharge. Then, say 8 to 12 hours for $15 more. Then $25 upcharge for 2 to 8 hours. The response was instant and about 60% of the people paid the $25 charge. Not only that but if people are really upset we can give them the quick service for free (because it doesn't cost us anymore) and it makes them really happy. (Like an upgrade to an empty seat in 1st Class.)
- larrys 14y ago
  "segmenting customers by behavior and price sensitivity" I like to sail when I go to an island. I can go to the resort that offers free sailboats and wait my turn. Or I can go to the resort that charges $x to use the sailboat. I like the $x because that way I'm not competing with others wanting the same limited resource. Actually the last place I was at charged for internet access. That was good I had plenty of bandwidth the $10 day charge kept people off the wifi.
  - tptacek 14y ago
    Text messages are not a limited resource; the misapprehension that they're priced as if they were is behind a lot of contempt for carrier pricing. A good way to think about it is that people who send lots of text messages are simultaneously subsidizing the accounts of people who don't send text messages.
    - chc 14y ago
      Except that would entail prices for non-text services go down proportionately as texting gets more popular, which is not borne out by reality AFAIK (my bill certainly hasn't dropped despite being a very light texter). So while that way of looking at it is good for your blood pressure, I don't think it's good for modeling reality.
      - larrys 14y ago
        "Except that would entail prices non-text services go down proportionately as texting gets more popular" Things like this sometimes only work in one direction in businesses which have locked in customers and depending on their competition and what they do. Now a bank that all the sudden loses income in one area will try and make it up in other areas (as was shown recently) by increasing costs. But a bank which makes extra money in an area won't (unless they have to for competitive reasons) lower the costs of their other services. They will keep that money and report more profit! Because it's not that easy to switch your banking arrangement. It's not like buying a Western digital hard drive instead of a Seagate. So this has to do with competition as well as the ease of someone switching their provider or vendor. And exactly how much competition they have or what their competitors are doing and what they are charging. Every situation is of course different.

by phaus 14y ago

tptacek 14y ago

I agree with you that ultimately the reason Apple won't buy a carrier is that Apple occupied a much more favorable spot on the value chain than the carriers. I'm unlike virtually everyone else on HN in not being alarmed by the pricing of text messages. Prices have nothing to do with costs. Text message pricing is a way of segmenting customers by behavior and price sensitivity, nothing more.

wh-uws 14y ago
> Text message pricing is a way of segmenting customers by behavior and price sensitivity, nothing more. Go on.. (by that i mean can you explain your view of this. it sounds interesting and I don't understand)
- bonzoesc 14y ago
  "Everything is worth what its purchaser will pay for it." -Publilius Syrus It's textbook price discrimination[1]. If somebody's not willing to pay much for texting, they can pay nothing and ask that it be disabled. If somebody cares very little about it, they can pay 20¢ per message[2]. If they know they'll text lots or just want to pay a flat fee and not care, they can pay $20/month[2]. The 20¢ per message is because if you're a light texter, that's about the most you're willing to pay per message. The cost of something only sets a bottom floor on a price; it's not immoral or unethical to maximize profit by setting a sale price with a large margin. 1: http://en.wikipedia.org/wiki/Price_discrimination http://en.wikipedia.org/wiki/Price_discrimination 2: http://www.wireless.att.com/cell-phone-service/cell-phone-plan-details/?q_sku=sku3830290&q_planCategory=cat1370011 http://www.wireless.att.com/cell-phone-service/cell-phone-pl...
- larrys 14y ago
  "segmenting customers by behavior and price sensitivity" Similar to what is done by web hosting providers. Offering more disk space for more money when the average customer isn't going to come close to using the base allotment. Also, we did this with domain redemptions. We used to charge a fee and process them all at about the same speed (Which was pretty quick usually within an hour or so.) We changed the order process so that the default turn time would be 12 to 24 hours for $0 upcharge. Then, say 8 to 12 hours for $15 more. Then $25 upcharge for 2 to 8 hours. The response was instant and about 60% of the people paid the $25 charge. Not only that but if people are really upset we can give them the quick service for free (because it doesn't cost us anymore) and it makes them really happy. (Like an upgrade to an empty seat in 1st Class.)
larrys 14y ago
"segmenting customers by behavior and price sensitivity" I like to sail when I go to an island. I can go to the resort that offers free sailboats and wait my turn. Or I can go to the resort that charges $x to use the sailboat. I like the $x because that way I'm not competing with others wanting the same limited resource. Actually the last place I was at charged for internet access. That was good I had plenty of bandwidth the $10 day charge kept people off the wifi.
- tptacek 14y ago
  Text messages are not a limited resource; the misapprehension that they're priced as if they were is behind a lot of contempt for carrier pricing. A good way to think about it is that people who send lots of text messages are simultaneously subsidizing the accounts of people who don't send text messages.
  - chc 14y ago
    Except that would entail prices for non-text services go down proportionately as texting gets more popular, which is not borne out by reality AFAIK (my bill certainly hasn't dropped despite being a very light texter). So while that way of looking at it is good for your blood pressure, I don't think it's good for modeling reality.
    - larrys 14y ago
      "Except that would entail prices non-text services go down proportionately as texting gets more popular" Things like this sometimes only work in one direction in businesses which have locked in customers and depending on their competition and what they do. Now a bank that all the sudden loses income in one area will try and make it up in other areas (as was shown recently) by increasing costs. But a bank which makes extra money in an area won't (unless they have to for competitive reasons) lower the costs of their other services. They will keep that money and report more profit! Because it's not that easy to switch your banking arrangement. It's not like buying a Western digital hard drive instead of a Seagate. So this has to do with competition as well as the ease of someone switching their provider or vendor. And exactly how much competition they have or what their competitors are doing and what they are charging. Every situation is of course different.