OT - Cellphone billing

[James Knott]

Christopher Browne wrote:
> On Thu, Feb 28, 2008 at 11:12 PM, James Knott <james.knott-bJEeYj9oJeDQT0dZR+AlfA at public.gmane.org> wrote:
>   
>> Christopher Browne wrote:
>>  > On Thu, Feb 28, 2008 at 10:28 PM, James Knott <james.knott-bJEeYj9oJeDQT0dZR+AlfA at public.gmane.org> wrote:
>>  >
>>  >> Lennart Sorensen wrote:
>>  >>  > On Thu, Feb 28, 2008 at 10:37:43AM -0500, William Muriithi wrote:
>>  >>  >
>>  >>  >> This is what I have found in any other country I have visited beside N
>>  >>  >> America.  Communication cost can get really low as just paying the
>>  >>  >> minimum fee to retain the number active. And as long as you have some
>>  >>  >> money on the phone, the numer is your for an year.
>>  >>  >>
>>  >>  >
>>  >>  > Here it can cost $5 per month to have voice mail service.  There it is
>>  >>  > included free in your anual minimum use cost.  Of course voicemail
>>  >>  > really costs the company nothing if they already have the equipment so
>>  >>  > the $5 per month is pure profit.
>>  >>
>>  >>  Why would they already have that equipment?  A company buys equipment
>>  >>  with the idea of generating revenue with it and that same equipment has
>>  >>  to be amortized over several years.  Where does the money to amortize it
>>  >>  come from?
>>  >>
>>  >
>>  > A peculiar thing happened in the US over the last few years:  A whole
>>  > bunch of companies went aggressively after cellular market dominance.
>>  > And a bunch FAILED.  That's part of why Nortel has gone through near
>>  > death throes - they sold equipment to these companies, and geared up
>>  > for expansion based on that, only to see the companies die.  Cisco is
>>  > suffering from the same thing, albeit to a lesser degree.
>>  >
>>  > At any rate, what happened after the business failures was that a
>>  > whole pile of cellular infrastructure leaped onto the US market at
>>  > fire sale prices.  A side-effect of this is that successors could buy
>>  > up "world class" infrastructure for a song, and thereby have near-zero
>>  > cost for this sort of thing.
>>  >
>>  > Canada did not see anything like the same sort of
>>  > cut-throat-to-the-point-of-bleeding-out competition, so the cellular
>>  > sellers, here, actually paid for the equipment that they are using.
>>  > Mind you, eventually the cost is amortized, and some of the fees that
>>  > they charge do become lies.
>>  >
>>
>>  Once that equipment is paid for & depreciated, it becomes a tax
>>  liability to keep it in service.  At least, that's what I recall from
>>  when I was planning equipment installs for Unitel.  Also, these days
>>  equipment depreciates fast!  Take Rogers, for example.  They originally
>>  started out with analog gear, then the old "TDMA" and now GSM (also
>>  TDMA) and they've already started  moving to the next generation.  On
>>  the other side, the carrier gear is quickly moving from TDM or ATM to IP
>>  switching.  So, that's 3 or 4 network builds in the about 20 years
>>  they've been in the cell phone business.
>>     
>
> No, it's NOT a "tax liability to keep it in service."  No more than it
> would be a "tax liability" to keep a car in service for a couple more
> years.
>
> The phone companies tend to be *so* profitable that their perspective
> on things tends to deviate from what many would consider rational.
>   

You're talking to someone who used to work for Unitel.  When I left, in 
Jan 95, they were losing something on the order of $1M/day!  I'd hardly 
call that profitable.  Back in the days when I was in planning for them, 
I was spending something on the order of $6-7 million per year on new 
hardware.  There were several other planners doing similar.  As for tax 
liabilities, what happens when you tell Rev Can that a piece of hardware 
has a, for example, 10 year life, base your taxes on that and then keep 
it in service for 15 or 20 years?

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