OT - Cellphone billing

[Duncan MacGregor]

On February 28, 2008 06:54:38 pm James Knott wrote:
> 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?

You save money. 
That was the idea behind all-stainless-steel railcars. Once they are fully 
depreciated, you still have 100% of what you bought. 

-- 
Duncan MacGregor    --- Toronto ---
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