OT - Cellphone billing

[James Knott]

Duncan MacGregor wrote:
> 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. 
>
>   
My question is what happens when you tell Rev Can that those cars have 
an expected life of 10 years, plan your finances and taxes around that 
number, but then use them for 15 or 20?  You've arranged for a tax 
deduction based on a 10 year cost, which is greater than it would be, if 
you said 15 or 20 year cost.


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