Spectrum of Greed

Ask blogger Mike Elgan or his son their opinion of AT&T & Apple’s iPhone, and you get the response, “Soup Nazi!”  Tasty, desirable, and served one way no matter what your circumstances.  He also has some clever correlations to the coffee shops and other eateries in the popular comic Seinfeld’s weekly world in a recent blog post he use to blast Apple in particular,  with the cell phone network sustaining only collateral damage.

And just like the soup Nazi, Apple has realized that they have a desirable product and can afford the luxury of dictating ALL the conditions necessary to play with their coveted device.  I differ from Mr. Elgan’s opinion in that I am going to share a little heat with AT&T, because more than Apple, they are the ones that really care about the existing customer versus the new customer coming onto their network.  While Apple gets a fixed dollar amount from AT&T up front for each phone sold (regardless of whether the customer is new or not), AT&T makes their money on the monthly fee, and has to recoup the expense of any device they hand out as ‘free’ during a new sale or an upgrade.  The difference comes in the new customer bringing a new revenue stream along, and depleting the revenue stream of a direct competitor.  The ‘current valued customer’ is an established revenue stream that has a device liability already attached that has to be written down before any new incentives can be ‘given away’ with the associated monthly fee that will be recouped over the next 2 years.

For the end user, this translates to a ‘customer experience’ that equates to a visit to a bad dentist that saves money on anesthetic.  But when your product is an obvious market driver (see Apple iPhone market growth this year, and Apple largest market increase), you can aggressively grow market share by providing new customers with an in-demand product (and latch on to them for 2 years of revenue) as long as you don’t lose too many of your existing customers.  For Apple’s part, they can charge a premium for their product, which in turn makes it much more difficult for AT&T to cover the cost of the phone in a 2 year plan.

So an existing customer is a liability that has to be closely cost controlled and yet you know that no matter how good you are, you will lose a certain percentage every year anyway.  So smart money plays to building the new 2 year customer base as aggressively as possible and limiting losses to a reasonable percentage.  This is how customer service is defined in the cell phone world.

Now when will the FCC open the discussion and invite some commentary from customers that would like to have a say in how the public airwaves are dispursed to the ‘customer’.  After all, each of the cell phone providers is in essence leasing OUR spectrum from OUR government and then selling it back to us for OUR personal use.  The walled gardens of the cell phone empires are visible monuments to industry superiority to civilian rights.  Only the FCC and the government that takes revenue that it provides can make change happen.