Vision - March 2009 - (Page 11) individually. Those messages come in with real-time updates on one screen on your cell phone so that you can always be in touch with the communities that are important to you. Our messaging has grown well in excess of 100 percent year over year, and shows little sign of slowing. The reason that mobility is such a nice complement to social networking is its realtime nature. For instance if you are at a concert, you can take a picture and immediately share it with your network. If you are at a bar and there’s a great band playing, you can share that immediately with your social network. Sharing of information based on location, based on what is happening right at that time and making it simple and easy to do that in a cost-effective manner is something we are very focused on. We obviously use all of the social networking tools to stay in touch with our customers on our own pages on Twitter, Facebook and YouTube. I truly believe that the more two-way dialogue you have with your customers, even though it can be painful at times, the better off you are in being able to keep them happy and engaged. We have done some very interesting things that utilize social networking to engage our customers. We created an online forum called Studio V where customers can design ringtones and wallpaper and then sell them to other customers to get free minutes of airtime or cash in their Virgin Mobile USA accounts. to be a second poor cousin to post-paid. You had an average price per minute anywhere between 25 and 40 cents a minute. Now we sell minutes that are as low as five cents a minute, while the average cost of a post-paid minute is five to six cents a minute. So pre-paid has become very competitive with post-paid, and as a result, a lot of consumers are looking at the kind of flexibility and value they can get — in comparison to service plans that lock you into the same monthly payment with a contract whether you use your phone or not. In the next three to five years, it would not surprise me if the wireless industry slowed to low single-digit growth in terms of new subscribers, but that does not mean that you won’t see growth in terms of new data applications and growth driven by iconic handset design and advanced user interfaces. proud of, they want it to have decent feature functionality, but the more important element is how much it costs them every month. How much flexibility is there — am I locked into something or can I adjust my usage based on my needs and my budget? How will consumer behavior change with the difficult economy? I’ve been called pessimistic in my predictions, but I believe we are seeing the beginning of a sea change in consumer behavior. Consumers have been devastated by the collapse of the twin pillars on which they have based their security: comfort and retirement. These pillars are their 401K retirement plans and the equity value in their homes. Consumer confidence is at an all time low, and I don’t think that it necessarily bounces back as credit starts to ease or the economy starts to turn around. It has been such a blow to the psyche of consumers that I now feel we are in a paradigm shift in how people will think about spending. In a recent survey, 50 percent of consumers worry about whether they are going to have a job a year from now. One third of wireless customers that were interviewed in November and December last year, planned to cut back on their usage because they are having trouble making ends meet at the end of the month. The wireless industry is not immune from what is happening in the economy, but wireless is fortunately a necessity and not a luxury for most people. On the other hand, discretionary purchases like games and ringtones were actually down in the fourth quarter. A year or two ago, people had projections of 40 percent growth in those applications. We also are seeing messaging replace voice calls as we look at the composition of our base because sending a quick text message obviates the need for a fiveminute phone call that costs you a lot more. You are going to see more movement toward efficient types of communication and less spending on discretionary purchases. We have seen the churn rate of customers who leave us improve substantially in the fourth quarter. People aren’t doing away with their cell phones. The cell phone is definitely a consumer electronics device they need, and one they are unwilling to leave behind, even in today’s tumultuous times. • March/april 2009 Do consumers buy based on the handsets they want, or the service plans that best fit their needs or both? It’s a combination of both. It depends on the segment of the market. As you move into postpaid services that offer similar pricing plans, a lot of decision-making now is done by the handset form factor. For example, the iPhone drove a tremendous amount of volume on the post-paid side to AT&T. Most of that was not new consumers coming into the market but people that were already with AT&T or switching from another carrier. The reason customers switched carriers was not due to dramatic network differences, nor was it due to superior pricing plans, but rather a unique and exclusive form factor that attracted a tremendous number of consumers. On the very low end of the market, it is more of the handset price that drives customer acquisition. This segment is not looking for fancy handsets; they are looking to get into the market with a $10 or $20 handset. You see a tremendous amount of handsets in that price range in the pre-paid segment. However, the sweet spot of the wireless market remains customers who use between 500 to 1,000 minutes of talk per month. There, people make their decision based more on the service plan, not on the handsets. People are becoming increasingly aware that monthly rates for your service plan add up much more quickly than the price of the handset. They want a good-looking handset that they can be Is there a saturation point for mobile subscribers or are there still markets to tap in the U.S.? We are clearly approaching a saturation point. Approximately 80 to 85 percent of the U.S. population has a cell phone — think of that as almost everyone between the ages of 14 and 65. We are seeing industry growth start to slow as a result. It’s dropped from double-digit growth three or four years ago to mid-single digit growth last year. On the other hand, there are distinct segments of the population that have still not availed themselves of a cell phone. They are comprised of the “tween” market, as well as some lower income segments that could not qualify or didn’t have credit for post-paid credit plans. The pre-paid market, especially in this economic environment, is still growing at a reasonably robust growth rate. Pre-paid used www.ce.org 11 http://www.ce.org
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.