Dish eyes changes in ‘backwards’ prepaid business


Dish Network executives apparently are discovering some of the head-scratching practices of the U.S. prepaid business.


Dish on July 1 closed the $1.4 billion acquisition of Boost Mobile that was a condition of the government’s approval of the T-Mobile/Sprint merger. With that, Dish acquired about 9 million prepaid subscribers.


“There are some of those customers that perhaps the way Sprint accounted for them … The way they ran that business wouldn’t make sense for us. We certainly have some cleaning up to do there,” said Dish Chairman Charlie Ergen during the company’s second-quarter earnings call on Friday.


In fact, he said it’s kind of the first day Dish really owns Boost because it took time to get new plans into the market. Boost on Friday announced five new limited plans that are all under $50. Boost also offers unlimited plans for $50 and $60 per month.


The postpaid market is more profitable, including as an MVNO, he noted. As a side note, he said the prepaid business is kind of backwards. “The United States is really the only country that I know of where the prepaid business actually is less expensive than the postpaid business,” he said.


In prepaid today, a U.S. customer with no credit can get a free phone or nearly free phone. However, credit-worthy postpaid customers are required to finance their phones. That’s reminiscent of some of the crazy things he saw in other businesses like video or OTT where the idea was to sell below cost and make it up in volume.  


Boost’s new plans include $10 for 1 GB of high-speed data; $15 for 2 GB of high-speed data; $25 for 5 GB of high-speed data; and $35 for 10 GB of high-speed data. It also offers the Shrink-It! Plan that starts at $45 a month for 15 GB of data and unlimited talk and text. The rate on Shrink-It reduces customers’ monthly rates by $5 after three on-time payments and an additional $5 after six total on-time payments.


Boost customers for years have been told to expect unlimited plans and this new emphasis on limited plans appears to be a direct result of its MVNO agreement with T-Mobile, according to Jeff Moore, principal of Wave7 Research. The MVNO deal, which has been characterized as a good deal for Dish, likely requires paying T-Mobile by the gigabyte of usage, so Dish has an incentive to limit data.


While a plan that includes 1 or 2 GB of data doesn’t sound like a lot, he sees that sort of plan as attractive for certain segments, including older people.


The older demographic is not Boost’s traditional focus, but the $20 price point seems to be a battleground for some prepaid carriers, Moore observed. It provides a limited amount of data, and older customers often don’t see themselves as needing to use a lot of data. “If they don’t market to older Americans, then I think they’re missing an opportunity,” he said.

In addition, for consumers who are at home or at work all day with access to Wi-Fi, they may not need that much data other than Wi-Fi, he noted.   


There’s a segment of the U.S. prepaid market where phones are subsidized and another segment where they are not. Moore distinguishes these as urban prepaid competition where phones are subsidized and national retail prepaid, which is where TracFone plays, and phones are not subsidized. He also said that now that it's under Dish, Boost is getting more rational in how it competes.


Some customers are referred to as “round trippers” who do frequent switching from one carrier to another and get free phones. Wave7 has seen some changes afoot in recent weeks where service providers are trying to crack down on that kind of activity.


It’s worth noting that Dish Executive Vice President of Corporate Development Tom Cullen said Dish doesn’t view its wireless business as purely prepaid and postpaid. There’s a huge wholesale opportunity, and given Dish’s spectrum holdings, it’s going to be in a good position to serve that segment.


“We’re going to have so much more capacity than we need for pre- and postpaid,” Cullen said during the earnings call. At the same time, there’s quite a bit of support coming out of Washington, D.C., for open radio access network (RAN) and for a U.S.-based telco vendor ecosystem. The progress that Dish has seen over the past five or six months around automation, network slicing and the ability to sell wholesale capacity has been tremendous, he said.

33 views

Wirelessdealergroup.com is not affiliated with any carrier, mvno, oem, manufacturer, or sites/newspapers that it is linked to.

© 2016 by Wireless Dealer Group. Proudly created by CE GrafX.