Why do the major cellphone service providers like Verizon, AT&T, and T-Mobile benefit from owning “cheap” services like Visible, Cricket or Mint?

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Are these services extremely throttled? Are they on separate towers where the service isn’t as great? Please help me understand.

In: Economics

7 Answers

Anonymous 0 Comments

selling different products at different price points to capture more of the market.

the budget MVNOs are often at a lower data priority than “mainline” customers: if a particular area is facing congestion, they will be among the first (after home internet customers) to be throttled back.

Data/voice limits may also be a lot lower, international roaming even in Canada/Mexico may be more expensive/limited, international calling rates might be higher, fewer or no bundled extras or hardware discounts, etc.

Anonymous 0 Comments

They use the same towers, but users of the cheaper services are deprioritized compared to the flagship service. If you’re in any area with a large amount of users, a Verizon user will have faster speed that a Visible user, for example.

Anonymous 0 Comments

For the most part, they don’t own them, they lease the use of their network to them. It’s an additional revenue stream that consumes idle bandwidth. Their direct customers get priority so there’s very little cost to them. The term for these carriers is MNVO (mobile network virtual operator). In the cases where they do own them, it’s to capture a different market segment (budget users) that wouldn’t normally sign up for their main service.

Anonymous 0 Comments

Carrier towers and spectrum are largely fixed cost assets. If available spectrum is not fully utilized up to the capacity of the build-out, then, like an airplane flying with empty seats, it’s just lost revenue to the carrier. Fundamentally, having a portfolio of brands and offerings is a way to fill those empty seats without having to lower the prices of the ones they were already going to sell at full price.

Mobile services, like anything, else, are subject to a demand curve. Raise prices, and fewer people buy services. Lower prices, and more do. Sophisticated businesses use a strategy called segmentation to have their cake and eat it too — a high-priced, “full service” offering for the premium segment — the customers who will pay top dollar (Verizon unlimited postpaid plans with the latest phones included) — and other services at other tiers. Having a low-cost service under a different brand name, like Visible, that a high-price customer doesn’t see when they walk into a store, is a way to get price-sensitive, digital native customers onto the network with less cannibalization of the high-priced business. They also have a wholesale business reselling via folks like US Mobile for similar reasons targeting value-conscious consumers, or whatever. Stacking different segments and customer bases is a way to maximize the area under the demand curve, rather than picking a single point along it.

Sometimes, the companies they’re reselling to end up becoming successful and strong enough that they become threats of a sort to the core network. Even though T-Mobile controlled the contract with Mint mobile, Mint had the power to shift customers to another network if they negotiated a contract with, or were acquired by, Verizon or AT&T. So TMUS bought them, presumably to do some combination of preventing this and increasing the margins by raising prices on the now-established brand, squeezing costs out, etc.

And yes, secondary brands are sometimes given lower service levels in different ways, by throttling, limiting usage, deprioritizing traffic at congested times, doing online customer service only, having less variety in terms of hardware offerings, and so on.

Anonymous 0 Comments

In addition to the other answers, the MVNO’s don’t usually provide as much in the way of new phone upgrade credits- so if you own your phone, and aren’t looking to upgrade anytime soon, they can be a good money saver for this reason as well.

Anonymous 0 Comments

Most comments mention towers and prioritization there, but I think it is also customer support quality difference, most cheap providers are self-serving almost without employees except few in call centers with long wait time to get to them.

Anonymous 0 Comments

For at least 3 reasons

Telecom infrastructure is crazy expensive, the more revenue streams the better, it’s essentially free money for traditional telecoms.

They’re serving a customer base that otherwise might not use their services in anyway

And last but not least, it’s a potential pipeline for future acquisitions, that’s speculation though it makes sense.