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