Friday, May 13, 2005

Hot spots

Bejota and I are debating the business structure for T-Mobile Hot Spots. Your input?

Do Hot Spot locations (Borders as an example) pay T-Mobile for the hot spot installed in their retail location? Thought being that they draw customers in by having hot spot there.

Does T-Mobile pay retail locations (Borders) for the right to install hot spot there? Thought being that without retail locations, T-Mobile doesn't have a business because aside from their stores they don't have retail outlets to serve as outlets for their business model.

Does anyone know the real answer? Or your guesses are welcome. I'd like to see what Isaac Fox has to say about this. Except his answer might read: "Sweat drip, well, let me think about this, sweat drip." I loved his class.

If you have not read Marc's comments, take a minute to read them. Love Marc.


At May 15, 2005 1:10 AM, Anonymous Anonymous said...

Hello Laura & Bejota,

Here is the answer to your question,

T-mobile hot spots are, for the most part, revenue neutral to for site operators. The concept is to drive revenue via subscriptions, not through charging services fees for stores and coffee shops. DT, T mobile's parent, did not feel the US market would suport a revenue stream from both end users and site operators. T mobile installs, maintains, pays all of the upfront costs for the networks.

Much like a wireless voice network, the economics of the deal is all about fixed costs. T mobile has very large intial costs, but after the intial expense is paid back, ROIC gets very high. Wireless subsriber bases historically increase exponentially after the 'early adpoter' phase.

Consumers do not realize that the CCPU (cash cost per user) for a $40 / mo subsciber vs a $90 / mo customer is exactly the same. Hence huge margin for the telco's.

The only exceptions to this model are in airports, where T mobile does pay facilities for the right to host a network there.

Again, for other operators the appeal for them (i.e Starbucks) is offering a ubiquitious experience and to provide a destination for small business customers.

Personally, I do not think the business model is sustainable. I would wager the subsription based model will fade away. But hey, what do I know, I am just a global fashion retailing icon.



Post a Comment

<< Home