Monday, June 26, 2006

Verizon dumps AirPhone

So it turns out that there are not enough people willing to pay $5 a minute to make calls from planes. Verizon is dropping the business as it is due to loose its air spectrum license in 2010 anyway.

Russell Shaw blogs his own theory as to why this has happened - private jets. I suspect though that in our world of cheap telecommunications there is probably a limit to the number of CEOs willing to pay prices that just scream RIP OFF, particularly when there is noone else around to see you doing it.

I suspect that most people with private jets use their standard cell phone and to hell with the FCC regulations which were only imposed in the first place at the request of the mobile operators because their creaky networks could not deal with the pace at which the jets switched base station.

People will not use a technology if it is perceived as being excessively priced even if they can afford the prices. The same sort of thing happend at new year 2000. For years the media built up stories predicting excess built on excess. Of bands and babysitters planning to charge five to ten times their usual rates. In the event business during the millenial festivities was sharply down on previous years. The in thing became spending the night quietly at home.

Airphone was an utter failure at $5 a minute. I have used an airphone on precisely two occasions and someone else paid both times. I travel on planes a great deal, it is years since I have seen someone make a call.

I have my cell phone and mobile pager and so does everyone else I need to contact. I check messages up to the minute they close the aircraft door. If anything happens in the next six hours that requires urgent attention someone else can handle it. Airphone is useless for inbound calls anyway, how would someone know which number to call?

Airphone could have been a major success if they had been less greedy with the pricing model. People might have been willing to pay a dollar a minute. I suspect that they lost business when they came out with the low cost plan for Verizon customers, they hadadmitted that their actual marginal cost was way less than their charges.

The airlines made a similar mistake with business class. Before 9/11 the major airlines all treated the business traveller as if they had a bottomless wallet. The price for an economy round trip Boston to San Francisco was $2,500 without a saturday night stay. Business class was twice that and many companies paid business class as a matter of course. Today I can get a round trip ticket for the same route for $500 and business class is no longer an expectation. The first class areas have shrunk, separate business class is eliminated. The routes are no longer flown by wide bodied jets with three service classes.

People have an expectation as to what something should cost. Making it too apparent that you are actually pricing according to their ability to pay and the model will eventually collapse.

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