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Old 02-02-2012, 09:51 AM   #39
azazel1024
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Yes, sort of. The difference is, as an extreme example, that instead of spending 25 billion and earning 25 billion and $2 back, they are earning 50 billion and $3 back. Lower margins, but more profit.

Yes their voice and data costs are something, but they are actually relatively low. The major costs are building out the infrastructure to handle increased bandwidth and new technology in markets where it didn't exist before. That certainly costs something, but they also reap the rewards down the line.

A bank makes no money off giving me a loan right away. Heck it costs them every cent of that loan out of their pockets. However, down the line they make plenty of money on that loan to me in interest, so long as I don't default.

Same thing with ANY company that is "utility" related in particular and most other companies for that matter. All companies have some kind of capitol costs, and they generally have to sink that capitol before they can start producing and/or selling goods or services. Those are upfront costs (unless they are borrowing the money) that MUST be paid, but ideally they get return on their investment overtime.

A utility company, like a wireless carrier, has some huge capitol costs in investing in infrastructure, but their ongoing costs are actually relatively small. They are still billions of dollars, but simply maintaining existing infrastructure is a pretty small piece of their financial puzzel.

If Verizon completely stopped building out their 3G and 4G networks and halted all capitol expenditures and focused only on keeping their existing infrastructure operating and shut down all brick and mortar stores...well per subscriber costs probably wouldn't be more than $5-10 a month to the company. They'd fold in relatively short order, but their actual costs to carry data (basically electricity and maintenance) are low.

Cellular data costs more, because the infrastructure IS more expensive to maintain. But if you ignore building out more capacity (which is required to keep customers happy, support additional customers and support higher device data consumption), the existing costs are low.

For traditional "all over the wire" data costs are something on the order of 1-2 cents per Gigabyte of data to traditional carriers. Costs to cellular carriers depend on if the data is 3G or 4G, but ignore build outs, the actual costs in maintenance of the existing network and electrical means that per Gigabyte cost is still obscenely low, on the order of 3-6 cents per GB of data on 4G LTE.

Of course factoring in what it cost to build the network, loan payments (assuming the company borrowed money for the capitol investment) and adding capacity increases the cost significantly, but the actual costs to the company for you transmitting the data and continuing to allow the data to be transmitted is pretty low.
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