 | Issue: | North America 2011 |
| Article no.: | 16 | |
| Topic: | A flood of new devices | |
| Author: | J. Mark Howell | |
| Title: | President, Americas | |
| Organisation: | Brightpoint Inc | |
| PDF size: | 350KB |
About author
J. Mark Howell his the President of Brightpoint Americas; he is also its Co-Chief Operating Officer responsible for managing all aspects of the company’s operations and activities in the United States and Latin America. Prior to assuming the role of President, Mr. Howell served as Brightpoint’s Executive Vice President and Chief Financial Officer. J. Mark Howell received his Bachelor’s Degree in Business Administration from the University of Notre Dame, and is a Certified Public Accountant.
Article abstract
Operators need readily available, affordable, devices to sign-up users for their costly 4G networks. The transition to high-speed networks is accelerating and carriers need to recuperate their network deployment investments. Migrating users to the new networks is crucial to realizing the efficiencies promised by their deployment. Recuperating the investment requires minimizing total device investment, accelerating turnaround time on returns and maximizing device distribution. Carriers and manufacturer that can meet these goals will reap the benefits of the high-speed, connectivity market.
Full Article
A flood of new devices by J. Mark Howell, President, Brightpoint Americas America’s four national carriers have little in common – at least, that is what they would like the consuming public to conclude. Each carrier’s brand message suggests the other three networks are constructed of expensive soup cans and thread. There is, however, one common theme embedded in all four carriers’ communications. The primary message from all four carriers regarding their 4G, fourth generation, networks is their promise of high-speed connectivity, and the capabilities that the vast array of devices built for these networks offer. A flood of new devices Original equipment manufacturers (OEMs) unleashed a river of exciting industry news at CES 2011 show, reinforcing the expectation that we will witness a flood of 4G-capable devices over the next few years. The fervent hope of many – manufacturers, carriers, distributors and retailers – is that the device influx will accelerate replacement cycles and energize wireless and mobile device markets. Whether consumers take advantage of “The Fastest, Most Advanced 4G Network in America”, or plug in to “America’s Largest 4G Network”, new devices are required. These new devices do more than generate a tally in the ‘units shipped’ box. They stimulate the markets for network bandwidth and for devices with wide-ranging functionality – two industry growth drivers that are essential to the evolution and convergence of wireless and mobility ecosystems. The growth driven by this market evolution will have wide-ranging impact upon the entire wireless ecosystem. Some estimates predict the global demand for 4G products will be in excess of 500 million units by 2015. Considering these numbers do not account for the quasi-4G ‘HSPA+’ products that are already hitting the US markets, the numbers are sure to be significantly higher. Device cost increasing? Another number poised to move higher is the device cost associated with these 4G devices. The industry needs to consider the predicted device volumes and create the price/value propositions the market will accept given the higher average cost associated with these devices. This will help carriers quickly generate the returns needed to pay for their investments in building-out and maintaining these new high-speed networks. The North American market is conditioned to device subsidies. Truly, generating a positive ROI from the new networks is contingent upon getting the appropriate devices into the users’ hands. Partners who can assist by extending the device life cycle and, as well, maximize device ROI are most likely to succeed in the evolving network capacity driven market. The depreciation conundrum New technology introductions and rollouts are almost inevitably accompanied by a corresponding rise in return rates on those devices. Buyer’s remorse, improper positioning of the device’s capabilities and limited usability/coverage areas often the cause the high return rates. While the devices still have worth, they cannot be sold as new. Much like a new car the instant it is driven off the lot, a new device dramatically depreciates in resale value as soon as it is ‘used’. Minimising that depreciation is vital. Additionally, when a user needs to have a new device serviced or repaired, the importance of providing the customer with a viable replacement cannot be overstated. With the existing generation of devices, suitable replacements that can perform the same or similar functions are fairly easy to find and supply. However, a newly launched device does not enjoy the same advantage as the volume and time in market is naturally more limited. Dipping into a pool of new devices is not practical owing to the high additional cost – normally non-recoverable – of a new device. Given that moving customers to newer, high-speed/ high-capacity networks is a priority goal for carriers, and those new, high-dollar devices are required to drive customers to these networks, carriers face a dilemma. How can they best migrate customers, while at the same time limit device costs and maintain or increase customer satisfaction scores? Charting a course The most immediate solution is to establish a returns triage channel tasked with a quick turnaround of no-trouble-found (NTF) returns. Field replacement units (FRU) are almost always in demand, regardless of the device in question. However, a properly triaged NTF unit can be easily repurposed to supply and refill a FRU stock pool without requiring the manufacture of a great number of units that are not destined for retail sale. New technology launches often lead to an increase in return rates for a variety of reasons. According to CNET.com, the computing industry experienced this in 2009 when return rates of netbooks spiked, reportedly hitting the 30 per cent mark with some manufacturers. In the majority of cases, the returns were the result of from improper initial sales positioning, not device failures. A glut of returned, high dollar, devices with no faults – but not re-sellable for full value – looks pretty grim on a balance sheet. However, this same glut of devices is the ideal source for building a FRU stock pool. Carriers adopt aggressive hardware pricing models to accelerate customer migration to new network platforms. Many independent agents face serious challenges when trying to offer the same products as those subsidised by operators at similar prices. In order to level the playing field, many have looked to the refurbished-device market for supply. Unfortunately, that market tends to deliver an uneven user experience, as it has been difficult for carriers and OEMs to exert much control. Again, an approach where a carrier, an OEM – or both – partner with a solutions provider that can deliver a rapid triage and turnaround of returned devices is an attractive solution. Carrier and OEM involvement affords the dealer a source of approved, refurbished product that allows them to compete on price. Partnering with a third party for the physical triage/refurbishment offloads labour cost while providing a way to rapidly re-deploy these units to the market. It also offers the OEM and carrier a level of control not currently achieved – control that allows for them to more closely manage the end customer experience. Finally, this approach provides an avenue that did not previously exist to recover cost on high-dollar devices. Navigating the flood The message from the carriers is not changing; 4G networks are both the present and the future. Manufacturers are in lockstep; today’s trickle of 4G devices is poised to rapidly become a flood. As the transition to high-speed networks continues to accelerate, and the associated carrier investment in that network build-out increases, avenues for cost recovery need to be explored and expanded. Migrating users to these newly deployed networks is crucial to realizing the efficiencies promised by their deployment. Being able to sell 4G capabilities positions carriers and manufacturers on the leading edge of the technological wave. Navigating the flood will require minimizing total device investment, accelerating turnaround time on returns and maximizing distribution of devices. The carrier or manufacturer who can successfully chart a course that meets these goals will be well positioned to reap the benefits promised by a high-speed, connected world.
