Russell Beattie

Wow, so here I am bitching about how the U.S. mobile telecom operators are clueless and not learning from the European model (i.e. receiving calls and SMS messages for free), and there's Virgin Mobile out there the whole time doing something pretty close. Leave it to Virgin to actually have a clue - they're so consumer-oriented it's amazing.

Here's Alan Reiter's writeup of the recent press coverage that Virgin's been getting about the success of their American Pre-pay phones:

I received a call yesterday from CNET News seeking comments for an article about Virgin Mobile's progress in the United States. It got me thinking about Virgin Mobile U.S., which is a mobile virtual network operator for Sprint PCS in the U.S.

I had written on June 20, 2002 that I believed Virgin had a good chance for success because of its success in the U.K. and it's excellence in marketing. But I also wrote that Virgin offered only two mediocre phones, both from Kyocera. I stressed the importance of offering cool, exciting phones to the youth market, which is Virgin's target market.

I was correct about Virgin Mobile doing well, but I was, apparently, incorrect about the value of cool phones! Either I underestimated the cool factor of the Kyoceras (which I don't think I did) or I underestimated the value of other components -- prices, features, marketing, etc. -- to overcome a mediocre phone.

Frankly, I think the Kyocera phones are pretty ugly, especially considering the sleek devices from other handset vendors. But perhaps the price -- $59 and $79 -- plus the per-minute pricing and VirginXtras are doing the trick.

Doing well

Virgin has more than 350,000 subscribers (August 1, 2002 - January 31, 2003) which, as I said in the CNET article, was pretty good considering the poor U.S. economy and the fact that Virgin isn't a big brand name in this country.

Also, a large percentage of Virgin's subscribers use SMS. In December 2002, more than 53 percent of Virgin subscribers used SMS. In addition, about 66 percent of subscribers have downloaded ringtones since the service debuted in the U.S. in July 2002.

More than 40 percent of subscribers have used VirginXtras..., which include ringtones, music, wakeup calls, group messages, and news, features and music from MTV and VH1 and the always exciting "SpongeBob's Deep Sea Thought of the Day.".

Not doing that well, though

However, Virgin Mobile U.S. subscribers send and receive an average of two SMS messages a day. In Europe, subscribers send more than that between the time they wake up and the time they walk to the bathroom!

Very interesting. I actually SAW a Virgin Mobile kiosk in a record store when I was in the U.S. in December and thought it was pretty wild, but didn't know what to make of it and promptly forgot. I mean, I hadn't heard a thing about Virgin Mobile U.S. until just in the past week so it was totally off my RADAR. Obviously I need to pay attention a little more.

Checking out their website I ran into a very clear page on the costs (incredibly surprising, really). Here's a summary:

More Ring for your Buck

Start talking each day at 25 cents a minute. After 10 minutes the rate drops to 10 cents a minute.

Call time is rounded up to the minute. Talk for one minute and 37 seconds, pay for two minutes. No tricks, no mirrors, nothing hidden here.

Local and long distance calls to all 50 states, Puerto Rico, and the U.S. Virgin Islands all cost the same.

Voicemail is included in your service, so when you check your messages from your cell phone, you only pay for airtime.

Text Messaging

Key in your message and send it to a friend.

Cost:
$0.10 per sent message
No cost to receive messages

International Calls

Cost:
$0.25 per minute + Airtime to Canada
$0.50 per minute + Airtime to Mexico
$0.75 per minute + Airtime to 30 other countries

VirginXtras

Cost:
Browse VirginXtras phone menus - free
Dial out to use VirginXtras - regular airtime charge
Ringtones - $1.00 (per download)
SpongeBob's Deep Sea Thought of the Day - $0.10 each

So you still have to pay for phone calls received it seems, but since Virgin is a "virtual" operator and uses Sprint's services, they obviously can't get away from those costs. However, receiving text messages is free! Look at that! A company with a clue! The prices on the phone calls aren't that bad, actually, and are similar to prepay rates here in Spain. Vodafone for example has several different plans that you can choose from here and we chose one that costs almost the same - I just went through this getting pre-pay phones for the Americans from my company who arrive and need something for a week or so while they're here. We settled on the "Vodafone One" plan which costs 28 Euro cents a minute for regular calls and 60 cents a minute for international calls, and these don't go down in cost after 10 minutes like Virgin's so that's not bad. (There are other Vodafone plans, by the way, where you pay less to call other Vodafone customers and pay a lot more to call someone else, and others based on time of day, etc., but the One plan was the most simple to guage.)

If you read that CNet article, it's quite enlightening. 350,000 subscribers since last July sounds pretty great to me - I don't know jack, but that SOUNDS good. So maybe there is some hope in the U.S. cellular market after all. You can bet that if Virgin starts to make some serious headway and starts robbing customers from the biggies, the other operators will follow in step and offer similar, simple to use and understand services as well.

-Russ

Later... I just checked out Stefan Smalla's Infofeed where he pointed out his detailed post on Virgin Mobile's business plan from last October. Very informative! Thanks Stefan!