WIND Shifts Strategy: Is Tiered Pricing in the Cards?

by Jordan Richardson on August 2, 2011

In a note published by Canaccord Genuity, a Toronto securities dealer, start-up WIND Mobile is planning a strategy shift that will see the company swim “upstream” toward the models of the big Canadian carriers.

An “emphasis on post-paid contract plans” is in the works, says the note, and smartphone sales will be subsidized. This will lead to contracts – something WIND Mobile has stood against since their inception. Also presumably in the works is a system of tiered caps on unlimited mobile Internet plans.

Currently, WIND sells plans with unlimited data for around the $45 a month mark. There are some $10 add-ons for voice plans, which indicates that WIND is currently selling tiered pricing plans already but aims to take a greater share of the competition by snagging a greater segment of the market through a post-paid base. This means that WIND should be able to keep prices down overall while still signing customers up to contracts, helping erode the business of the incumbents.

WIND chairman and CEO Anthony Lacavera is on record as saying that the analyst’s note is a little off, however. “We are not introducing any kind of contract that has termination fees or overage charges – nothing at all like the incumbent fee structure. In our case, it is a true simple financing of the phone, there’s no other hook,” he said.

Naturally it is more expensive for phone companies to subsidize smartphones, as the products are getting fancier and more feature-heavy than ever. Many customers simply aren’t ready, willing or able to spend the $450 or more on the latest BlackBerry model.

“We make no margin at all on the handset when we subsidize it,” Lacavera said. “What the incumbents do is take $400 BlackBerry mark it up to $700 or give it to you for $200 on a three-year contract.”

Part of what WIND is up against is the inevitable. Running a pricing model as is when customer data usage is through the roof is simply unsustainable. And as WIND moves in to the higher-volume business markets to try to land a new subscriber base, the usage factor will only accelerate more and more. How the carrier will respond to that remains to be seen, but something tells me that the rock bottom pricing plans can only last so long.

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