Cell phones are getting cheaper all the time. Many companies are offering pay-as-you-go cell phones, preloaded with minutes for as little as $10 or $15. The idea is to sell the phone at a loss, and then make up for it when the user returns to buy extra minutes again and again. Sounds like a profitable idea, and it can be; but clever entrepreneurs have also figured out how to “beat the system” by unlocking the phones software and reselling it abroad.
As you might imagine, cell phone companies are not very happy with this turn of events, and are complaining loudly in the media and the courts. There’s only one problem: what the cell phone traffickers are doing is not technically illegal.
Basically, here’s how it works: cell phone traffickers purchase thousands of low-cost pays you go phones, and then tweak the software to unlock the phone from any particular network — this way it can be used on any number of mobile networks abroad. The unlocked phones are then sold at a profit.
Yahoo! News is reporting that traffickers routinely employee dozens or even hundreds of “runners” to buy phones at retail outlets that can later be unlocked and resold. It has turned into a large and growing business, especially in New York and California.
The problem for the cell phone companies is obvious: after selling the phones at a ridiculously cheap price, the traffickers unlock the phone and resell it in a distant country — so the original phone company is not able to recoup their investment.
Of course, the phone traffickers would say that’s the company’s problem; if they don’t like it, they shouldn’t sell the phones so cheaply to begin with. And in fact, the enterprising phone traffickers may be correct. They are simply taking advantage of a system put in place by the cell phone companies — and there is nothing technically illegal about the practice. So why are the big cell companies getting so bent out of shape? Simple — they are getting beaten at their own game.
You see, the cell phone companies’ “game” is to make it as cheap as possible for anyone to buy a phone, and then proceed to make big money off of the user purchasing new minutes for the phone over a period of several years, resulting in a much greater long-term payoff. Many of these ridiculously cheap pay-as-you-go phones are sold to teenagers who can not really afford a phone, much less the constant purchase of new minutes to keep it active.
By reselling unlocked versions of the same phones abroad, the traffickers can typically make about $50 per phone. And when the phones are sold in groups of 5000 or 10,000 at a time, the profitability of phone trafficking becomes very clear, even if it’s not appreciated by the big cell phone companies.
Interesting EH…No matter how bad the economy someone is making dollars. The great american dream..make lemonade from lemons..and someone is always doing it. carol stanley author “for Kids 59.99 and Over”
Comment by carol stanley — July 19, 2008 @ 12:06 pm