Best of the ISP-Lists

Mobile Wireless Internet Pricing

Members of the ISP-Bandwidth list discuss the pricing (or mis-pricing) of the now-defunct Ricochet wireless network. Could this be a case study of too much advertising ruining a good product?

[August 27, 2001]

On the ISP-Bandwidth list in August, MT asked,

"Metricom is shutting down the Ricochet wireless network. Why did this happen?"

A number of respondents claimed the company's demise had everything to do with overpriced service:

[EK observed] "They had 34,500 subscribers at 128 Kbps and about 16,000 subscribers at 28.8 Kbps! I can't believe they couldn't drop the rates a little to attract additional users. That would put their monthly revenue over $3,000,000—how much can it cost to operate that network?"

[DK agreed] "Their pricing was their mistake—that and the rapid expansion. They could have grabbed many more users at $40 or so a month rather than $75."

[RB added] "I have been really skeptical about Metricom. I couldn't figure how they would generate enough revenues to cover their operational expenses. The obvious reason why Metricom charged $75 a month was that they need those type of revenues to cover wacko costs. I have also been really skeptical about these mobility plays in general. Who needs Metricom's service? About the only time I would use it is in a taxi."

Others suggested the service filled a real need:

[GK complained] "Breaks my heart; it was the best wireless I've ever used. Everyone I know that used it swore by it; now we're stuck with 19.2Kbps CDPD service. I know a trainload of commuters that used it every day. Given the choice of driving four hours a day in the car versus relaxing for an hour and a half on the train while getting work done via Ricochet, it's a no-brainer."

[DK agreed] "It sure was nice to be able to work from my car or wherever I was. Now, until I come up with the money for a CDPD modem card, I'm stuck at home. And even when I do get on CDPD, I'll have to deal with shoddy coverage and service. It was an exceptionally useful service."

GK contended that the real problem lay with lack of advertising, not high prices:

"Their real problem was their utter lack of any marketing whatsoever. If they had known how to market it, it would have sold. I can't even tell you the countless number of people that asked me about it and ended up signing up for it. Professional commuters, doctors, lawyers, you name it. There was a big market for their service, but nobody knew about it. I never saw a single commercial here; I only found out about it from a fellow rail commuter."

Others suggested that there was more than enough advertising:

[EK claimed] "They had huge marketing efforts on TV here in Houston; they blitzed those ads all the time."

[DK agreed] "Up until they shut off, the coffee I bought in the morning was wrapped with a Ricochet ad."

[RB added] "Metricom had big marketing campaigns in NYC, but I don't know anyone who used the service."

Still others claimed Metricom's problems were even greater than others had suggested:

[DM noted] "I agree that there is a significant market for this, but Sprint and other wireless firms have announced that their services will expand to 128 Kbpsby the end of this year. I am guessing that if that actually works, they would have eaten Ricochet's lunch anyway. Metricom did not have the resources to market themselves, nor to expand service to other markets."

[RB added] "Get real about Metricom: this company had almost $300 million in plant and property spread out over fifteen markets. For the fiscal quarter ending March 31, total revenues were $3 million, with $42 million cost of services sold! Metricom stated that it expected to generate most of revenues through its resellers. In other words, Metricom was a wholesaler, splitting the revenues. As Northpoint, Covad, and others found, it's not an attractive model. Besides, it was useful to a tiny number of people. One of the biggest mistakes we make is to imagine that everyone is like us in terms of their needs for gadgets and bandwidth. We are the exception, not the rule."

— End