Verizon to cut off Amp’d? Who loses? Consumers.

July 19, 2007 – 1:38 pm

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I was reading today’s Fierce Mobile Content and saw the article Verizon seeking to terminate Amp’d service and it got my attention.

Amp’d Mobile, as some of you may know, runs over the Verizon network. Amp’d is a MVNO (mobile virtual network operator). Basically, they offer mobile service but the network and infrastructure is provided by someone else (Verizon, in this case).

Some other common MVNO’s are Helio and Boost, which both run over the Sprint network.

Via Fierce Mobile Content:

Verizon Wireless is seeking to terminate its network capacity deal with embattled Amp’d Mobile, filing court papers claiming the MVNO is almost out of cash while racking up charges of $370,000 per day. According to the Associated Press, Verizon wants to cut ties with Amp’d unless the virtual operator secures a debtor-in-possession loan to finance its Chapter 11 bankruptcy proceedings: “Based on the record of this case and the fact that [Amp’d] has been given ample opportunity (over 46 days) to secure debtor-in-possession financing which has not materialized, this court should not permit this case to be run for a single additional day on Verizon Wireless’ back,” Verizon wrote in court papers filed Tuesday.

The AP said Amp’d Mobile has accumulated $15.6 million in charges to Verizon Wireless since filing for bankruptcy June 1. The company already owed Verizon $41 million prior to seeking Chapter 11 protection. U.S. Bankruptcy Judge Brendan L. Shannon in Wilmington, Del., previously ruled Amp’d could pay $2.5 million to Verizon in order to continue operations on the VZW network, but Verizon now says Amp’d is “unlikely” to land financing, and it should no longer be required to provide network access if Amp’d can’t pay its debts. According to Verizon, Amp’d will have just $9,000 in its coffers as of Monday.

“The reality is that the debtor has no funds with which to pay Verizon Wireless absent a ‘real’ debtor-in-possession loan or an infusion of equity, neither of which has been made available,” Verizon stated. “While it is not the court’s responsibility to second-guess the debtor’s business decisions, it is the court’s responsibility to protect creditors’ interests from the actions of inexperienced, incapable or foolhardy management.”

Considering how much money Boost is costing Verizon everyday ($370,000) and how much they already owe (over $56 million), I can’t blame Verizon for wanting to minimize their loss.

Interesting side note: Amp’d is blaming its financial problems on its rapid growth and significant percentage of its more than 200,000 customers not paying their bills on time. [via]

The first step I would take if I was Amp’d would be to cut off any customers that hadn’t paid. That would slow down their daily burn.

A longer term solution would be converting Amp’d customers over to Verizon customers, but I can’t fathom the complexities that would be involved. Nothing they could turn around quickly, except cover the cost to transfer from Amp’d to Verizon and let them get out of any Amp’d contract.

Is there a good solution to this soap opera in the land of telecom that Boost and Verizon won’t get pummeled by the press and consumers alike?

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  1. 3 Responses to “Verizon to cut off Amp’d? Who loses? Consumers.”

  2. I can’t say that I’m terribly surprised about Amp’d’s excuse regarding their predicament. Their service (like many MVNOs) is not exactly targeted towards a group with a high level of financial responsibility at this point in their lives.

    But yes, why wouldn’t they pull a Sprint-style move and boot some of the deadbeat subscribers in order to cauterize a little bit of the bleeding?

    By Jeremy Fuksa: Creative Generalist on Jul 20, 2007

  3. yeah, thats part of the challenge. Amp’d would have justification to giving non-paying customers the boot, but that still doesn’t mean they wouldn’t get railed in the press.

    In order to make it significant enough, they are going to have to do it on a much larger scale than 1,000 accounts.

    And out of a large number of customers, someone is going to have a sob story and get tons of press about it and create some kind of wacky internet site like “save my phone” where people can donate to keep their phone turned on.

    I’ll even give you a story line.

    Consumer A: doesn’t pay phone bill because their dog got hit by a truck and requires $3,000 in reconstructive surgery. Therefore, they can’t pay their bill.

    Amp’d: turns off Consumer A’s phone service for lack of payment.

    Consumer A: responds by blogging about how cold hearted Amp’d is. they must not like animals by not understanding Consumer A’s position and priorities. creates Facebook group and internet donation site. achieves national attention after Oprah appearance.

    Amp’d: donates free lifetime service to Consumer A in gesture of good faith.

    By Dustin Jacobsen on Jul 20, 2007

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  2. Jul 23, 2007: Amp’d joins the deadpool. Google makes a bid for wireless spectrum. « Shake Gently - advertising technology blog

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