An IPO, A New Model

Last week we saw the IPO of MetroPCS Communications Inc. (PCS). This is a provider of unlimited wireless communication service for a flat rate with no signed contract. Its target demographics consist of budget- and value-conscious customers. Customers pre-pay between $35 and $50 monthly for unlimited levels of service. For $50/month, one gets unlimited talk, instant messaging, and internet access--Sprint-Nextel is running a test whereby one gets unlimited access to all services for $150/month. MetroPCS deploys and operates an all-digital network based on third-generation infrastructure and handsets. This is a new model for the US markets, yet quite common in Europe.

Likely effects of the growth of the MetroPCS model are: the erosion of the traditional wireless operators power and margins, the commoditization of the space, followed (hopefully) by improved quality of signal, and a-la-carte service and product offerings. The handset manufactures able to sell cheap and reliable phones are also likely winners. It is also interesting to learn the extent to which MetroPCS' evolution will mirror that of AOL's.