We accountants call it "incremental costs." The incremental cost of adding Vonage to my existing broadband connection is zero, in so far as the cost of the broadband connection is concerned.
***** Moderator's Note *****
Doesn't that imply that the cost of disconnecting the broadband service is zero as well? I'm not joking: it just seems to me that _some_ of the broadband cost would have to be apportioned to the "VoIP" use of the broadband connection, since _disconnecting_ the broadband connection would result in replacement costs.
Bill Horne, who is trying to recall his college accounting lessons Moderator
It's $350 a month. For some folks that choose to live in the remote areas of Montana, or such, that is petty cash. The point is, the market offers that option.
She also has the option of Digitalpath, which is a WiFi system along the way of Cellular, again this is a large cost. She is not a large user, just e-mail, so it may be enough. I only use my system for this newsgroup and a couple of others as well as e-mail, so I have a lot of extra bandwidth and costs also, but there are times I do need it since I have to handle time sheets and other record keeping from home. I just got my MiFi router and with it I get almost the same speeds as I get at home, I'm temped to switch to this and drop my DSL. I thought about the area she lives in and looked into using a WiFi system like mine for her, but according to the service area map, she is in a Digital Black Hole, with no service other then roaming. but it is just a couple of miles from an area that just went 4G, 3G is in operation and 4G later this year. I have to go up to Oregon later this month and she might be able to get it to work with an external ant, so I'll see if I can stop by and check it; right now it is snowed in. on the roof, like I use for WiFi.
The key is the incremental cost of the *existing* broadband connection is zero. OTOH, the incremental cost of electricity to power the VoIP adapter is not zero, but no one would account for that because it is immaterial.
Let's say this is an office environment. Our commercial broadband service costs us $125 a month (big pipe). If we add 5 Vonage lines it is still $125 per month for the broadband connection. If we now charge some increment of that $125 per month to our telephone expense, the result is to understate the cost of the broadband service.
The "bottom line" (pun intended) is that two companies could choose to allocate differently, which is fine so long as they are consistent. Something of this nature is not specified in accounting practices or principles.
That "incremental" cost is zero _now_. But the cost of that last mile hasn't gone away and it may go up, especially if today's extensive economies of scale disappear.
Also, remember that many new products and services are priced cheap to develop a market. Then, the price goes up. I remember when automatic teller machines were not only free, there were giveaways to promote their use. After they got everybody hooked, they added charges to use them.
(Likewise with automatic car toll collection like 'EZPASS'. When it first came out it was free with discounts, now there are service charges and few discounts.)
That is correct.
There are numerous ways to account for 'costs', the proper method depends on the decision-making to be done with the information.
A company considering closing a single store wouldn't consider total company overhead ("fully allocated costs") in that decision; rather, it would consider the costs and revenue of that store (and some other things). But total company overhead still has to be considered for financial reports. [I am trying to sum up a year's worth of cost accounting study into a single paragraph.]
As to which to use, what _Is_ changing the issue for many people is that they already have a cellphone and have no intention of giving them up. So with that the costs of a landline look more expensive. HOWEVER, people forget that the equivalent unlimited talk cellphone plans--as compared to their old landline--can get quite expensive. So, killing a landline will probably mean upgrading their cellphone plan to a more costly one.
And, I said that, provided a given enterprise is consistent in its application.
"Cost accounting" is a loose use of the term when allocating General and Administrative expenses such as those we speak. More strictly, it is classification of G and A expenses.
Standard Cost Accounting is real cost accounting, which applies to work in progress of goods being manufactured; i.e., incremental accounting for inventory as it is being manufactured.
Unless you have a family of teenage girls, I don't see any reason for wanting an unlimited-time cell plan. And haven't the teenagers of both sexes switched to text-messaging now?
(I've been on the same 150-minute/month plan since 2001 and have only once ever gone over, when I was recuperating from a broken knee away from home and telecommuting. Amazingly, VZW even let me keep this plan when I upgraded to a smartphone, although they did make me choose between the $30 unlimited-data plan and the identical-but-for-price $45 unlimited-data plan. According to various Web pages, they plan to eventually prevent $30 subscribers from doing stupid things like using Microsoft Exchange servers.)
I recently found that my old unlimited-local-calls landline was costing me about twice as much as it should have, and dropped back to measured service. I almost never make local calls -- most of my calls on the landline are regional or long-distance -- so there wasn't much point in paying an extra $12/mo. for unlimited local calling. I'll still keep the landline because the phones themselves are more comfortable -- I actually have my cell busy/no-answer-transfer to my landline -- and for emergency access.
I think you are overlooking local calls. I've been using Vonage for going on 4 years now. With out of state relatives on both sides, work related calls and a teenager at home for part of that time, we run a combined 1200-1400 minutes a month on the land line, plus another 500 or so on three cell phones.
I'd stay with Vonage, but we're on a marginal DSL connection now with no immediate prospects for improvement, so I've just started reconfiguring things to use a standard land line along with Google Voice and will drop Vonage shortly.
I'm "overlooking" them because I don't make any. Well, maybe once every so often to reschedule a dentist appointment or something of that nature. I'm at a loss as to what else I might make a local call for that isn't more easily accomplished online.
As with most VoIP boxes that have the "standard" analogue handset connection.
I have my cordless phone/answering unit plugged into mine, having given my land-line number the flick last year, and using Naked DSL since then (I had my VoIP service for a couple of years before finally cutting off the land-line - time proved its value).
-- Regards, David.
David Clayton Melbourne, Victoria, Australia. Knowledge is a measure of how many answers you have, intelligence is a measure of how many questions you have.
I have been on Vonage on top of either cable/dry dsl for over 4 years now and don't have any particular issue with VOIP in general, other than when operated as a customer application over residential broadband, it is highly dependent on the bandwidth, latency and stability of the underlying circuit.
In my case, VOIP on cable HSI was excellent. I had sufficient bandwidth both directions and there wasn't any jitter that interfered with call quality. My current dry DSL line is much slower -
1.5Mbps. Still plenty for downlink, but the limited uplink made simultaneous calls and file transfers/embded video web pages a problem.
Finally broke down and ordered a standard voice line. Plan to use Google Voice as a front end which should get me within $5 or so of what I was paying to Vonage each month.
Tough to say, indeed, wire may not have been the 'major' cost component in voice calls.
Terminal equipment--the gear that converts analog to digital and back, repeaters, and multiplexers--all cost serious money in the past. A
1975 Bell System text noted the high cost of terminal equipment and that in some cases it was cheaper to simply use wire instead of multiplexing.
As noted in a prior post, the huge drop in the cost of electronic computers has allowed for big savings in the cost of terminal equipment.
Another cost component was the switchgear itself--the design, construction, installation, and maintenance of electro-mechanical switches was not cheap. Considerable advance engineering went into designing the optimum amount of switchgear for a particular central office--too small would cause service jams and too big was wasteful.
While costs have gone down, telephone switches and terminal gear still cost serious money. There are physical concerns to maintaining fiber links whether underground or aerial. Buildings are still needed.
When comparing cellphones to landlines, one thing we must remember is that cellphones usually include _incoming_ calls as part of the monthly bill while a landline does not.
My landline gets plenty of unwanted legal and illegal solicitation calls--marketing surveys, political surveys, charity drives and even illegal sales pitches. My answering machine gets plenty of them. I don't get such calls on my cellphone, but if I were to port my landline phone number--which is (sadly) in many directories--will I start getting such calls on the cellphone? I know they're not supposed to call cellphones, but I know they callers don't always honor those rules. This includes calling nursing home phones or sending spam text messages to my cellphone. (I disconnected my texting ability since I had to pay for the spam text). Anyway, the point is that these minutes add up and have to be included.
The usage of incoming and outgoing calls of a household will of course vary greatly by household. But I dare say even a single person alone will use more than 150 minutes of talk time a month total of combined landline and cellphone--that comes out to only five minutes per day per month--not a whole lot. I'd figure an individual person would talk at least 15 minutes per day on average.
A cellphone replacing a landline might not need be 'unlimited', but it'd better have quite a bit more minutes.
My cellphone is free after 9 PM on weeknights, but I find I rarely talk that late; most people prefer an earlier call.
Lastly, the quality of a cellphone transmission is significantly worse than a landline.
Why would you figure that? (Speaking as a single person, living alone, who -- as noted earlier in this thread -- does not spend even remotely close to that much time on the telephone.) Is there any
*recent* evidence as to what the actual distribution is? (Anything published in BSTJ is far too old to count as recent.)
I might spend as much as an hour, total, on the phone in a typical month. Am I a serious outlier, or within a standard deviation of the mean for youngish single guys?
Agreed, but in comparison the cost of counting all the calls, determining what to charge for them, sending out bills, processing payments, chasing up overdue accounts and providing "Customer Service" facilities must be a way higher percentage of any "retail" telco's costs these days than previously.
I wonder if these admin costs are now the biggest cost component.
-- Regards, David.
David Clayton Melbourne, Victoria, Australia. Knowledge is a measure of how many answers you have, intelligence is a measure of how many questions you have.
That's about my usage, too, and it appears you use your phone "smartly", too. I have several friends, however, who seem to use their phones some
8 to 12 hours each day; I prefer speaking with friends face to face (in person) and become annoyed when some will allow their ringing cellphone to interrupt us (I usually turn off the ringer when I'm with others).
People must have too much free time or, perhaps, they're simply not doing all the things they should and/or need to be doing and, instead, are playing too much with their phone(s). The new "smart" phones aren't going to improve this situation; I was examining a neighbor's Nexus last week (he works for Google) and it's a remarkable device but nothing I would want or use -- with my V3 I push one button, speak "order pizza", and 45 seconds later the pizza is ready for pickup in 15 minutes because they have my number (CallID) and I simply say "repeat the last order". :-)
If you look at the bill; at least in the US; there is a charge on it which includes those costs, it is the customer charge. I always thought that should have been included in the costs of services.
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