The problem with your "deflation of the dollar" argument is that you are just lookingat the time/value of money as if we are burying it in the backyard. Let's use big round numbers:
CPE cost: $300 Interest: 10% Term: 36 months Monthly lease payment: $10 Customer rate: $30/month So, from day one, I'm making $20/month. That means on the last day of the lease, I still make $20. So even though that $10 may be worth $1000 in todays money in three years, the $20 I make is worth $2000. Total paid for CPE over life of loan: $350 Total received from customer: $1,080 Total made on CPE: $730 Now, if you assume that the $300 is a 15% discount due to buying in bulk, that means the CPE is the same price as what is paid over the loan. However, as I've mentioned before, you are also paying more to ship 10 CPE ten times then to ship 100 CPE once. So that increases you costs as well. Whatever the value of money tomorrow, I know that leasing allows me to make more money today. One thing I've learned over the years, money in my pocket is worth a hell of a lot more than the possibility of money tomorrow. On Sat, Jan 3, 2009 at 9:19 PM, J. Vogel <jvo...@vogent.com> wrote: > Actually, I wasn't trying to say that CPE prices would go down 50%, I > don't think they will. Just pulling nice round numbers out the hat. That > doesn't change my point though, that in a deflating economy, debt that is > being taken on will be repaid with dollars that are worth more and/or are > harder to come by, unless you are lucky enough to be in a sector of the > economy that isn't affected (as much) by the deflationary cycle. I hope > that we are in such a segment. > > On Sat, January 3, 2009 3:01 pm, e...@wisp-router.com wrote: > > Don't expect to see that price of the cpes will drop by 50%. At $60-$100 > > there isn't much left to go lower. Especially considering shipping a cpe > > with integrated antenna $5 to $10 from manufacturing plans in asia. > > As well some semiconductor parts are currently going up instead of down > as > > plans are being closed left and right. At current rate electronics will > be > > up in price maybe as much as 20-30% in a year or two if things don't > > change soon. > > > > /Eje > > Sent via BlackBerry from T-Mobile > > > > -----Original Message----- > > From: "J. Vogel" <jvo...@vogent.com> > > > > Date: Sat, 03 Jan 2009 14:44:48 > > To: WISPA General List<wireless@wispa.org> > > Subject: Re: [WISPA] Congress may help smaller ISPs grow > > > > > > Another way of looking at it is that if deflation is occurring, and you > > have committed to pay for the CPE via leasing, you will be using future > > dollars that are worth more to pay for them, (e.g. at the time I commit > > to paying $100 for a cpe, each of those $100 would purchase a loaf of > > bread, but following the deflation of the dollar, each $dollar used to > > pay the lease would have purchased TWO loaves of bread.) so the real > > cost of those CPE is higher. That is even without figuring deflation on > > the CPE themselves. If deflation hits the CPE market as well, committing > > to pay $100 for CPE that 6 months from now will only cost $50 may not be > > a good position to be in. > > > > In any case, in a generally deflating market, pressure will be high to > > reduce prices, including subscription prices for Internet Access, so > > there may be fewer dollars available to pay those lease commitments, > > even though the dollars you do have are worth more. > > > > John > > > > Brian Webster wrote: > >> Tom, > >> > >> <snip> ... If however you bought all of that > >> equipment using credit and they deflate the dollar you have actually > >> hedged > >> against the deflation because your cash did not get deflated, yet you > >> are > >> still producing revenue on the other people's money you used. If you can > >> get > >> good credit terms and can make the numbers work I would personally > >> borrow > >> like crazy and expand to ramp up cash flow. The numbers will work if the > >> government doesn't cause deflation, but if they do it works out even > >> better. > >> > >> People who have loans always make out better in deflationary times > over > >> people who have hard cash assets. If you don't have assets they don't > >> lose > >> value. The person who built their business on cash or personal assets > >> loses > >> out twice. First the value of everything they already paid for > >> depreciated > >> in a big way and then the cash flow they are producing is buying less > >> because of inflation. Hope that makes sense...... > >> > >> > >> > >> Thank You, > >> Brian Webster > >> > >> -----Original Message----- > >> From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org]on > >> Behalf Of Tom DeReggi > >> Sent: Saturday, January 03, 2009 3:23 PM > >> To: WISPA General List > >> Subject: Re: [WISPA] Congress may help smaller ISPs grow > >> > >> > >> Chuck, I will contact you offlist. I have some question. > >> I have not tried SBA recently, and its time that I probably should, > >> before I > >> critisize the program. > >> > >> My point was... In past experience.... SBA enabled guaranteeing very low > >> rates, but SBA could sometimes be harder to get than traditional loans, > >> as > >> SBA required more documentation. Very few SBA loans get defaulted on, > >> because they have such strong requirements. I found the same thing with > >> RUS > >> loans. The misconception by many is that SBA gives loans, which is not > >> the > >> case. SBA guarantees other bank loans. So those banks are giving loans > >> at > >> lower interest than they normally do, because of the SBA's guarantee. > >> But > >> the SBA still wants to cover themselves similar to any other lender. It > >> does > >> not get the borrower off the hook for proving credit worthiness, by > >> traditional industry methods. What I always found Ironic was that to get > >> the > >> SBA loan, one had to prove they were turned down by other lenders. But > >> then > >> the SBA potentially would turn down applicants for the same reasons. > >> > >> All loans have the same requirement, proving 1) ability to pay back > >> (pre-existing consistent cashflow and profit from revenue stream), 2) > >> proven > >> credit worthiness, 3) colateral. > >> Getting a lower interest, just makes the lenders look more closely to > >> prove > >> the above. > >> > >> There are very few lenders that will lend based on a potential of a > >> "business plan" (that does not have pre-existing good cash flow to back > >> it > >> up), or simply based on the merit of the business. I find that > >> borrowers > >> that don't have problems getting loans are borrowers who have had a past > >> life that had already established their high credit worthiness, usually > >> via > >> personal assets, or by having multiple officers to guarantee the loans. > >> > >> The big problem that I ran into was... I sold most of my traditional > >> assets > >> to fund my network build outs. And then invested all profit back into > >> the > >> business to build out the network, there fore increasing potential. And > >> then > >> Banks did not look at those network assets with a value, the same as > >> they > >> would if it was still real estate, so to speak, that was recognized as a > >> safe liquitable asset. > >> > >> I have found that obtaining finance requires long term planning and > >> preperation, to position oneself to look good to financers by their > >> standards. I have found that being more or less debt free, and owning a > >> network, had no value to the lenders that I have talked to. > >> > >> Even with RUS matching fund loans, it seemed similar. They were more > >> interested in what new money I'd put in, for them to match, and did not > >> value the money already put in and spent.. > >> > >> My company is growing, and my financials are improving to be loan > >> worthy, so > >> I won't have a finance problem to much longer. But it was a long road, > >> and I > >> do not wish the same experience to other new start ups, and small > >> providers > >> that grow to the same point. > >> > >> Tom DeReggi > >> RapidDSL & Wireless, Inc > >> IntAirNet- Fixed Wireless Broadband > >> > >> > >> ----- Original Message ----- > >> From: "Chuck Bartosch" <ch...@clarityconnect.com> > >> To: "WISPA General List" <wireless@wispa.org> > >> Sent: Saturday, January 03, 2009 1:25 AM > >> Subject: Re: [WISPA] Congress may help smaller ISPs grow > >> > >> > >> > >>> On Jan 2, 2009, at 12:13 PM, Tom DeReggi wrote: > >>> > >>> > >>>> What I'd like to see is a SBA Broadband Lease guarantee program, > >>>> that is easier to qualify for than traditional SBA guarantees, to > >>>> help open up lending to the WISP market. There is tons of money out > >>>> their, But its harder than said for most to prove themselves "credit > >>>> worthy". > >>>> > >>> I haven't seen access to money to be that much of a problem. I'm a > >>> relatively small operator (compared to Travis, for example), but I got > >>> a $285K SBA loan last year with no trouble at all. Took just a few > >>> weeks. The rates weren't bad at the time (8.25%), but they are lower > >>> now I think. Have you actually *tried* the regular SBA route? In our > >>> case it was authorized both for "pop" build out as well as inventory > >>> (and a small percentage could even be used for working capital if we > >>> wanted) and it sure didn't seem hard to qualify for. > >>> > >>> Chuck > >>> > >>> > >>> > >>>> I'm seeing high risk lenders being more open to 1 yr leases. But > >>>> lenders are still concerned about 3yr leases, when they realize 3 > >>>> yrs is a long time, and plenty of time for a WISP to loose their > >>>> custoemrs to Comcast or FIOS. Expecially when grant programs are > >>>> talked about that might subsidize Fiber Optic deployment growth. > >>>> > >>>> Tom DeReggi > >>>> RapidDSL & Wireless, Inc > >>>> IntAirNet- Fixed Wireless Broadband > >>>> > >>>> > >>>> ----- Original Message ----- > >>>> From: Travis Johnson > >>>> To: WISPA General List > >>>> Sent: Thursday, January 01, 2009 11:47 PM > >>>> Subject: Re: [WISPA] Congress may help smaller ISPs grow > >>>> > >>>> > >>>> We have been charging the same for internet service for almost 5 > >>>> years.... and just two days ago, we got double the new sign-ups on a > >>>> single day of what we can do for installs. Business is booming in > >>>> our area and our industry. Just looking at our 2008 financials, our > >>>> gross revenues are up 15.2% and our Net Profit is up 10.3%. > >>>> > >>>> And I'll take the bet on being able to lease or finance equipment > >>>> in 6 months. How much shall we throw on the table? I have lease > >>>> companies calling me daily wanting to give me money... seriously... > >>>> I get 3-4 calls PER WEEK from all different leasing companies. They > >>>> all have money and want "credit worthy" companies to use it, because > >>>> that's how they make money. > >>>> > >>>> So again, how much shall we bet on this? :) > >>>> > >>>> Travis > >>>> Microserv > >>>> > >>>> rea...@muddyfrogwater.us wrote: > >>>> ++++++++++++++++++++++++++++++++ > >>>> <insert witty tagline here> > >>>> > >>>> ----- Original Message ----- > >>>> From: "Travis Johnson" <t...@ida.net> > >>>> To: "WISPA General List" <wireless@wispa.org> > >>>> Sent: Thursday, January 01, 2009 7:24 PM > >>>> Subject: Re: [WISPA] Congress may help smaller ISPs grow > >>>> > >>>> > >>>> You can not grow in large scales without financing... and I don't > >>>> understand why people are against it. Our last equipment lease was > >>>> under > >>>> 10% interest, no personal guarantees, no money up front. We were > >>>> able to > >>>> purchase a large quantity of CPE units (thus saving us about 20% off > >>>> the > >>>> single unit price). So, in the end, it actually saves money and the > >>>> "cost" > >>>> of installing a new customer is $0 to you, because the $99 > >>>> installation > >>>> fee pays for the time, materials, etc. > >>>> > >>>> Example: > >>>> single CPE = $190 each > >>>> 460 CPE = $155 each > >>>> > >>>> 36 month lease on $71,300 = $2,300 per month x 36 months = $82,800 / > >>>> 460 > >>>> units = $180 each > >>>> > >>>> But in 36 months, you might be able to charge no more than 10 > >>>> dollars / > >>>> month per customer. That's the magic of deflation - which is already > >>>> occurring. > >>>> > >>>> And it costs you $5 per month for 36 months for the equipment on that > >>>> customer... that's pretty cheap even if you only charge $29 per > >>>> month. :) > >>>> > >>>> Whatever happens in the future... It will NOT be the same as today. > >>>> Inflation or deflation will happen. No way around it. Congress has > >>>> already taken on more debt than can be serviced. Neither scenario > >>>> will > >>>> let you survive being in debt. > >>>> > >>>> Besides, don't expect to be able to lease equipment at any rate or > >>>> terms > >>>> within 6 months. > >>>> > >>>> > >>>> Travis > >>>> Microserv > >>>> > >>>> > >>>> > >>>> > >>>> > ------------------------------------------------------------------------- > >>>> > >> ------- > >> > >>>> WISPA Wants You! Join today! > >>>> http://signup.wispa.org/ > >>>> > ------------------------------------------------------------------------- > >>>> > >> ------- > >> > >>>> WISPA Wireless List: wireless@wispa.org > >>>> > >>>> Subscribe/Unsubscribe: > >>>> http://lists.wispa.org/mailman/listinfo/wireless > >>>> > >>>> Archives: http://lists.wispa.org/pipermail/wireless/ > >>>> > >>>> > >>>> > >>>> > >>>> > ------------------------------------------------------------------------- > >>>> > >> ----- > >> > >>>> > >>>> > >>>> > >>>> > ------------------------------------------------------------------------- > >>>> > >> ------- > >> > >>>> WISPA Wants You! Join today! > >>>> http://signup.wispa.org/ > >>>> > >>>> > ------------------------------------------------------------------------- > >>>> > >> ------- > >> > >>>> WISPA Wireless List: wireless@wispa.org > >>>> > >>>> Subscribe/Unsubscribe: > >>>> http://lists.wispa.org/mailman/listinfo/wireless > >>>> > >>>> Archives: http://lists.wispa.org/pipermail/wireless/ > >>>> > >>>> > >>>> > ------------------------------------------------------------------------- > >>>> > >> ----- > >> > >>>> No virus found in this incoming message. > >>>> Checked by AVG. > >>>> Version: 7.5.552 / Virus Database: 270.10.1/1870 - Release Date: > >>>> 12/31/2008 8:44 AM > >>>> > >>>> > >>>> > ------------------------------------------------------------------------- > >>>> > >> ------- > >> > >>>> WISPA Wants You! Join today! > >>>> http://signup.wispa.org/ > >>>> > ------------------------------------------------------------------------- > >>>> > >> ------- > >> > >>>> WISPA Wireless List: wireless@wispa.org > >>>> > >>>> Subscribe/Unsubscribe: > >>>> http://lists.wispa.org/mailman/listinfo/wireless > >>>> > >>>> Archives: http://lists.wispa.org/pipermail/wireless/ > >>>> > >>> -------------- > >>> Chuck Bartosch > >>> Clarity Connect, Inc. > >>> 200 Pleasant Grove Road > >>> Ithaca, NY 14850 > >>> (607) 257-8268 > >>> > >>> If all is not lost, where is it? > >>> > >>> > >>> > >>> > >>> > >>> > -------------------------------------------------------------------------- > >>> > >> ------ > >> > >>> WISPA Wants You! Join today! > >>> http://signup.wispa.org/ > >>> > -------------------------------------------------------------------------- > >>> > >> ------ > >> > >>> WISPA Wireless List: wireless@wispa.org > >>> > >>> Subscribe/Unsubscribe: > >>> http://lists.wispa.org/mailman/listinfo/wireless > >>> > >>> Archives: http://lists.wispa.org/pipermail/wireless/ > >>> > >>> > >>> -- > >>> No virus found in this incoming message. > >>> Checked by AVG. > >>> Version: 7.5.552 / Virus Database: 270.10.2/1871 - Release Date: > >>> 1/1/2009 > >>> 5:01 PM > >>> > >>> > >>> > >> > >> > >> > >> > ---------------------------------------------------------------------------- > >> ---- > >> WISPA Wants You! Join today! > >> http://signup.wispa.org/ > >> > ---------------------------------------------------------------------------- > >> ---- > >> > >> WISPA Wireless List: wireless@wispa.org > >> > >> Subscribe/Unsubscribe: > >> http://lists.wispa.org/mailman/listinfo/wireless > >> > >> Archives: http://lists.wispa.org/pipermail/wireless/ > >> > >> > >> > >> > -------------------------------------------------------------------------------- > >> WISPA Wants You! Join today! > >> http://signup.wispa.org/ > >> > -------------------------------------------------------------------------------- > >> > >> WISPA Wireless List: wireless@wispa.org > >> > >> Subscribe/Unsubscribe: > >> http://lists.wispa.org/mailman/listinfo/wireless > >> > >> Archives: http://lists.wispa.org/pipermail/wireless/ > >> > >> > > > > > > -- > > > > John Vogel - jvo...@vogent.net > > http://www.vogent.net 620-754-3907 > > Vogel Enterprises LLC > > Information Services Provider serving S.E. Kansas > > > > > > > > > -------------------------------------------------------------------------------- > > WISPA Wants You! Join today! > > http://signup.wispa.org/ > > > -------------------------------------------------------------------------------- > > > > WISPA Wireless List: wireless@wispa.org > > > > Subscribe/Unsubscribe: > > http://lists.wispa.org/mailman/listinfo/wireless > > > > Archives: http://lists.wispa.org/pipermail/wireless/ > > > > > > > -------------------------------------------------------------------------------- > > WISPA Wants You! Join today! > > http://signup.wispa.org/ > > > -------------------------------------------------------------------------------- > > > > WISPA Wireless List: wireless@wispa.org > > > > Subscribe/Unsubscribe: > > http://lists.wispa.org/mailman/listinfo/wireless > > > > Archives: http://lists.wispa.org/pipermail/wireless/ > > > > > > > -- > John Vogel - jvo...@vogent.net > http://www.vogent.net 620-754-3907 > Vogel Enterprises LLC > Information Services Provider serving S.E. Kansas > > > > -------------------------------------------------------------------------------- > WISPA Wants You! Join today! > http://signup.wispa.org/ > > -------------------------------------------------------------------------------- > > WISPA Wireless List: wireless@wispa.org > > Subscribe/Unsubscribe: > http://lists.wispa.org/mailman/listinfo/wireless > > Archives: http://lists.wispa.org/pipermail/wireless/ > -------------------------------------------------------------------------------- WISPA Wants You! 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