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ADVENT OF FLEX BRINGS USED PAGER MARKET INTO FOCUS

With paging systems and devices moving evermore toward FLEX-based equipment, a debate is heating up about the future of second-hand POCSAG-based gear.

The nation’s top 10 paging carriers are migrating their networks and customers primarily to FLEX equipment, devices and enhanced services. Their one-way numeric offerings serve as a gateway to upgrade customers to more revenue-enhancing services.

Paging carriers expect to reduce their POCSAG numbers either through attrition or by upgrading subscribers from numeric to alphanumeric service and swapping the POCSAG device for a FLEX one.

TSR Wireless Inc. President Mitchell Sacks estimates 70 percent of his customers use FLEX-based devices, while the other 30 percent continue to use POCSAG. Doug Ritter, senior vice president of corporate development at Paging Network Inc., said PageNet intends to move the majority of its customers to its FLEX network. PageNet will keep POCSAG service in smaller markets where it doesn’t make sense financially to migrate users to a FLEX network.

Because larger operators eventually plan to transfer all of their customers to FLEX devices, a glut of older model POCSAG pagers are flooding the used-pager marketplace.

Carriers sell leftover POCSAG pagers to used equipment brokers or refurbishers. From there, “they go to resellers with carriers that still allow loading of POCSAG, or to other countries,” said Ritter.

Because smaller carriers may not have the spectrum nor the money for a FLEX network-much less the subscriber numbers to warrant loading customers on a high-speed, high-capacity system-these operators transmit via the POCSAG protocol and have subscriber devices to match. Thus, these carriers can take advantage of the growing base of cheap POCSAG pagers.

“Small-to-medium carriers are going to have a need for that because they’re going to try to put off upgrading their networks as long as possible,” said Darryl Sterling, paging analyst at the Yankee Group. But there is debate as to whether consumers will want older pagers when the selection of new ones is so great.

With technology moving at a fast rate, manufacturers are popping out new, cheap and more advanced pagers every year. Some estimate the lifespan of a new FLEX pager is only two years.

Bob Barnett of Barnett Electronics sells all types of used wireless equipment but recently exited the used-pager business. “That market is dead,” he said. “The problem with used pagers is that you can buy new ones so cheap now, why would you bother buying an old one?”

Years ago, when a new pager cost several hundred dollars, there was a market for used pagers because of the price difference, he said. But today Barnett said he believes the price point needed to make a used unit attractive is too low.

A used POCSAG pager has to be cleaned up, in some cases repaired, and reprogrammed to the new frequency on which it will be used. This costs money and reduces the profit margin of the pager broker or refurbisher.

“It’s a nickel-and-dime market. It’s not worth your time to mess with,” Barnett said.

Gary Brake, a broker for used pagers, disagrees.

Brake said a significant market for second-hand paging goods exists. “It’s huge,” he said. “These people don’t know what they’re talking about.”

Brake is president of National Pager Services, located in St. Louis. He buys used pagers, refurbishes and frequencies them and sells them. He also operates a small POCSAG network in St. Louis.

Brake admitted the profit margin on a used POCSAG pager is small, about $10 after the refurbishing and reprogramming is done, but the key to making money is volume.

Distributors also sell reconditioned pagers outside the paging industry. When selling to carriers, used-pager brokers settle for a smaller profit margin per pager, which they make up in volume. When selling pagers to organizations like schools or hospitals, the number of units sold is lower, but the profit margin is higher.

It is precisely because there is such a short lifespan for pagers that a used-paging market exists, Brake said. He contends people always will be willing to buy a used pager for half the price of a new one.

“It will be a market for years to come,” Brake said. “It has been for some time. When the used market goes from POCSAG, it will go to FLEX.”

John Reilly, president and chief executive officer of Fourth Dimension Industry Inc., also believes the reconditioned market will continue to play a role in the paging industry. Fourth Dimension sells new and used paging products for both on- and off-the-hip applications. It is an authorized paging distributor of Motorola Inc. and has one of the largest pager-repair facilities in the country.

“We’re always happy to sell new product before a reconditioned one,” Reilly said, but added there always has been a reconditioned presence in the paging industry, which likely will not go away, even with new devices getting cheaper.

Reilly contends that because manufacturers still make new POCSAG units, some people will prefer the out-of-production older models, much like some people prefer older lines of cars.

“People are moved to new products first,” he explained, but “consumers still like the Bravo and they can’t get it anymore unless it’s reconditioned.

“The used market will never go away, no matter how low the market will go,” he continued. “There will always be room for a reconditioned product.”

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