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PREPAID CELLULAR PHONE TARGETS PEOPLE WITH POOR CREDIT HISTORY

These days cellular phones are sold just about everywhere you turn, even the drug store. However, it may not be so easy to buy one. One company said it has designed a solution for people whose credit history has inhibited them from buying a cellular phone.

Prepayment is the premise of Communication Systems Integration Corp.’s secured credit cellular service. Like a debit credit card, users buy the product-airtime-in advance through a local cellular service provider. Once the allotted time is up, the handset becomes inactive.

Besides dialing 911, secured credit cellular users cannot directly place outgoing calls and can receive incoming calls only with Calling Party Pays service. To place a call, users dial the area code and phone number they wish to reach then pushes SEND, which dials a preprogrammed 800-number to a debit platform. Once the platform receives the call, it asks the user to push SEND again, which forwards a 21-digit number-the area code and phone number previously dialed by the user plus an individual, preprogrammed 10-digit authorization code-to the platform. Based on the user’s location, the code sent begins either with “0” or “1,” indicating if the phone is in roaming or local calling mode, and charges (or deducts) at the appropriate airtime rate. Before the platform connects the call, it reports to the user how many minutes remain on the account. Once a call is terminated a user can directly place a second call by pushing “#” after hanging up from the first call.

Englewood, Colo.-based CSI’s secured credit cellular service is unique, said the technology’s pioneer and company president Dean Olson. It’s an “off-the-shelf” product, Olson explained. Basically, service providers purchase both the handsets and airtime, which they sell to their customers. The two key factors exclusive of CSI’s secured credit service, said Olson, are simplicity and profitability. CSI’s service requires no billing integration, said Olson.

“We’re not competing with any of the providers for the client base,” said Olson. “We’re offering a product to providers they can offer to a new market.” One in five people in the United States have credit issues that prevent them from accessing cellular service, according to CSI, which illustrates a significant market potential.

Other applications of the secured credit cellular phone service include businesses where the owner wants to limit employees’ cellular use to a specific dollar amount per month. “Businesses are looking for a better means of control over their cellular costs,” Olson said.

CSI’s system can be used for rental services in hotels and motels, noted Olson. Other possible secured credit cellular customers are people who have feared owning a cellular phone would lead to exorbitant airtime fees. If prepaid, any possible debt is avoided.

Nonetheless, Olson said he believes the primary users will be consumers with difficulty obtaining credit.

Japan Radio Corp. is producing the custom secured credit handsets in two models, the JRC 8830 transportable with built in speaker and JRC 830, which is a true hands-free portable, said Olson. Both use analog technology. The provider will pay between $175 and $200 per handset, depending on the model. CSI charges service providers $25 per handset, for the input of authorization codes, and 22 cents per minute debit switch time. Olson said CSI profits are derived from the debit switch charge.

While the retail costs of handsets and airtime will vary among carriers and markets, Olson suggested “$250 is the threshold of pain.” In other words, based on application responses by people previously denied credit for cellular service, most indicated they would pay no more than a $250 deposit for cellular service. Therefore, Olson said he believes these people will pay $250 for a handset and cellular activation with CSI’s secured credit service.

Phone activation for secured credit cellular customers will be similar to that of typical cellular activations.

Qwest Communications Corp. of Denver, an interexchange long-distance carrier, is the debit switch operator. The company also assigns authorization codes for the handsets, which GPS Communications of Denver, preprograms into handsets along with the 800-numbers. GPS also distributes the phones to carriers. Olson said delivery takes about five days from the time of order to receipt of shipment.

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