NEW YORK-Domestic wireless carriers “now have prepaid (services) fully introduced throughout their geographic territories,” but they lag behind their peers abroad in fully tapping its potential, said Scott R. Cassell, president of Globalnet Communications, an Indianapolis consulting firm.
“It’s exciting to see prepaid take off in the United States,” he said at a Telecom Business ’98 conference seminar, here Sept. 3.
Today, more than 250 wireless carriers in 75 countries offer prepaid services, Cassell said. Between now and the end of 2001, prepaid cellular and personal communications services worldwide will quintuple to an expected peak of about $2.5 billion, forecast Eric Stebel, associate publisher of “Telecom Business.”
Despite that opportunity knocking, “no one but no one is marketing heavily to the (American) consumer,” he said.
There is a wide variety of Americans to whom domestic carriers have yet to promote prepaid wireless services aggressively, Stebel said. These include the 4 percent to 5 percent of the population who lack any kind of phone service, travelers at airports and vacation resorts, members of affinity groups like the American Association of Retired Persons, college students at orientation meetings, families visiting amusement parks and customers of furniture rental stores.
Perhaps the biggest barrier to broader adoption of prepaid wireless by the general public is its price, Cassell said.
“In the United States, most (prepaid) services are extremely high relative to postpaid, and carriers have lost a great opportunity because of fear of taking customers away from the postpaid base.”
According to Stebel, a related irritant to end users is that, in some cases, there “are problems with how roaming and long-distance calls are debited.”
American carriers also are stingy about the useful life they confer on prepaid wireless services, selling them on a use-it-or-lose-it basis with 30- to 90-day automatic expiration dates.
A study in contrasts is offered by Telecom Italia, which posted 6 million prepaid wireless customers at the end of August. It is the largest prepaid wireless provider in Western Europe, which is the world’s largest prepaid cellular market, Cassell said. Telecom Italia sells all its prepaid services with extended expiration dates, sometimes as long as one year.
Like many of its counterparts on the Continent, it offers variable pricing. Telecom Italia’s prices depend on whether the wireless call is to a landline phone, a competing cellular carrier or another of its own customers. Many Western European carriers also offer “multiple tariffs,” responsive to the needs of youth, senior citizen, business and other consumer market segments, he said.
“You’re seeing a completely new business model, not worried about prepaid cannibalizing postpaid but focusing more on minutes of use … and cash flow is much improved,” Cassell said.
Like other Global System for Mobile communications carriers, Telecom Italia Mobile’s prepaid services employs switch-based debiting with a subscriber identity module card, which acts as a security chip, Stebel said. Its prepaid wireless phones work much like the debit card wireline phones deployed in this country by GTE Corp. and U S West Inc.
Omnitel Pronto Italia launched its wireless network in February 1997, closing out that year with 2.4 million subscribers, 70 percent of them prepaid.
“It has a very robust distribution network, a blended all-day rate, easily rechargeable value and offered the first [GSM] prepaid card for international calls,” Cassell said.
In Portugal, Telecel Comunicacoes, the first carrier in Europe to offer prepaid services on a large scale, has a relationship with a large bank to enable easy recharging of accounts. It markets its various price plans as “Vitamina,” or vitamins, with Vitamina K for kids ages six to 13, and Vitamina P for professionals, for example.
Western European carriers no doubt benefit from calling party pays, another area in which the American market is a laggard. To sweeten the pot further, another Portuguese carrier, Telecomunicacoes Moveis Nacionais, gives partial credit toward future minutes of use for incoming calls its prepaid customers receive.
Other carriers on other continents also are engaged in creative ways to market prepaid wireless.
“In India, Hutchison Max created a whole new identity with Ace, and BPL Mobile offers customers discounts to stores and bazaars associated with its prepaid services,” Cassell said.
“In Colombia, Comcel sells its `Amigo’ card like potato chips, and it can be used in all phones. Movilnet in Venezuela has developed a very strong company-branded resale product.”
Looking at prepaid wireless from a U.S. perspective, Stebel said there are several variations on the theme, each with their own pros and cons.
Rent-A-Center offers an example of a debit phone resale, which is open to just about all comers, offers nationwide roaming and encourages repeat business. However, there is a high cost of about $250 to the consumer to obtain a phone this way.
The “soft debit” approach, in which calls are billed upon completion, “resides in the networks of cellular carriers like Bell Atlantic Mobile. It’s available to resellers on a limited basis and requires a resale agreement from a carrier,” he said.
AT&T Wireless Services Inc. is one example of “service bureau resale” of prepaid calling. “There are low entry costs because the resale bureau already has worked out the resale agreement with the carrier, but there are ongoing operational risks related to reliance on a third party for providing service,” Stebel said.
Switch-based debiting used by carriers like Ameritech Cellular Services “works like a prepaid card, but it requires prepaid platforms, which cost anywhere from $80,000 to several million dollars,” he said.
Last but not least is the switch-based debiting with SIM card used by GSM carriers. This, too, requires an upfront technology investment and an ongoing investment in SIM cards.
