DUBLIN, Ireland-The myth that prepaid cellular users are by definition low-value customers has been firmly discredited, and prepaid services did much to increase GSM penetration among the young and cost conscious at a time, around 1997, when European growth rates were slack.
Now European operators are hoping that prepaid services will have the same impact on the equally slow-developing Wireless Application Protocol (WAP) market.
It is clear that operators need prepaid WAP to boost their customer figures. Slow connection times and limited content are a long way from the marketing hype of “the Internet in your pocket,” and even operators admit some campaigns have misled the public as to what they can do with wireless Internet services.
BT Cellnet was the first European operator to commit to large-scale prepaid WAP when it decided to acquire 250,000 handsets specifically for prepaid customers from Siemens, Mitsubishi and Alcatel. Managing Director Peter Erskine described his company’s introduction of prepaid WAP in early April as “taking WAP to the mass market.”
Phil Kendall, mobile communications senior analyst at Strategy Analytics, applauded BT Cellnet’s move to prepaid WAP handsets. “In the early days of WAP, many networks experienced problems obtaining sufficient volumes of handsets, and this obviously impacted on their subscriber growth,” said Kendall.
At its prepaid WAP launch, BT Cellnet said it expected to sign up roughly equal numbers of prepaid and postpaid users. Stuart Newstead, general manager, data and wireless at BT Cellnet, confirmed that prepaid accounts for about 70 percent of the carrier’s total WAP connections.
“Our most recent figures are for the period April-June 2000, and in that period, we sold 175,000 WAP connections, of which around about 120,000 were prepaid,” Newstead said.
The company sold 670,000 total connections during that period, meaning approximately 18 percent of all connections were prepaid WAP. BT Cellnet was able to introduce prepaid WAP services because current WAP billing platforms are basic and priced on the basis of access duration in the same way as standard voice calls.
However, according to Scott Goldman, chief executive officer of the WAP Forum, there are no technical reasons why prepaid WAP cannot be sustained when billing systems evolve to enable wireless service providers to share subscriber revenues with content providers.
He also described prepaid WAP services as an opportunity for operators to address the issue of small-value transactions. “Prepaid credit could be used as a micro-payment mechanism for low-value transactions, such as downloading music tracks. In this scenario, the phone acts as a wallet with debits made from the prepaid credit. Additional call value could be uploaded via WAP through a simple credit card transaction,” said Goldman.
Many network operators have decided not to introduce prepaid WAP services. Kendall believes these operators risk alienating a large percentage of their customer bases. “Prepaid customers account for between 50 percent and 80 percent of mobile-phone penetration in the major European markets,” Kendall said. “These customers have rejected postpaid services for a variety of reasons, and unless their network offers a prepaid WAP option, the chances are they will either switch networks or not become WAP users.”
He pointed to BT Cellnet as an example of how an early commitment to prepaid WAP has paid dividends. The carrier served approximately 90 percent of the country’s prepaid WAP customers as of June. “BT Cellnet has done very well with its prepaid packages and is clearly leading the U.K. market for WAP services,” he added.
Newstead added that the introduction of a prepaid option has definitely increased demand for WAP.
The entry-level handsets developed by companies such as Siemens are also vital to the success of prepaid WAP. Because postpaid subscribers are usually tied into contracts, carriers heavily subsidize the cost of handsets, knowing they will recoup the cost of the subsidy through call charges. However, with prepaid services, guaranteed call revenues are much lower, and therefore, networks cannot afford to pay handset subsidies.
