Sep 1, 2001 12:00 PM,

Merging Markets

BY BETSY HARTER

Prepaid and data customers no longer are separate segments.

A Market for Prepaid Data?

U.S. wireless carriers definitely are interested in prepaid data, and some already are getting their feet wet with prepaid SMS. A Verizon Wireless spokesperson said the company (www.verizonwireless.com) soon plans to extend its SMS offering, Mobile Messenger, to its prepaid customers. Cingular Wireless (www.cingular.com) currently offers prepaid SMS in most markets.

“I am hoping we can offer all the other data services on prepaid, including WAP services,” said David Neveleff, Cingular Wireless head of prepaid products. “There is no reason not to do it — it is just overcoming connectivity issues.”

In March, BCGI and Cincinnati Bell Wireless completed a successful prepaid data trial (www.cincinnatibell.com).

“We opened up Cincinnati Bell's i-wireless (prepaid) service to be a mobile commerce spending account,” Erskine said. “It successfully validated the technology, as well as the fact that this is something subscribers are interested in doing.”

Erskine said BCGI's prepaid-data solutions will be deployed by carriers at the end of 2001.

A Different Prepaid-Data Model

Not all carriers anticipate billing issues with prepaid data. Leap Wireless (www.leapwireless.com) offers a free month of service when customers buy a phone. After that, customers pay a flat fee in advance of the coming month for unlimited usage, much like a cable-TV bill. Right now, for an extra $3 per month, Leap Wireless customers can access content via SMS, a service for which they also pay in advance. Dan Pegg, Leap Wireless senior vice president of public affairs, said the company has not decided how it will charge for its future “pay-in-advance” data services, but it hopes to deploy a model similar to its voice plans.

“Our voice service is such a value, with a flat rate for all the use you want,” Pegg said. “We think we can do on the data side the same thing we did on the voice side, which would hopefully take away the mystery and ambiguity of the billing system and provide a value that makes customers want to use it more.

Leave the incremental charges to the traditional carriers that market their products to the top 30% of the economic spectrum, he said. If Leap offers data as a flat rate, customers will pay in advance just as they do for voice, and the company won't have to worry about value-based billing.

Those carriers that do want prepaid data have specific goals. Cingular's Neveleff said he is looking for several features in a prepaid data solution. First, it must integrate easily with the company's current prepaid system. It also must mesh with platforms for other services, including SMS. Like prepaid voice platforms, the prepaid data platform should notify customers when their accounts are about to run out.

Because data services are measured in increments other than minutes, it should be able to estimate what a transaction might cost so that it can pro-actively notify customers if they don't have the funds to complete a transaction.

“The best of all worlds would be that there would be no difference in prepaid and postpaid; the only difference would be the way you pay,” he said.

Prepaid Data in Development

Vendors already are providing prepaid products that can support data services. For instance, Convergys (www.convergys.com) has added Convergent Pre-pay to its Geneva 5.0 product. This new functionality includes management of prepaid and postpaid accounts, partial event handling, balance management and real-time integration with an IN platform for the voice calls, actions prompted by crossing balance thresholds, and event guiding based on filtering rules.

“You can offer a whole range of services, either on a prepaid or postpaid basis, such that you can use the same prepaid balance for multiple services simultaneously,” said Thomas Bygott, Convergys market strategy manager.

With 3G services, customers likely will want to do everything from make calls to get stock quotes to use location-based services. As the various members of a family use these services, Convergent Pre-pay allows them to share a prepaid balance that will update in real time and control which services each family member can use.

PrePay Open, PhoneFuel and PhoneFuel Open from Corsair (www.corsair.com), a Lightbridge company, all support micro payments and transactions. Because customers will expect to pay on a per-event basis, carriers will be forced to move from flat rates for data to incremental charges. PrePay Open also supports sophisticated taxes and tariffs.

“In the United States we have tax requirements, fees and tariffs with voice, and there will be different ones that will be associated with data billing,” Schneiderman said.

PhoneFuel and PhoneFuel Open enable prepaid customers to add money to prepaid accounts from a credit card or bank account, over the handset. Then, they can use the phone to view their accounts.

BCGI's Wireless Wallet product snaps onto its Prepaid Wireless and Prepaid Connection products to enable carriers to offer content billing for enhanced data services or to deliver third-party content services via prepaid. The product bills on value, which means carriers can move beyond flat rates for prepaid data to rates based on value.

“Prepaid opens a great opportunity for carriers to move quickly into mobile commerce where they might move more tentatively on the postpaid side,” Erskine said. “With m-commerce, the carrier acts as a bank and takes on credit risk with postpaid. If a customer buys a book and puts it on a postpaid bill, the carrier is on the hook for the money, but that whole issue is moot with prepaid because the carrier already collected the money.”

A Growing Group

To deny data services to prepaid customers could mean ignoring almost half of your customer base.

According to a report by Baskerville and Chorleywood Consulting, 45% (www.chorleywood.com) of the world's wireless customers are on prepaid plans. In some countries, nearly all subscribers are on prepaid accounts, and operators have taken a more positive approach to their prepaid customers, said Karen Swain, Global Mobile Prepaid Strategies co-author.

“Instead of trying to reduce the prepaid base, operators are concentrating on raising profitability through increased usage and new services,” she said.

Because data is one of these profitable new services, carriers should ensure they can handle both prepaid and incremental charges. If they don't, their prepaid customers may choose to find a competitor that can.

Betsy Harter (betsyharter@aol.com) is a freelance writer based in Athens, GA.

Cash Collection

Replenishment always has been a big problem with prepaid. Customers who want to add airtime in cash usually have to buy prepaid cards in fixed dollar amounts. Not only are the card-distribution points fairly limited, but the preset amounts hinder customers. For example, if cards come in $25 and $50 amounts, a customer who wants to add $30 can only do so through a credit card. Because prepaid customers tend to pay in cash, credit cards are not always viable. Moreover, prepaid cards expire after a certain time, rendering them worthless if the customer does not use them quickly.

Sprint PCS (www.sprint.com) and Verizon Wireless (www.verizonwireless.com) both have teamed with PreNet (www.precash.com) for a new form of cash-based prepaid service. PreNet's PreCash solution integrates with a carrier's prepaid platform to transfer cash in real time. PreNet produces cards with a 16-digit number that is tied to a customer's phone number. The cards, which have no value attached to them, are distributed to a carrier's retail locations, as well as PreNet's other retail partners around the county. The customer takes the card to any location that displays a PreCash sticker, similar to Visa or MasterCard logos at retailers. The clerk swipes the card into a point-of-service terminal, then enters the amount of money the customer wants to add. PreNet's server queries the carrier's server to ensure that the customer's phone number is valid. Once the number is verified, the terminal authorizes the transaction and prints a receipt. A real-time message is sent to the carrier, and the money is loaded into the handset.

“It provides a more secure method of transferring cash to he customer,” said Gordon Breen, PreNet vice president of carrier sales. “Customers receive their funds quicker than using a hot card (prepaid card), and there is much wider distribution at lower costs.”

Prepaid cards with fixed dollar amounts are as good as cash, and they often are stolen from retailers. Because the PreCash cards have no value, they are useless if stolen.

“The worst anyone could do if they stole your card is put money into the account,” Breen explained.

And, because the PreCash cards don't expire, customers don't throw them away.

“The carrier is top of mind,” he said. “Every time customers open their wallet they see ‘Sprint PCS’ or ‘Verizon Wireless.’”

Prepaid-Data-Solution Checklist

Scales to handle millions of subscribers and transactions per day
Flexible to handle sophisticated charging schemes, including taxes, tariffs and royalties to content partners
Modular components work with infrastructures from a variety of vendors
Displays real-time account information
Notifies subscribers as accounts run low
Measures data transactions before a customer makes them
Comes with consulting services to help implement prepaid data solutions