Prepain Relief

Prepaid had been a roaring success with more than just the credit-challenged. That's also why it's tripped up so many providers.

Chris Gent likes prepaid, and it's not hard to see why: It attracted roughly 93% of Vodafone AirTouch's nearly two million new customers in 4Q99. Gent, Vodafone AirTouch CEO, hopes to repeat that success here with Verizon Wireless' forthcoming nationwide prepaid service, but he won't be alone.

"In the United States, we've seen 30% to 50% of new adds coming on in prepaid or real-time billing," said George Lebus, National Telemanagement (NTC) president.

Why? Prepaid's combination of anonymity, no commitment and tight control over bills attracts a much wider range of demographics than postpaid. Granted, a prepaid customer is by many estimates worth only about half as much as a postpaid subscriber, but the growth spurt they bring helps excite investors and in turn boosts market caps.

"Prepaid financed Chris Gent buying AirTouch," said E.Y. Snowden, Boston Communications Group (BCG) president & CEO. "That's why he ought to be loud about prepaid being done right in America."

A lot can and has gone wrong, as any victim of prepaid's success can attest.

"It was a real surprise to many that the service had a wider appeal than expected," said one wireless-provider engineer. "The initial traffic projections are still a great source of humor. It was projected that we would need only 48 trunks to support a top-10 MSA for the first year. Within six months of launch, we had 150 full T1s and growing. It was a mess and a huge fire drill to meet the demands on switch hardware and transport."

That's not an isolated case.

"Almost every carrier that rolled out prepaid underestimated the growth," said Hennie Pelzer, Powertel director of IN operations.

Delays in connecting calls is one sign of a platform stretched to capacity. That's what one Mexican provider learned when it tweaked its pricing in an effort to move 80% of its postpaid subscribers to a prepaid platform that couldn't scale beyond one million users. Prepaid callers suffered connect times upward of 20 seconds and, worse, calls that didn't connect at all.

"Because they weren't getting good service, subscribers were trying more and more," said John Martin, Corsair Communications senior director of product management. "That exacerbated the problem."

Ripple Effect
Prepaid's growth ripples throughout the network. For example, if balance updates are sent via SMS, the SMS platform has to be scaleable enough so that it doesn't get bogged down and wind up with hours-long backlogs. Delayed updates could result in more calls to customer care and in turn increase the overall cost of supporting prepaid even though the prepaid platform itself is working fine.

Understanding how prepaid affects other network elements helps avoid being ambushed.

"As far as switching and signaling, the prepaid customer has the impact of almost two postpaid subscribers," said Powertel's Pelzer.

Another forecasting factor is how prepaid customers' usage patterns differ from those of postpaid subscribers.

"Prepaid customers (often) move in different areas," Pelzer said. "They make calls at different times of the day. In lots of cases, when you add prepaid, you see your whole traffic pattern change."

Some providers try to steer prepaid users away from busy hours to avoid blocking calls by more lucrative postpaid subscribers.

"You need a strong, flexible reporting mechanism that goes through your call-history database or call-detail-record database," said Ran Mitra, Comverse Network Systems vice president, sales and marketing. "Canned reports from vendors tend not to be sufficient for many operators because they all have their own peculiarities for the network."

Back Office to the Future
Prepaid also has different back-office needs.

"Most carriers fail to realize that prepayment is purely a form of collecting money," said NTC's Lebus. "So your back office and OSSs become more critical than how you process the call."

That goes beyond tight integration with customer-service systems to include interfacing with enhanced-service platforms. SMS, for example, is a convenient way to replenish balances and can help reduce prepaid's overhead.

"As you increase capacity, it probably makes more sense from an operations perspective to send routine balance information to the subscriber over SMS," said Sridhar Sripathi, Lucent SurePay product manager. "It's easier for them to handle increased SMS delivery than adding interactive voice-response units (IVRUs) and trunking calls to an IVRU for playing a balance announcement."

One caveat: If prepaid subscribers can roam, make sure that roaming partners support SMS. If not, balance updates need to be sent another way.

The ability to link prepaid to enhanced services also translates into the ability to wring more revenue from customers who typically spend less than postpaid subscribers. One example is SMS.

Offering data to prepaid subscribers is an opportunity to avoid repeating the mistake of underestimating prepaid's market potential.

"When choosing a prepaid platform, a carrier needs to ascertain whether that platform can bill and offer vertical services out of one account," Lebus said. "This is how we evolve prepaid into the concept of real-time billing, which has a much larger focus than just the credit-challenged. Imagine a billing system that accounts for each service in a real-time basis. By ascertaining credit limits for each user, the carrier can be comfortable that those limits won't be exceeded."

That's something to keep in mind during deployment because prepaid ultimately is an exercise in real-time billing, which can be applied to postpaid, too. A flexible prepaid platform could set the stage for wireless e-commerce by handling payments for small-ticket items such as sodas and MP3 songs. Postpaid subscribers could use the same platform to replenish their phones' electronic "wallets."

Postpaid subscribers "have plenty of means of paying but no way to perform micropayment purchases because you can't buy anything on the Internet today for under $12," said BCG's Snowden. "A credit card is an expensive payment transaction. A prepaid platform that has taken advantage of its scale to deliver low-cost transaction processing is in a unique position to do micro-payment processing and open up a whole new world of products to subscribers and carriers."