Prepaid cellular represents a huge opportunity for carriers, as demonstrated by the flood of prepaid services inundating the marketplace. More significantly, however, prepaid cellular may prove in itself a new paradigm for conducting consumer business in wireless.
Industry estimates show between 20 percent and 30 percent of people who try signing up for cellular service either are rejected outright or required to fork over a large deposit due to poor credit. So indeed carriers are excited with the prospect of winning those customers they once turned away, particularly those carriers who previously had saturated a market, said Janet Constantin, analyst at the Yankee Group in Boston.
Alongside carriers’ goal of reaching the credit-impaired are a number of ancillary applications, some happenstance.
Perhaps number one is fraud. An account that is a prepaid account can only be defrauded to the dollar amount of the customer’s remaining balance, whether a said user has committed subscription fraud or a legitimate user is cloned. Prepaid systems not capable of tracking roaming do not allow roaming.
For people on limited budgets or who just like to plan ahead, a prepaid program is a logical choice for cellular service.
Safety has been cited as one of the top reasons today’s consumers want a mobile phone. Included in this market are teens whose parents foot the bill. In this instance, the argument for prepaid goes without saying.
To limit costs or minimize accounting hassle, a business that equips its employees with cellular phones may chose prepaid service. And this niche presents a corollary benefit to carriers. As many prepaid programs are offered via carriers, a business contracting prepaid could mean 100 new accounts for a particular carrier. Without a prepaid option, a business may leave the choice of carriers to the discretion of those 100 employees.
Constantin said for prepaid services to succeed, they must be reliable and use close to real-time call rating. Constantin added that many carrier’s switch functions including customer billing and fraud management rely on real-time call rating.
Other crucial success factors for prepaid include ease of use for carriers and their customers. Convenient and various ways of restoring one’s balance and minimal time and legwork in placing calls are key. Because some prepaid services can track roaming while others cannot, the former may have an advantage, indicated Constantin.
A number of prepaid services are configured in the carriers’ networks by installing the necessary software/hardware platform at the switch. Account data is managed by the prepaid provider or carrier, or a combination of both.
Another approach is handset-centered billing where all of the prepaid account data is processed through the phone itself. How subscribers are required to prepay on accounts varies. Some prepay via credit card, debit card, cash at a dealer/retailer sight, checks in the mail, or purchasing preset blocks of time-such as a half hour or three hours-at the dealer site.
While Constantin said prepaid may evolve into a more mainstream service, as it reduces risk for carriers, she said prepaid “limits the scope of what subscribers can rack up for charges.” Carriers don’t want to lose those high-volume subscribers who-knowingly or unintentionally-use $200 per month in airtime.
