In the paging industry today, money talks.
Carriers know this and are pursuing every avenue available to bulk up the bottom line. One relatively new road eyed by some carriers in the United States is prepaid paging.
At first it sounds suspect, as prepaid cellular services in the United States traditionally cater to low-tier, credit-challenged subscribers. One then might wonder how such a service package helps an industry bent on increasing average revenue per unit by attracting high-tier customers.
Darryl Sterling, paging analyst at the Yankee Group, said prepaid payment options contain several carrier benefits.
“You streamline the acquisition process and lower the acquisition costs,” he said. Prepaid paging requires no credit check, meaning less time and paperwork. Also, prepaid paging plans usually require the customer to buy the pager outright, something financial analysts prefer to leasing.
“Prepaid streamlines the distribution process so you have more points of distribution,” Sterling said, allowing carriers to reach new audiences with new distribution partners. “You can centralize your customer support center and have more people selling your product.”
It also removes the monthly hassle of collecting payment.
“You don’t have to generate bills and send them out every month. You don’t have to worry about somebody not paying a bill and it taking you months to figure that out and then pay somebody to go collect the money.”
To date, only a few carriers in the United States have prepaid paging plans. SkyTel Communications Inc. is perhaps the largest carrier with such an option, which may seem odd, since SkyTel has aimed to set itself apart as a premium services provider. But Craig Hagopian, marketing director for the company’s consumer product group, said the service fits well within SkyTel’s portfolio and strategy.
“Advanced messaging is still our battle cry,” he said, “but we found as we moved folks from the one-way to the advanced messaging market, it opened up some space on our one-way network. We asked ourselves, `What do we do with this spectrum?’ “
With its advanced messaging network gaining high ARPU customers, Hagopian said SkyTel felt the answer was to target one-way customers in a financially secure manner.
“We’re not crazy here,” Hagopian said. “Advanced messaging is a good-sized market, but not as large as the consumer market. We wanted to serve the consumer market but on terms good for them and good for us, financially … Prepaid is our way to address that market without exposing ourselves to the pitfalls,” such as the cheap-beep model of old that the industry now is so desperately trying to shed. “It protects SkyTel’s investment.”
It does this by leaving nothing to chance. “You control the cost for equipment and services upfront,” Hagopian said. “From a carrier perspective, it makes the sale and service to the customer easier … We recognize that the cash upfront protects us financially. There are no bad debt issues.”
SkyTel launched a prepaid plan for one-way numeric service in December 1997, which has gained more than 30,000 subscribers, and just recently added a similar alphanumeric service plan, with surprising results.
“We found out… that when you go to alpha prepaid, a wide part of the market attracted to it are business professionals. They’ve minimized any (communications costs) surprises.”
If prepaid alpha can attract a higher-tier customer, what potential is there for prepaid advanced messaging?
“There’s going to be a lot more value with prepaid if it is integrated with advanced messaging architectures,” said the Yankee Group’s Sterling. “It provides the opportunity to experiment with extended coverage and enhanced services on a pay-as-you-go basis.”
According to Hagopian, SkyTel intends to move in this direction.
“The platform built for alpha prepaid was laid down with future hopes in place for advanced messaging,” he said. “But we’re not releasing that until we feel we’ve nailed the alpha segment.”
