The Prepaid Press - February 15, 2008 - (Page 13)

CALLING CARDS February 15 · 2008 - 13 The STaTe of PrePaid Technology by Ken Osowski Another Kind of Prepaid Calling VoIP Changes Everything Again Most analysis of the prepaid market centers around the innovations, economics and various market forces that help define the prepaid service provider’s interactions with end customers. Far more predictable until now - and thus seldom analyzed – have been the innovations, pricing and dynamics that have shaped the prepaid service provider’s relationships with wholesale minutes providers. Like the Newhart Show’s famously silent “other brother Daryl,” prepaid’s wholesale sector has typically loomed large but quietly in the background, often comically predictable. The two main types of wholesale minutes brokers – larger & smaller ones - have offered prepaid service providers traditional TDM minutes with predictable levels of quality and reach. The larger “A List” wholesale minutes brokers have typically offered a broader spectrum of national and/or global routes, and high levels of quality at fixed pricing. The A Listers operated at premium prices, setting high bars for levels of commitment and credit worthiness of their prepaid service providers. The smaller TDM minutes wholesalers, on the other hand, have offered smaller sub-sets of routes, typically at more questionable and/or lower levels of call quality, and, in turn, have charged lower rates, also with specific credit and usage levels. Prepaid service providers often targeted a specific demographic group, stringing together multiple low-cost wholesale routes in order to preserve margins. This increases the chances for poorer call quality, diminishing the profit opportunity as multiple wholesalers took their shares of the call’s already narrow retail price. VoIP Transforming Wholesale Minutes Just as it’s doing on the retail level, VoIP is transforming wholesale minutes in four ways: price, reach, quality and packaging. Because its infrastructure costs are lower, the pricing of VoIP wholesale minutes is usually inherently lower than comparable TDM routes. Closely related is VoIP’s fast-growing global route reach. Because the infrastructure costs of building VoIP routes are so much lower than for those of TDM routes, the global VoIP route footprint is quickly growing and will overtake TDM in the near future. The quality of these routes is more easily and precisely maintained for a number of reasons, from the newness of the fiber and wire to the sophistication of the service delivery platforms, all of which make IP calls comparable, and often superior, to those carried over TDM routes, especially as the number of routes needed to carry a call to a particular region starts to rise. But VoIP will probably have the biggest impact on the actual packaging of wholesale minutes. With only minor variations, VoIP wholesalers can use the same prepaid IP service applications and platforms that prepaid service providers use to package and sell minutes to end consumers. As a result, VoIP wholesalers are now able to bypass the stringent credit requirements and minimum usage thresholds that have helped stabilize the wholesale cost of minutes, and have helped limit the overall number of competitive service providers. The ability to buy large lots of prepaid minutes opens the door for new generations of service providers with significantly lower capitalization and credit requirements, without shifting risk to the wholesalers. ISPs, and other would-be prepaid service providers, can now buy and resell large quantities of moderately priced wholesale VoIP minutes, launching services without incurring a major long-term commitment to a carrier or set of wholesalers. This new model further commoditizes the overall price of minutes, substantially reducing the risk for both larger and smaller wholesalers, providing easier entry to new generations of service providers, both prepaid and postpaid. Just as with retail, wholesale VoIP is a wild card that will reshape the market. What’s the upshot for today’s prepaid service providers? The growth in wholesale prepaid VoIP makes the move to VoIP far more attractive on the retail side, to keep pace with shifting wholesale cost and service pricing models. At the very least, as the wholesale pricing model begins to shift, it should prompt a regularly refreshed analysis of your business model. Next month, we’ll look at the underlying changes in wholesale networks and technologies that will help you address them. Ken Osowski is the VP of Marketing & Product Management at Pactolus Communications Software. He can be reached at keno@pactolus.com. http://www.pre-comm.com http://www.pre-comm.com

Table of Contents Feed for the Digital Edition of The Prepaid Press - February 15, 2008

The Prepaid Press - February 2008 Beachfront Property for Sale Cardholder Facing Systems Contents The Retske Report: Getting the Word Out 5 Minutes With Mark Flanagan, CEO of PrepaidWireless.com Regulatory Rundown: Mid-Winter Update 2008 Prepaid Wireless Handsets Consumer’s Union Raps Wireless Industry Prepaid Reviews Launches Canadian Website Maginpins and TúYo Mobile Form Alliance Prepaid Wireless in Brief Boost Mobile Introduces New $1/Day Chat Plan Mobile Voice to Overtake Fixed in Europe Prepaid Wireless Roundup Another Kind of Prepaid Calling Spot Rates VSNL Wins ATLANTIC-ACM Award The Legal Line Calling Cards in Brief Sapotek Partners with DigiLinea Pactolus Goes Live at Cable MSO Low-Income Market Initiatives to Drive Mobile Banking Payments in Brief Monitise Americas Expands Payments Network Charge Anywhere Mobile POS Wins Award Hypercom Introduces System for Small Merchants TIO Networks Announces TIO Prepaid MasterCard NPBCA Makes Leadership Change A Walk Down the Aisle Branding Your Retail Store Retailers Welcome Senate Approval of Stimulus Bill NRF Forecasts 3.5 Percent Growth in Retail Sales Cyphermint Teams With DHL Retail Focus in Brief Our Advertisers Contact Us

The Prepaid Press - February 15, 2008

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