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Pre-paid users will fuel mobile commerce
Tuesday, July 02 2002
by Ciaran Buckley


Pre-paid mobile phone users will be critical to the success of the emerging
m-commerce mobile data market, according to a new report by Analysys. 



The report, "Enabling Prepaid Mobile Content and Data Services: Strategies for
Operators and Vendors," argues that the 170 million customers currently on
pre-paid packages across Western Europe are in danger of being ignored by mobile
operators. Despite the dominance of pre-paid users in terms of customer numbers,
most operators have only made advanced services, such as multimedia messaging and
entertainment services, available to their contract customers.



"Pre-paid customers already account for 63 percent of active mobile users in
Western Europe, and despite operator efforts to convert them to contract
subscriptions [they] will remain a substantial segment of the mobile market for
at least the next five years," said lead author Emily Turnbull. 



GPRS and UMTS are new-generation mobile phone standards that allow greater data
volumes through the mobile networks. These standards are expected to popularise
mobile commerce by facilitating the sale of content through mobile networks. 



A 2001 report by Frost and Sullivan found that although up to 80 percent of some
mobile phone operators' customers are pre-paid, they generate only 20 percent of
revenues. For this reason, many operators have attempted to nudge pre-paid users
into contracts by reducing subsidies on their pre-paid phones, by charging extra
for calls and by raising the minimum credit threshold for pre-paid customers. 



Speaking to ElectricNews.Net, Turnbull warned that attempts by operators to force
pre-paid customers into contracts by excluding them from next-generation phone
services may make customers take their business elsewhere, to operators who are
prepared to offer parity of service. 



If operators make next-generation services available to pre-paid customers by
early 2003, Analysys estimates that residential pre-paid users could generate
EUR16 billion in GPRS and UMTS non-voice service revenue by 2007. Because many
young people are pre-paid customers, they could also be early adopters of
shopping by mobile phone, which would generate significant revenues for the
operators, as well as the content providers. 



"My feeling is that operators need to launch new services simultaneously for
pre-paid and billing customers," said Jack McDonnell, director of marketing and
business development at Altamedius, a company whose software powers micro-payment
services for operators like Vodafone. "That's the ideal. I don't know that it's
technically possible yet."



McDonnell believes that the technical problems lie in the limitations of
operators' billing systems, which currently use complicated rating rules to
facilitate content charges that are bundled with airtime charges. Under the
current technology, content charges can only be charged to the user's pre-paid or
post-paid mobile phone account. 



McDonnell believes that in the long-term, operators will have to allow content
providers to set their own charges for content, while charging separately for
airtime. Operators are also expected to give the option to have content billed
either to the consumer's phone bill or to a credit card.