Where Have All of the Prepaid Phone Card Customers Gone?

In this article on the prepaid phone card business, the first in a series of postings regarding the overall business and it's forcasts, we look at some of the main reasons why the phone card market has been shrinking at such an alarming rate.

1) Prepaid Wireless

For years most immigrants, had no way of getting their own phone service due to poor credit so they resorted to using phone cards from payphones to make all of their calls. Now with prepaid cellular becoming so popular (close to 40 million subscribers today), these immigrants and credit challenged people now have more convenient options for making phone calls. To date international calling still remains expensive on these prepaid cell phones but with each passing year we see more and more companies starting to lower their rates to international locations to help increase their revenues and market share numbers.

2) VOIP

Thanks to companies like Vonage, Packet 8, Skype and others, who had no interest in being profitable, home phone service and international rates were brought down to insanely low amounts that consumers would have to be foolish not to try! The good news is that with many companies in this industry going belly up or running up against financial hardships, many consumers have lost faith in this brand of calling and are looking elsewhere for solutions. The problem here is that many are not looking to phone cards as the answer!

3) Cable Companies

While technically classified as VOIP, they deserve separate mention as unlike the other VOIP players, their strategy is to make money. Their pricing is a little higher but they offer good bundling packages that makes overall monthly expenses lower, at least for the first year. By marketing to their existing base they are having tremendous success in driving up their revenues and giving the traditional LD companies a major headache!

4) Traditional LD Providers

Traditional long distance providers like At&t, Verizon, Quest and others were extremely reluctant to give up their fat cat margins but faced with declining customer bases (mostly thanks to cable companies) they have been reluctantly coming around. Today you can find many providers with unlimited international calling plans and deep discounted bucket plans. One thing to note here is that they are not actively marketing or pushing these plans but instead using them as retention tools... no need to pillage a profitable base!

All in all prepaid wireless and wireless in general is probably having the biggest impact on the calling card market and most likely will continue to be the biggest influencer in the future.

Next week I will touch on the prepaid wireless business in a little more detail!