Happy New Year!

Just wanted to wish all of my readers a Happy New Year and a prosperous 2011!

New Year Same Old Trend - Phone Card Sales Declining

Well we are now into the new year and I started to reflect on the past year and the year ahead. For the most part 2009 saw a substantial decline in overall phone card sales and I'm afraid we will continue to see the same trend throughout 2010. Prepaid Mobile phones with competitive international rates are only going to get more aggressive this year and with increased penetration of broadband in recent immigrant households, VOIP services like Skype and Vonage will also continue to errode the phone card market share.

Nobody beats phone card rates, but drop dead lowest rates is not always the most important factor, the convienience of these other services along with decent (and clean) rates seems to be the deciding factor in most purchases.

I don't want to be all gloom and doom here so I will point out that there are some positive trends that I have noticed:

1. Prepaid Mobile sales have been growing (lower margin and higher risk)
2. These new International Mobile Top-Up products have delivered a nice volume of sales (lower margin)
3. Prepaid cash cards have seen a slight increase in demand

While the above have certainly helped, they have not replaced the amount of traditional phone card sales volume lost. If we could just get another product like International Mobile Top-Up, I think we would all be able to return to our business levels of years past!

Here's to hoping for something new and revolutionary will come in 2010!

Cheers!

Publish Post

C&W Lime Phones Now Rechargeable Through US Western Union Locations

C&W Lime mobile phone throughout the Caribbean can now be topped up at authorized Western Union locations in the United States. A patron with family and/or friends in the Lime Caribbean countries now can top up their friends and/or families Lime mobile phones just like they were wiring them money.

The process goes through MoreMagic Solutions IRR Global Hub, and is initiated just like a Western Union MoneyGram transfer, with a customer filling in the paper work with desired money amount and mobile phone number of the person's phone whom they wish to recharge. Once the funds are deposited to the account, the Lime subscriber receives an SMS message notifying them of the top up transaction.

This solution seems to be coming to market at just the right time since the poor economy is hitting quite hard in the Caribbean region (mostly due to the large decline in tourism revenues).

Individuals in the US can also purchase Lime top-up services online at https://www.etopuponline.com/lime/

Poor Economy Hurting the Bodegas

While there is no doubt the economic woes of this country has hurt the telecommunications business, I never once thought that the small mom and pop stores would be feeling it as hard.

According to a recent article in the Charlotte Observer small bodegas in the south that used to do quite well with their money remittance products are seeing that business almost cut in half. One store they reference in the article used to do over $4,000 a day in money remittance and is now doing only $2,000 a day. The reason for this decline is that many of the communities who had high concentrations of migrant Latino workers are seeing those migrants going home and staying home since there are just not that many jobs anymore (mostly in construction and farming).

While calling card sales have not dipped as dramatically for this store, there is no doubt that those sales are down as well since most of those people that used to use the money remittance service also purchased phone cards.

The migrant worker population is much larger in the South and Western parts of the United States so the decline is felt much more in those areas than in the Northern areas where most of the immigrants are permanent rather than temporary.

IRS Employees Spent 8.4 Million of Tax Payer Dollars on Calling Card Calls

In a recent report by the Treasury Department, it was disclosed that the IRS had issued just over 34,000 calling cards to it's employees for the purpose of making business related long distance calls (primarily for dialing into conference calls). The most disturbing part of the report is that in the period from October 2005 to April 2008 the total spend on these cards was about 8.4 million dollars. In one case it was found that 1 calling card in particular had made over $59,000 worth of calls in a one year time frame.

The abuses of these business issued calling cards is just another example of the governments total lack of controls in the way they manage their funds. The report points out that there is a glaring need for the IRS to increase their controls over the use of these government issued cards... ya think???

The sad part is the best solution that the IRS can come up with is to review these numbers quarterly for better identification of abuse and fraud rather than it's current trend of once every three years. How about reviewing who actually needs one of these cards in the first place and limiting the number of people with government issued cards into the hundreds rather than in the tens of thousands! In the modern day with low cost mobile plans, all inclusive conference services and free (or close to free) calling methods like Skype, why in the world would the IRS need to have so many calling cards circulating around?

Knowing how slow the government tend to move, it would be of no surprise if we are still seeing the same high spending a year or two from now as well!.

The service provider for these cards is AT&T

Complete details of the IRS calling card program can be found on the IRS website at http://www.irs.gov/privacy/article/0,,id=161120,00.html

Primus Telecommunications Files Chapter 11 Bankruptcy Protection

Long time telecom player, and phone card provider, Primus Telecommunications Group Inc. filed for chapter 11 bankruptcy protection this week in Delaware bankruptcy court. They had been on financial hard times the last few years and had been managing to make ends meet these last few years since their big tumble in 2006 but were no longer able to stay afloat with a huge mounting debt. Hoping to find some relief from creditors and have a chance at restructuring they finally decided to go into chapter 11. It is important to note that the company does plan to try and restructure and is not necessarily heading into chapter 7. They have given a timeline of about 120 days to complete their restructuring.

Their main businesses include carrier wholesale, phone cards (small), home VOIP service (lingo) and various other VOIP based business offerings. Their 4th quarter 2008 net revenues were reported at 203 million and close to 1 billion in liabilities. The filing did not include their separate sub business entities in Europe, Australia, Brazil, India and Canada.

Richard Allen Harding Passes Away

I was saddened to learn that last month Richard Allen Harding had passed away. Richard had been in the telecommunications business since the early 80s and became most well known to us in the prepaid industry through his roles as Chief Operations Officer for 9278, Chairman of the now defunct International Prepaid Communications Association (IPCA) and most recently as President of his own company Giraffe Communications.

While I never new Richard on a personal level, I did have the opportunity to meet and discuss with him a few times at the various InteleCard Expos. He was a very tall guy and heavy in stature and was intimidating but after having met and spoke with him I had realized that his size was not representative of his personality. He seemed very kind and genuine. He will be greatly missed in this industry!

Richard was 57 years old and passed after a brief battle with a yet unknown illness.

Adult Entertainment Prepaid Cards

Looking for another product to add to your prepaid mix? How about selling Adult Entertainment prepaid cards along-side your prepaid phone cards and prepaid mobile phones?

Web Wise is a company offering prepaid adult access cards that allows users to prepay for their online porn by buying a card at their local prepaid retailer (I don't think too many retailers carry this one). They claim that it provides a level of anonymity that credit card payments do not and also boast the fact that there is no need to worry about some sleazy porn site misusing your credit card info.

While the idea may seem like a joke, the adult entertainment industry is multi-billion dollar a year business and this product is sure to get some interest... it will be controversial but will still get interest nonetheless!

You can even buy these cards on ebay!

Traditional Telco Decline

If you look at the stock market performance over the last year you will see an alarming trend among traditional pure telco providers. Companies like IDT, Level3, Ibasis, and even Qwest have seen dramatic reductions in their overall stock prices.

>>IDT went from around $11.20 a share in March of 07 to roughly $3.70 a share in March 2008

>>Level3 went from around $6.20 a share in March of 07 to roughly $1.83 a share in March 2008

>>Ibasis went from around $10.00 a share in March of 07 to roughly $3.75 a share in March 2008

>>Qwest went from around $8.70 a share in March of 07 to roughly $5.09 a share in March 2008

This trend is no doubt not a coincidence and is reflective of these companies poor performances financially and a sign of the changing industry. Unless you are a Telco provider offering a mobile service like Verizon, Sprint and others, your business is not part of the future of Telecommunications. Analysts see mobile as the future and are not impressed by anything a traditional player can come up with... Even VOIP providers like Vonage and Packet8 are seen as yesterdays technology and not collecting much on the trading floor.

I have a feeling we will be seeing a lot of consolodation going on amoungst these traditional Teleco's in the coming months and years. It is the only way they will be able to continue as market share keeps dropping.

Using Phone Cards in Iraq - The Only Way to Call Home?

I see tons of press releases out there about groups sending over phone cards to the troops in Iraq to help them call home and always wondered if people really understood the "phone" situation over there. To help calrify, here are a few hings you should know:

1) Some Military bases have AT&T pay phones installed and allow for the use of calling cards but beware the cards won't deliver the promissed minutes because they will incur a pay phone fee and if it is a non AT&T calling card will incur at least another $1.50 network access fee. These fees come off the balance of the card, resulting in less minutes. I have even heard reports that some of the pay phones block acess to other non AT&T 800 numbers.

2) Some Morale, Welfare and Recreation posts actualy offer VOIP Phone calling and the costs can be much better than phone cards but they are harder to come bye and subject to more "lag" and quality degradation based on the internet signal strength.

3) Government DSN phones are also available in some places where a soldier connects directly to an operator who connects him/her to the party of their hoice. The rates are similar to that of calling from your home phone in the US.

4) Iraq cell phones are also available locally to the troops but you must buy them off base. From what I hear the coverage is ok but the rates are somewhat more expensive.

5) Last but not least are sat phones which are not as plentiful but they deffinately are useful in the more remote bases in Iraq where the amenities are not as plentiful.

Long story short, consult with your loved one over there and see which one of the above options is best for them and see if you can help them out in another way. Sometimes a phone card may be the best choice but other times more practical and economical methods are available.

How Many Prepaid Phone Cards Deliver Full Minutes?

In a recent study conducted by the Hispanic Institute and published in many major newspapers, 45 different phone cards were selected from a variety of companies and tested to see which ones delivered the advertised minutes. To no suprise, only one third of the cards delivered the real minutes and 7 of the cards didn't work at all. In fact 8 of the cards tested delivered less than 50% of the advertised minutes.

The cards that were tested included the following:

• Florida ($5)  Telmex Compaqero, STI Florida, Touch-Tel Hondureqa, Touch-Tel Guatemalteca, Touch-Tel Salvadoreqa, Dollar Phone Coffee Time, Dollar Phone Rey, MPTAFlorida Idol, MPTA Nine, PCI Pilot, PCI Prima and TST Si Pues
• New York ($2)  Diamond Bingo, Diamond Arenque, SDI I Love NY, Lycatel Success, Lycatel Call Me, STI World, RTG Martini, RTG Cocktail and IDT Play Ball.
• Washington, DC ($2)  IDT Boss
• Toll Free ($5)  GEO Florida

You can read the full article here

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!

Women Fights Verizon Over Charges and Wins!

A women of Indian decent living in Florida was very surprised one day when she received a bill from Verizon for $590 for calls to India, Colorado and New Jersey. For the two years she has been living in the US, she has been using one particular calling card ("Mother India") to make all of her long distance calls. Verizon claims she absolutely made these calls but she fought back and said she didn't use them and there was no way she could make a mistake since she had been using the same access number for two years. Plus the woman says the Colorado and New Jersey calls prove this bill is false since they don't know anyone in those states.

She made many calls to Verzion customer service but go nowhere until she finally contacted a media outlet in south Florida. As soon as the media outlet contacted them they credited her account for those disputed calls.

Not saying this women is lying but having been in this business for a while, I can't tell you how many times I heard people calling into the calling card customer service department saying that their local phone company charged them for calls they made using our phone card. But 9 out of 10 times it is usually due to user error, forgetting to dial the access number and just dialing directly. It is possible that Verizon made a mistake but more possible that she made a mistake.

The full news story can be viewed at http://www.tampabays10.com/news/local/article.aspx?storyid=63720

The Decline of the Pay Phone Industry

When I first started in Telecom back in the 1990s I remember when a large percentage of phone card calls were made via local pay phones but with the rise in cellular phone and the ease of acquiring one, came the demise of the pay phone industry.

According to the FCC website there were over 2 million pay phones throughout the US. Now, 10 years later, that number is half of what it once was, with a little over 1 million total pay phones still in existence. The number of calls made has also decreased dramatically from over 2.5 billion in 1997 to around 1.7 billion.

While you will still find many Mexicans and other recent immigrant groups waiting on the corner pay phones because they don't have the credit ability to qualify for a home or cellular phone, I think that with rise in popularity of prepaid mobile, many of these loyal pay phone users will switch to prepaid cell phones for all of their calling needs, leaving the pay phone operators in a much worse situation than they are in now!

One thing worth noting is that much of the decline in pay phones comes from the private pay phone operator sector with the public companies like AT&T and Verizon only making up for a smaller percentage of the decline. Today private pay phone operators make up exactly half of overall pay phones on the street.

Charter Announces New Calling Card and Phone Card Industry Gets Bashed at the Same Time!

Just read a story in the St Louis Post-Dispatch, announcing that Charter communications is launching a pinless dial phone card in the United States which is good to see but unfortunately the angle of the story was that Charter was launching a clean card because the rest of the industry is dirty!

Just another in the long line of bad press for the prepaid calling card industry!

You can read the whole story here

Verizon Launches Prepaid Translation Card

OK Now I have seen it all.... Verizon just announced the launch of a new prepaid calling card service that will provide on demand language translation via a phone call. Aimed at travelers, business men or anyone interacting with people who either speak no English or just a limited amount, the card provides translations to and from over 170 different languages. These cards are fully rechargeable and offer 24/7 access for Spanish translation and more limited hours for other languages.

Verizon is carrying all of the cards and marketing it with the Verizon name, but the actual translation service is being provided by Language Line, an existing translation call center. Cards can be used from the US or over 100 different international locations and are available in $35, $50, and $100 denominations. From what I can tell the service is not cheap and those cards will be eaten up fast...

To find out more about this product visit http://interpreter.verizon.com/

Warning - In State Phone Card Calls Cost More

Just an FYI for those of you using phone card calls within the same state, extra fees will apply on some phone cards. Recent FCC rulings make phone card providers subject to many of the same tax laws as those of your local phone company. On out of state and international calls, you won't notice any changes, but on in state calls you will see a huge increase. For example the at&t phone cards will now charge 5 minutes for every 1 minute in state call. These extra charges are the phone card providers way of paying the new taxes.

Please note that only some companies are charging the increased fees and many others are choosing to eat the costs rather than pass along to their end users.

All in all this ruling is just another step towards bringing us back to a monopolistic telecommunications industry.

At&t CEO Retires and Cashes In Big Time!

On Friday it was announced that at&t chairman and chief executive officer, Edward Whitacre is retiring (65 years old) and as a parting gift he will be getting a 158.5 million payout. And you thought telling your kids to become a doctor or a lawyer was the best way for them to make big money.

Being an executive of a large corporation is quickly becoming the fastest way to becoming a billionaire these days.... Believe it or not this was not the largest payout to a Chief Executive Office, that honor is held by former ExxonMobile CEO Lee Raymond, who received a 351 million parting gift back in 2005. In fact this was only the thrid largest parting gift, behind a former Wall Street Executive Richard Handler who received a measly 202 million parting prize.

Whitacre has been a long time CEO (17 years) with SBC and now at&t and no doubt moved this company into a position of dominance, but I don't think anyone deserves to get a 158 million dollar package on their way out. With so many employees in Telecom loosing their jobs, all SBC has done, is manage to squash the competition and reduce the market place.

I am just sick of this corporate greed.... no corporate executive deserves to make this kind of money and especially not when they are on their way out the door!

Phone Cards - A Little Bit of History

I always get asked the question, how long has the prepaid calling card business been around and who invented it so I thought I would give a brief history to help shed some light on this little known subject.

The first phone card was introduced in Italy in 1976 by a pay phone operator, SIDA, who created a mag stripe card to use in their phones instead of change. Pay phones were being broken open by thieves and the company needed to find a way to reduce this problem.

Phone cards floated around Europe for years but did not come to the United States until World Telecom Group introduced them in 1987. Distributed by GE and Siemens they were mag stripe cards and did not see much mass distribution. It was not until AT&T introduced their own calling card in 1989 that the product really started to hit the mainstream market.

A year later NY Bell released their own calling card that was the first of it's kind in the US where the user dialed an access number and entered the pin printed on the card (turned out to be the most popular form of calling card). Over the next few years all of the major telecom companies followed suit and released their own cards.

By 1993 the calling card market in the US was generating 25 million annually and most of the companies by this time had dropped the mag stripe technology and switched to the access number and pin format. Two years later (1995) the phone card business in the US had grown to a 650 million dollar business and by the close of 2000 it was around a 3 billion.

The end of the 90s brought about most of the smaller companies but with the decline in the domestic market brought about by the surge in the cellular phone business, many of these smaller companies could not survive and most were gone by 2003 and 2004.

The market continues today and while more ethnically focused than before continues to bring in billions of dollars a year.

What is the Future of Prepaid Phone Cards?

While most of us will no doubt agree the prepaid phone card boom is well behind us, but the real question now is what kind of future does the prepaid card business hold?

The answer, seems to be clear by the fact that the once powerful companies, like UTA and STI are just not doing well. Sales of prepaid cards are at an all time low and I think the market was just so badly managed and abused that the customers are more willing to try other methods of long distance calling, like with prepaid cellular phone, VOIP services (Skype/Vonage) as well as traditional long distance.

The idea that the average prepaid phone card customer is credit challenged and prefers cash business is changing and more and more immigrants are either becoming more credit enabled or now have the means, through prepaid cash cards and other debit systems, to buy more mainstream services.

Immigrant consumers are more educated and technology savvy than they were 5 years ago and the rates that Ma Bell and VOIP players are offering today are so low that it is almost no wonder why a lot of people are turning away from phone cards.

What do you think?