2012 - Phone Card Industry Year in Review

Well we are just about ready to say farewell to another year and for the phone card business, it wasn't the most exciting of years in recent history. Unfortunately just like the year before, the top stories continued to be focused around the FTC crack down on deceptive practices in the industry and bankruptcies.

Some of the top phone card related stories of 2012 included:

• The once powerful STI going into Chapter 11 Bankruptcy protection (Vivaro is the parent company)
• Skype pushing into the hard card space (available at 7-11, Best Buy and Radio Shack)
• FTC fining DR Phone Card for deceptive marketing practices (case still ongoing)
• IDT expanding it's Point of Sale activation products into Rite Aid stores
• Millenium Telecard paying a 2.3 million dollar settlement to FTC for alleged deceptive marketing practices
• Consumer Reports publishing scathing review on phone cards finding that most cards tested delivered far lower than the advertised minutes. This report led a month long media flurry around the subject, painting a terrible picture for an industry which cannot afford more negative press!

While all of the above are definitely not positive news items that is not to imply that there were not at least a few positive things this past year. For starters in 2012 there was a huge expansion and mass acceptance of the "virtual" type cards also known as Pinless products. The most popular of which seems to be the IDT Boss Revolution offer followed hot on their heels by VoxCall a SpeedyPin product. Another positive in 2012 was the huge growth seen with the International Mobile Top Up products (IMTU). The margins are a ot lower than traditional calling cards but the consumer demand is there and it has helped many distributors replace some of their lost calling card business.

To all of my readers and those in the business have a Happy and Safe New Year!

Here is to better things in 2013!

Updates on Vivaro Corp. Bankruptcy

It has been about three months now since the powerhouse phone card company Vivaro Corporation and it's child companies STI Prepaid LLC, Epana and Kare Distribution entered into chapter 11 bankruptcy protection (filed Sept 5th 2012). The company continues to operate but it is not clear as to how long they can continue to operate in this environment as some of their distributors begin to withhold payments (more about this later). Unfortunately since the initial filing news has been limited and the company representatives mostly tight lipped so I thought I would put out a post with all of the updates I could provide.

• In early September, Vivaro applied for and was granted by the courts the ability to continue to honor it's cards already in the channel.

• In mid September, Vivaro made it known that it was open to a buyout.

• In late September, Gustavo M. De la Garza the President of Vivaro Corporation, steps down from his position as chairman of The American PrePaid Phonecall Association (APPPA) and is replaced by Pete Pattullo, CEO of Network IP.

• According to an article in the Prepaid Press from October, Red Cherry/Sigma Prepaid took over distribution for Vivaro's NY/NJ cards and in contrast to what you would expect with a company in bankruptcy, Vivaro is giving more minutes than advertised in some cases. Most likely to help continue the consumer and distributor trust in their products.

• In early November, Vivaro sued one of it's major distributors Raza Communications over what it claims is $7.4 million in missed payments. No doubt more of these type of lawsuits will follow!

• Numerous lawsuits filed from the companies owed monies are in process against Vivaro.

There are clearly a lot of rumors floating around in the phone card world but I won't dive into those and will stick with the known facts right now. I will post more information as it becomes publicly available!

Look Out World! Vonage Launches Digital Prepaid Calling Card!

Vonage put out a press release today announcing the launch of it's new stand alone, Digital prepaid calling card offering. A first for Vonage! They have long had a calling card feature bundled with their home phone service but they never offered a stand alone calling card until now.

The card is available exclusively online and is can be purchsed in $5, $15 or $25 amounts. The $15 purchase amount comes with a limited time intro promotional $5 bonus and the $25 purchase amount comes with a limited time inro promotional $10 bonus. The product seems to have very aggressive, yet not rock bottom, A to Z rates on par with it's main competitors like Pingo and PennyTalk. Some sample rates for the card are as follows:

• India $0.017/min
• Mexico $0.033/min
• UK $0.01/min
• Philippines $0.109/min
• Pakistan $0.111/min

New Vonage Digital Calling Card

There are no connection fees, no monthly fees and is fully rechargeable! However, the card is not completely fee free, charging a $2 inactivity fee per month after 6 months of no use.

The card also offers pinless dialing from up one registered phone, speed dial settings and a convenient auto recharge option.

For more information about this card, visit the Vonage website at  http://lp.vonage.com/callingcard

Tarzan Phone Card TV Commercial

Is this the End for STI?

Vivaro Corporation, the parent company for STI, filed a voluntary chapter 11 bankruptcy petition this past past week in the NYC bankruptcy court for all of it's telecom related units including: Kare Distribution Inc, STI CC 1, LLC, STI CC 2, LLC, STI Telecom, Inc, STI Prepaid, LLC and TNW Communications.

Reason for Filling
Vivaro's revenues' have dropped by over 40% since 2010 and their total liabilities are double that of their current assets. Their cash flow situation is what forced them to finally to file for chapter 11 protection having slightly less than $150,000 in cash

Who they Owe the Most?
Sprint - $4.5 million dollars
Telecommunication Relay Service - $2.7 million dollars
Telecom Italia Sparkle - $2 million dollars
Verizon - $1.9 million dollars
Level 3 - $1.3 million dollars

How Many Phone Cards are Currently on the Street?
According to the bankruptcy filing, they have about 22 million unused active cards currently on the market representing about $31.2 million face value dollars.

What are Some of their Card Brands?
Digame, Mi Carnal, STI Family, El Chavo, Eroika, STI Edge, and Clarito

How Many Employees Jobs are Currently at Risk?
In total all of the companies listed above has a total of 231 full time employees & 64 part time employees.

What's Next?
It is important to note that chapter 11 does not mean the company is closing down, it just means that they are trying to seek temporary relief from creditors so that they can restructure and hopefully emerge more stable. However, the odds seem to be against Vivaro since most telco's in this position usually end up going to chapter 7 (bankruptcy) within weeks or months. Vivaro has made it clear that they need more time and absolutely cannot have their big creditors shut them down as they need to be able to honor all of the cards currently on the street as failure to continue to provide service for these cards will make a recovery all but impossible. There is a hearing on the motion is scheduled for September 10th.

Stay tuned for updates...

Skype Prepaid Cards Launched in Mexico

To make inroads into the the Mexican marketplace, Skype announced this week the introduction of Skype Prepaid Cards. These cards will help Skype get into this largely non credit card market by making two different types of prepaid cards available at local stores like 7-eleven, Best-Buy, and Radio Shack. The cards will be available in a 100 pesos format (unlimited calling to US and Canada) and a 150 pesos format which will provide a PAYG balance so users can call anyone of 170 countries world wide.

This move is sure to better position Skype in the huge Central American marketplace and one that will no doubt get the local operators to take notice!

New Skype prepaid cards now available in Mexico

FTC Cracks Down on Another Phone Card Distributor for Deceptive Practices

The latest phone card distributor to be slapped on the hand by the FTC is DR Phone Card owned and operated by David Rosenthal, a long standing distributor of prepaid calling cards dating all the way back to the Econophone days from the early 2000s. The FTC is suing the company for deceptive advertising practices using terms like "No Fees" on posters for cards where there were fees and for delivering less than the advertised minutes on its cards. The FTC tested 169 of the companies cards and on each and everyone found that they delivered far less than the advertised minutes. In fact they found that most delivered less than 50% of the advertised minutes. If the lawsuit is successful, consumers most likely stand to get some relief in form of minutes or some sort of other type of financial settlement.

Pending the court hearing DR Phone Cards has agreed to stop all "deceptive" practices the FTC lists in it's suit and has agreed to cooperate fully with the FTC and the courts on this matter.

To read more on the suit, visit the FTC web site.

Hitch Phone Card Commercial - United Telecard

US Government Bans The Sale of Phone Cards

In what will sure send shock-waves through the phone card business, the US Government recently announced that it has passed a law banning the sale of prepaid phone cards. Congressional spokesman Dr Pepper issued the following statement: "Phone Cards are just bad and we don't want them sold anymore." The ban is set to go into effect starting today April 1st and lawmakers are wasting no time on their next major law, the ban of sugar in chocolate followed by.... April fools!!!!!

The Death of the Payphone

It's hard to believe that only 10 years ago the payphone market was at its peak with over 2 million payphone scattered throughout the United States. You couldn't walk for more than 100 feet in any direction in a major city without seeing one! Today you would have to walk for miles to see one! The American Public Communications council now estimates that there are approximately 400,000 payphone left in the US and declining at a rate of about 10% per year.

I can't say this is a surprise. The proliferation of the cellular phone has made the payphone much less useful. In fact the decline of the payphone matches u exactly with the growth of the mobile phone market. Today almost 90% of Americans use cell phones and with the recent popularity of prepaid mobile, even the recent immigrants and lower classes also now own a mobile phone. It used to be the convenience store always had a payphone outside for the immigrant groups to go and use their phone cards to make a call back home but today, those same people now walk out of the store, pull out their cell phone and use their phone card to make the call.

The major telecommunication companies have already abandoned this once hugely profitable business with Verizon selling off most of it's payphone to PTS in 2011 (AT&T and Sprint sold off their businesses in 2008 and 2006, respectively). There is still a market out there for payphones especially in high traffic service related public areas like airports, train stations, hospitals and rest stops, it's just going to take you a little longer to find the one or two phones which are now most likely hidden off in a corner somewhere. If it continues this way, 10 years from now the only place you will be able to find a payphone is in a museum!

Stats courtesy of the Payphone News

IDT Inks a Deal to Sell Calling Cards in Rite Aid Stores

IDT has been selling phone cards in Walgreens stores for years but this month IDT announced that they have an agreement to sell IDT Phone Cards in Rite Aid stores across the country. The cards will be available in approximately 4700 retail locations in 31 states and will be co-branded with the Rite Aid logo. The cards will feature minutes ranging from as low as 150 per card all the way up to 2000 minutes per card and range in price from $5 to $50.

"IDT has been an industry leader for over 15 years and brings to Rite Aid a wealth of experience providing practical, prepaid communication solutions that we believe our Rite Aid customers will use and appreciate," said Bill Renz, Rite Aid vice president, consumables. "As an added incentive, customers who recharge an existing card with new minutes from a Rite Aid store will receive 10 percent additional minutes for free."

The deal probably means more in name than it does in terms of added revenue, but it still is a significant accomplishment especially in the declining hard card market. The deal also helps IDT push it's services to the mainstream as most of the companies success with hard cards has come from the recent immigrant consumers and not the mainstream.

Vox Call PinLess Commercial - Agent Program

Harvard University Students Set the Record for the Longest Phone Call!

A Harvard university group called "The Harvard Generalist" have teamed up with Ibasis and their rechargeable calling card program called Pingo to attempt to get into the Guiness Book of World records for what would be the "Longest Phone Call."

The rules, according to their website dictate that the students must keep the call going and actively talk in real conversations (no gibberish or yes no type exchanges) and taking no more than 10 second pauses between comments. The time to beat: 43 hours, 8 minutes, 55 seconds. That is one long call!!! Good thing they have Pingo flipping the bill ;)

In the end they managed to do it, talking for 46 hours 12 minutes and 52 second . Congrats Guys & Gals on one of the weirdest achievements I have ever heard about!

Check out the following article from their Harvard Student Newspaper, The Crimson... it appears they had a lot of fun with this world record attempt!

>Picture above from The Harvard Crimson Newspaper shows one of the students on the active call and it seems the students decorated the room quite nicely with lots of blankets and other items to keep the participants comfy!

FTC Reaches Settlement with NJ Based Millennium Telecard, Inc.

Just wanted to follow up on an earlier post about Millennium Telecard who had run a foul of the Federal Trade Commission for deceptive advertising practices. It seems as if both sides have reached an agreement where Fadi Salim, the principal of this company and two others also under investigation, has agreed to hand over 2.3 million dollars to settle this accusation of wrong doing (without acknowledging that they did anything wrong of course). The money will be paid over a 10 year period and the settlement will ultimately stop Mr Salim from misrepresenting the amount of minutes on a phone card in any of it's advertising campaigns.

The settlement is the biggest of it's kind and is sure to signal the end of what has been a dark period of prepaid calling, where the fees in many cases would out-bill the actual minutes on a card. It is important to note that they will still be allowed to have fees on their cards but they all must be clearly displayed on all printed materials and be easy to understand (better than nothing I guess).

I wonder if this government crackdown is at the beginning, the middle or the end?

To read the full article go to the Star Ledger Article here!

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Manny Pacquiao Phone Card TV Commercial

Making Money with PINless - Vox Call Agent Program

In a follow up to last months post, I wanted to fill in my readers on Vox Call’s latest offering that now allows for distributors and retailers to benefit and start making money with the popular Vox Call PINless calling service. Vox Call just about sells itself with great low rates, ZERO additional fees, clear connections, no contracts or bills, complete recharge functionality, 100% satisfaction guarantee and much much more!

One of the most appealing aspects of the agent program is that the retailer/distributor no longer needs to worry about stocking or running out of physical inventory since the service is completely virtual! It removes the hassle and problems associated with supply change management” says Vox Call’s Director, Eric Itzkowitz. All you need is a computer or Internet-ready device and internet access as the purchase and management process is conveniently done online via the unique Vox Call agent portal. Once a customer has been turned up by you online they can either recharge via your store (cash or credit card) or online at VoxCall.com and no matter which way they top up, you will always receive commission.

Wireless/Mobile phone store owners, convenience store owners and the like are ideal Vox Call agents, especially those looking to add a superior quality prepaid international calling service to their product lineup. As long as you can have access to an Internet connection, you too can sell Vox Call PINless calling service.

Also for those agents/distributors who need their own look and feel for the product, Vox Call also offers a white label program which allows the service to be customized with your very own url, logos, custom prompts, rates and more.

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The Vox Call Agent Program is always evolving, in order to provide our agents with the best PINless service available. Some of the future functionality we are working on includes:

* DID Mapping - Your customer receives a local access number to call an international phone number. The person/people they call get a local international access number to call them.
* International Access - Vox Call service can be used within the USA, Canada, Mexico and other select countries throughout the world.
* International Prepaid Mobile Top-up - Your customers can pay to top-up (recharge) an international prepaid cell phone.
* and more...

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To find out more about the Vox Call Agent program visit them online at http://www.voxcall.com/business

Dramatel - The Strangest Phone Card Product Yet!

Now I have seen everything in this business!

SpeedyPin Introduces VoxCall Pinless Calling Service

The latest news on the war to win the PINLess dialing battle, online phone card giant SpeedyPin recently announced the release of their new PINLess international calling service called VoxCall.

The service, offered directly online or through an extensive agent network, offers super low rates which they claim can help customers save up to 95% on their international calling costs (versus calling with traditional long distance plans). Some of the other great features of this product include:

- No-PIN Dialing from any Phone (home, office or mobile)
- Online Account Management
- No Added Fees
- No Contracts
- Toll Free & Local Access
- & and much more.

Calls are billed in one minute increments and complete CDRs are available to the end users at anytime via their super convenient online account center. VoxCall is so confident that you will like their service that they offer a 100% satisfaction guarantee to each and every customer. They also maintain full accreditation with the Better Business Bureau with an A rating.

Later this year VoxCall has additional plans to offer:

- International access numbers
- A Spanish version of the website
- Direct calling via a phone number mapping feature

If you are a consumer who would like to try their service for free just visit their site at http://www.voxcall.com for a free trial.

Temporary Restraining Order Issued Aginst Millennium Telecard, Inc.

Based on the findings of the Federal Trade Commission (FTC), a federal court order was issued on May 2nd (but only made public this week) against Millennium Telecard, Inc. and it's principal owner Fadi Salim. The court order is aimed at getting the company to immediately halt its misleading practice of advertising a certain number of minutes but only delivering a portion of those promised (in some cases they are being accused of delivering less than 50% of the advertised minutes).

The court order will bar Millennium Telecard from engaging in further practices like this and will also freeze their assets while possibilities of reparations are investigated (they want to avoid the possibility of the company of hiding or moving monies). A temporary receiver and manager of funds has been appointed by the courts to handle all financial affairs for the company while the matter is investigated further.

Millennium Telecard is fighting the FTCs finding and is litigating the matter. It is important to note that the court order has been issued based on recommendations of the FTC and not based on the ruling of guilt in any matter.

A copy of the court order can be found on the FTC web site.

Ruby Prepaid Calling Card Commercial