By Tara Seals

Posted: 3/2003

Green Acres Cell Phones Go
Environmental

By Tara Seals

Low-cost, no-commitment wireless
phones have made inroads in the prepaid market, culminating with throwaway
versions that cater to the same people who buy disposable cameras. However, as
landfills begin to brim, two pioneers of cheap and disposable have decided to
turn over a new leaf by making their phones recyclable.

"We encourage recycling,"
says Peter Michaels, CEO for phone manufacturer and mobile virtual network
operator Hop-On Inc. "I have five kids, and someday these landfills are
just going to get ridiculous. I’d rather be environmentally friendly."

The best part about it? You get paid
to be eco-aware. Both Hop-On and rival New Horizons Technologies International
Inc. (NHTI) offer postagepaid and a $5 reward for sending their phones back.

NHTI launched its wireless offering
in January in the United States on a limited scale, and plans to roll out its
phones nationwide later this year. The company has been operating in Europe and
will target U.S. carrier-operators that want to private label the product for
distribution. Steve Romeo, vice president of sales and marketing for NHTI, says
agreements already are in place with several regional carriers.

"We also have a house brand
name, Cyclone, for people who don’t want to brand it," he explains.
"But I see this as a white-label product. We have no intention of really
building the Cyclone brand as a national brand."

The analog offer retails for $39.99
and includes 30 minutes of anytime, anywhere airtime along with a toll-free
number. Because it uses the 20-year old Advanced Mobile Phone Service (AMPS),
the phone offers service in 2,260 markets nationwide.

Meanwhile, Hop-On’s digital phone
(it’s reselling service from Verizon Communica-tions Inc.) is a retail play,
available through Walgreens for $39.95 with 60 minutes of airtime. Both phones
include roaming and long distance, with no activation fees or deposits, and are
refreshable by phone or retail prepaid cards. Airtime costs between 35 cents and
40 cents per minute.

These kinds of deals are made
possible because the phones are stripped down. They don’t even have LCD
displays. NHTI holds a patent on its 200-part design.

"This is a phone that we like
to call ‘one bell and one whistle,’" says Romeo. "It really doesn’t
have everything — you can’t do any Web browsing with this thing, you cannot
check your stocks, you cannot order pizza online and you can’t make a plane
reservation at Orbitz."

NHTI’s phone does have speed dial
and audio caller ID, and distributor operators will provide voice mail and
conference calling through the network. Hop-On’s version features a 911 button,
a hands-free earbud microphone and audio confirmation of the number dialed.
Voicemail may be offered in the future.

Despite the lack of whiz-bang
features consumers have come to expect from wireless handsets, the companies
have targeted several lucrative markets, such as senior citizens who don’t want
calling plans and vacationers.

"Certainly the safety and
security market, the glove-box user who wants it for emergencies or to call
911," says Romeo. "It’s not designed for you to use it every day.
Beyond the soccer moms, you’ve got seniors, and of course it should be a must in
every child’s backpack."

Michaels says the low-income market
also is a target. "One of the things I feel strongly about is, I like to
empower people, and in our society there are so many limitations on that. If we
provide a cheap cellular solution, we can empower people from the inner cities,
and now they’ll be able to make phone calls like other folks," he says. He
explains his phone compares favorably to other prepaid plans that require a $100
handset purchase and often don’t include long-distance or roaming.

Romeo says the recyclable phone is
attractive on the wholesale level, too. "Because this is a refreshable
product, it’s more attractive to the carrier-operators than a disposable product
that lowered the [average revenue per user] and raised the churn," he
explains. "So this product increases ARPU and lowers the cost of
acquisition of the customer because it’s a nonsubsidized product."

Most wireless operators spend
upwards of $300 to acquire a customer, says Michaels.

"The carriers are selling
handsets for $70 or $80, and the cost to the carrier is about $125, so the
carrier loses money every time they sell those phones," he explains.
"We don’t do that and so it’s a profitable business."

Meanwhile, Michaels says demand is
so good that Hop-On can barely keep the shelves stocked. It also is working on
promotional offers with fast-food chains and alcoholic beverage producers.

"I’ve been in telecom a long
time, and I’m one of those guys that uses a cell phone a lot, and there’s been
times when my phone broke and I thought about it, but people said there’s no way
you can make it affordable, but we did," says Michaels. "It’s the
least expensive CDMA handset in the world, and we’re getting huge amounts of
orders."