Platform Snooze

Posted: 02/2000

Rid Yourself of
Platform Snooze
Prepaid Rage Is Way to Robust Future

The prepaid communications services market is buzzing with activity. Companies
are clamoring to get into prepaid, while established carriers are adding it to a growing
telephony menu. The list and range of available services is expanding, as are the methods
companies use to market, sell and use prepaid.

On the carrier and customer sides, the result is an explosion of prepaid products and
fierce price competition. In the shops of prepaid platform providers, the result is brisk
business, which focuses on the creation of robust platforms with increased functionality,
flexibility and features.

To Switch or Not to Switch, That Is the Question

One thing a carrier must decide is whether to go with a PC-based or switch-based
platform for prepaid. PC-based systems, which have been available for several years, offer
a low entry price for companies just entering the prepaid market. The starting price range
can fall between $35,000 to $70,000, for a system that usually can handle hundreds of
thousands of calls without extensive system configuration.

However, with that speed and ease comes limitations. Most PC-based systems start at one
or two T1 lines. Pushing them beyond 16 T1s stretches the system’s capabilities and could
add unmanageable complexity and overhead.

Brad Schaffer, vice president of sales for AmeriCom Communications (www.amrcom.com), says the typical evolution of a
prepaid carrier’s platform is it starts as a PC-based system and moves to switch-based
architecture once call volume and system demands grow.

"They probably got a PC-based system at a startup level," Schaffer says.
"They might have had a good understanding of PCs but zero understanding of telephony.
The problem with a PC system is you have to have a switch to mate it to. PC systems may be
scalable but you are still tied to one carrier in and one carrier out."

Schaffer adds that many PC-based systems do not use switch ports efficiently. A
PC-based prepaid platform may end up using up to four ports per call, he says. A platform
built into the switch will require only one port per call.

"With hundreds of thousands of calls per day, that becomes a factor and takes away
the cost savings of buying a PC-based system," Schaffer says. "If you only route
10,000 a day, it might not be a big deal, but get up to a million per day and it becomes a
significant factor."

Switch-based systems cost more to purchase and to install. Schaffer says a typical
switch may cost more than $1 million. That kind of capital outlay may be too large for
startup companies or CLECs with other capital investment obligations.

That is where AmeriCom’s TeleSwitch SwitchCondo program comes in, he says. It lets
companies collocate in the AmeriCom Southern California facility. Companies pay for a
portion of a switch and a regular maintenance fee and get all the advantages of a switch
without all of the cost.

"You have ownership of at least part of the switch for as little as $120,000, and
can then start to recoup your own costs significantly," Schaffer says. "You
don’t have to start out with a PC-based system."

Gary Crockett, chief technical officer for platforms vendor IEX (www.iex.com), says that as the prepaid market expands, more
carriers will migrate from PC-based systems to switch-based architecture.

"When you have a real switch, you have redundancy built in," Crockett says.
"Plus you have the strength and marketing flexibility that comes from putting your
caller database all in one place."

Crockett says the IEX architecture is "beyond switch-based" and is referred
to as service control point (SCP) architecture. A single SCP will contain 64 to 128 T1s.

"Our carrier-class customers want the ability to scale up to tens and hundreds of
millions of minutes per month," Crockett says. "You can’t do that with a
PC-based system, or at least you can’t try to do that for long."

Jeff Porter, vice president for sales platform vendor Voiceware Systems Inc. (www.voiceware.net), concurs. "The entrepreneurial
companies that are just getting into the prepaid market tend to look at the PC-based
systems," he says. "The global carrier zooms right in on the switch-based
solution."

Voiceware offers both, because a growing part of the business is migration services,
which helps carriers move from PC- to switch-based systems, Porter says.

Advanced Services

Changes in prepaid platforms are not simply a result of the numbers and types of new
companies entering the prepaid market. Larger, more powerful prepaid platforms also are
reflective of changes in the types of services offered.

Schaffer says carriers look for capabilities such as least-call routing and SS7
signaling for short connect times. Such abilities more likely will be found on
switch-based than PC-based platforms.

Another trend is that service providers are asking for the ability to bundle a number
of advanced features with prepaid voice, including services and features like voice mail,
misdialed number correction, fraud detection, multilingual services, long idle detect and
speed dial-back, Schaffer says.

Crockett speaks of "a whole myriad and bewildering variety of ways" that
carriers want to provision and to charge for prepaid services.

Elhum Vahdat, vice president of APEX Voice Communications Inc. (www.apexvoice.com) says the market continues to
evolve, and that a key driver behind more advanced platforms is greater demand for
expanded prepaid services.

"Traditionally, what you’ve found in the prepaid market were generic platforms
specializing in distributing and billing for calling cards," Vahdat says. "But
now we are getting into things like prepaid cellular, prepaid voice mail, prepaid e-mail
and things like that. Now when someone buys a prepaid platform, they need the ability to
deliver whatever customized services they want, and deliver them now. Flexibility and
customization are very important in this market."

Another important element is that they can tie into next-generation networks, including
voice over Internet protocol (VoIP) systems, Vahdat adds.

"There are not too many prepaid applications being brought out right now that are
IP ready. We think it will be very big in the future, particularly with companies like
Cisco out there pushing it."

That future may be sooner than Vahdat indicates. In July, APEX announced an agreement
with Motorola Inc. (www.mot.com) and Vsys (www.vsys.com) to provide IP-based network user services
such as announcers, prepaid calling, voice mail and e-mail readers with an eye toward the
prepaid market.

Schaffer says AmeriCom does not have anyone using full-up VoIP yet, but adds that could
change too, particularly if and when VoIP networks improve their service.

"The call quality is so terrible that the buying public won’t have it no matter
what the price," Schaffer explains. "But once you get the quality there, the
prepaid market will be one of the first and most eager to get into VoIP."

Hugh Goldstein, director of marketing for the Surf&Call Web-page Internet telephony
plug-in offered by VocalTec Communications Ltd. (www.vocaltec.com),
says prepaid carriers already are showing interest in VoIP as a low-cost transport
technology for voice calls.

In addition, he says, carriers are eager to develop prepaid e-commerce initiatives.
With Surf&Call customers can turn their desktop or laptop computer into a
"virtual phone booth," able to place and to receive calls, and to add value to
prepaid cards and services without leaving the screen or keyboard, Goldstein says.

Graph-Prepaid System

Taking technology a few steps further, Goldstein says the marriage of prepaid and
e-commerce also means prepaid carriers will do things like permission marketing.

"You can have special promotions," he explains. "Say it’s Valentine’s
Day. You can offer a special deal on just that one day. You can communicate with your
customers and build more loyalty, perhaps give them an incentive to recharge the
card."

The biggest potential issue with such a system is channel conflict, as more cardholders
decide to recharge via the Internet rather than returning to a retailer for a new card or
recharge, Goldstein says.

"Most of the prepaid switch operators are learning they cannot make it just
offering minutes alone," adds Voiceware Systems’ Porter. "You need things like
voice mail or a one-call system that rings several different numbers at once to locate a
person."

Porter adds, the key is to offer customers ease of use and a wide range of services.
The way to do that is to have a robust platform that can handle the demands a carrier
throws at it.

"I don’t think you have one traditional setup or one standard type of
configuration," Porter says. "Everyone has something they might want to do a
little different, and that is where they are trying to gain competitive advantage."

Kevin Chia, CEO and president of Softel Communications Inc. (www.softel.com), says today’s prepaid market is about
enabling flexibility.

"We have to be able to cater to innovative business environments," Chia says.
"You might have a promotion that needs to be applied to a card that is already out
there. You sold the card three months ago but now you want to offer a 10 percent discount
on minutes. These things have to be assigned dynamically by the service provider, and the
platform must let them do it quickly, easily, inexpensively and remotely."

Chia says he can foresee the prepaid market moving to an application service provider
(ASP) model, in which the prepaid vendors deliver blocks of minutes and services via web
pages. Those minutes and services would be partitioned and managed in-house by the
customer.

As with on-the-fly card changes, Chia says this type of ASP model will require prepaid
platforms to offer flexibility and customization.

Vendors agree that a critical element of any prepaid platform is robust and
customizable reporting.

"The bottom line of any prepaid application is reporting," says Vahdat.

Service providers are interested in call routing and times, as well as call data
charted against various marketing promotions and pricing strategies, he says.

"One of the most obvious changes of the past several years is that people want
more information," Vahdat adds. "They want to use that to determine their next
marketing plan and how to increase call volume and duration."

Another reporting feature is for "tiered-level" reports based on customer
size and volume of calls generated. He says APEX, for instance, sells to wholesalers who
might be selling prepaid to 15 different retailers, and they need data–who is using what,
where and when–for each one.

Platform and Market Evolution

Vendors are optimistic regarding the future of prepaid services. Most see increased
usage, which in turn will result in stepped-up demand for robust, flexible and
customizable platform hardware and software.

"I think the neatest thing is we are just at the beginning of what we can
do," says Vahdat. "We are starting to see prepaid cellular, and all of the
services that we take on a postpaid application can have a prepaid nature."

In addition, we may soon see companies move to prepaid as a way to control telephony
costs, Vahdat adds.

As an example, he says companies may provide blocks of prepaid minutes to traveling
executives and staff rather than to equip them with cell phones or cover hotel phone
costs.

"The benefit of prepaid is that it gives you real control," Vahdat says.

Another advantage is with prepaid companies knowing telephony costs at the time they
are incurred, rather than waiting for a bill, he adds.

"If you have $100 prepaid, you can amortize that, because you know it is going to
be $100, not balloon up to $150 or something."

Schaffer says he already sees the emergence of prepaid telephony combined with prepaid
nontelephony products. As an example, he cites warranty work and technical help from a
computer company.

Computer firms will sell systems with prepaid minutes already in the machine, ready for
use when a user needs to reach technical support, Schaffer explains.

An added benefit is special 800 numbers tied to the prepaid services, he says. Callers
who use these prepaid minutes can be channeled to special operators, thereby avoiding long
wait times, billing questions and other inconveniences.

Prepaid platforms will need to handle this type of mixed service, Schaffer says.

With prepaid growing as it is comes new companies, products and services. Platform
vendors say it all adds up to one inescapable conclusion: stronger, more flexible and more
feature-rich prepaid telephony platforms now and in the future.

James R. Dukart is a freelance writer based in Minneapolis. He can be reached at [email protected]