2006 saw prepaid telecom services margins continue to be unstable, but also saw the advent of technology advances and emerging trends that can help drive new growth and opportunity in 2007. These include: 1. Active Growth Vs. Passive Amortization: IP Eclipsing TDM In recent issues, we’ve looked at new SIP peering technologies that let Payphone Service Providers, PSPs, replace expensive long distance minutes from legacy TDM facilities-based wholesalers with far more affordable wholesale services. Wholesale IP services from carriers such as XO, InterRoute and Level 3 provide simple, reliable core capabilities such as toll-free/local number access, PSTN-to-IP call internetworking, and cost-effective international calling at increasingly compelling rates. As a result, PSPs have been migrating from TDM to IP business models, largely driven by three factors; • More affordable minutes, • The extremely low costs and increasing ease with which the shift to IP operations can be made, and, • The ability to more easily grow in terms of footprint, capacity and service features. After crunching the numbers and examining the process, even TDM-entrenched PSPs are using SIP peering to gain IP minutes, and are twilighting dedicated TDM facilities. 2. Going Global, Growing Quickly Many factors and consumer sectors continue to drive prepaid markets. For example, immigrant populations are avid consumers of prepaid services because prepaid is credit-agnostic and because it generally offers strong economic advantages over traditional carrier international minutes. In response to this continuing trend, IP and in particular, SIP peering, have helped PSPs open up new routes and extend their networks to places they’ve never been before, with unprecedented speed & agility. Group of Gold Line, VCG and LatiNote are among the growing list of prepaid providers racking up enviable revenue growth by serving growing immigration populations and communities. Multi-language support and even currency conversions are easily implemented in IP services. 3. The Incremental Services Advantage IP’s service flexibility opens up new doors that are particularly attractive to prepaid consumers. Voicemail, for example, is a powerful opportunity that’s easily offered either as a free service, a time-limited (expiration/renewable) or per usage service. Innovative prepaid services, such as voicemail, mirror traditional wireline and postpaid wireless service, and give prepaid consumers the status transparency they’ve long needed but haven’t been offered. Such service add-ons can clearly fuel both initial selection and customer retention/recharging. Self-hosted IP conferencing and IP-PBX offer similar opportunities for business model expansion. 4. Open Source Comes on Strong So how does a PSP transition and tap into the IP wholesale model to leverage affordable minutes, and introduce new subscriber side IP innovations that can build demand? The key is simple and astoundingly economical: self-hosting. IP wholesaling requires only a Linux server, freely downloadable applications & media server software, and open source applications. New generations of easily usable, more reliable IP service creation/deployment solutions and open source service applications have become available via industry resources such as SIPdev.org. Their user-friendliness, scalability, reliability and subscriber feature flexibility mark the coming of age of open source PSP technology. This model lets PSPs introduce new services – such as either free or incrementally available voicemail, for example – and host them on the same Linux server that hosts their prepaid business. 5. New Wireless Prepaid Opportunities: WiMAX and MVNEs Looking ahead, WiMAX will create new VoIP arbitrage opportunities in the access network, and will drive the emergence of (warning: new acronym alert!) the MVNE opportunity. An MVNE is a Mobile Virtual Network Enabler, which in English means anyone who provides services and/or network infrastructure that supports the Mobile Virtual Network Operator’s (MVNO) relationship with their end-user customers. PSPs wholesaling prepaid VoIP minutes to an MVNO are MVNEs, and as WiMAX deployments come online and grow, the MVNE opportunity will be compelling. So as 2007 begins, make your New Year’s resolutions to: 1) start crunching IP minute cost numbers, 2) visit SIPdev.org regularly and see how easy it is to leverage free service creation/service delivery technologies and open source services. Look to IP to give you the service flexibility and expansion agility to serve fast-growth prepaid consumer segments, and watch for WiMAX-driven arbitrage opportunities. Happy Holidays! So how can we help? What’s your question?

Ken Osowski is the VP of Marketing & Product Management at Pactolus Communications Software. He can be reached at Keno@pactolus.com.