The recession has knocked around many a prepaid market segment, but wireless has managed to remain steady despite macroeconomic conditions. As a result, innovation in prepaid marketing plans, devices and applications has abounded. So executives in the prepaid wireless/telecom field believe that in 2010 the market will bear the fruit of what has been carefully planted in 2009.

At the same time, 2010 will prove that prepaid calling cards are not dead, but are instead transforming with new payment plans, fewer fees and innovative applications.

In the coming year, growth in wireless handset sales and subscribers is expected to blossom. Atlantic-ACM predicts the prepaid wireless market will grow at a compounded annual rate of 3.9% through 2014. What’s more, a survey from Washington think tank New Millennium Research Council shows that more than 17 percent of Americans have already switched from contract wireless plans in 2009 due to concerns with the job market and the recession. On the handset front, the Global Telecoms Insight 2010 study from TNS Global shows 53 percent of Americans are planning to buy new mobile phones in the next six months, up from just 24 percent this time last year. Twenty-nine percent of these consumers are expected to invest in touch-screen phones, which will continue to drive mobile device growth in the coming few years, according to the study.

“Increased consumer confidence, pent-up demand and a raft of new smartphones have created conditions akin to a ‘perfect storm’ for 2010,” said Tom Buehrer, Senior Vice President of TNS.



Price Wars Mean Resellers Need Prepaid Smartphones

If 2009 will be remembered for one major trend, it will be the very definite emergence of price wars in prepaid wireless. Companies like Boost Mobile, Virgin Mobile USA (which was acquired by Sprint this year) TracFone and Metro PCS all launched all-you-can-talk/text plans with rates that dropped as low as $40 a month. As prices came down, resellers were forced to suck it up and find new revenue streams to make up for lost minutes and overage charges.

These folks realized quickly that the answer to offsetting losses was in more expensive handsets and applications. Carriers and device providers were quick to respond, all releasing smartphones for prepaid plans that weren’t once available. A few of these players are coming to market with their first BlackBerrys and Google Android phones in Q1 of 2010.

“Prepaid is pushing the envelope on the demographics that we used to fit in the past. With smartphones coming to market, and touch screens becoming the standard over the next couple of years, postpaid and prepaid are beginning to look more and more alike,” Yakety Yak CEO David Timlin told The Prepaid Press during the summer. That means that business users and other consumers that don’t traditionally go with prepaid programs will look to companies like Metro PCS and Boost for service.



Prepaid Smartphones Make New Applications Possible in 2010

The rise in prepaid smartphones will in turn lead to the ability to create and sell applications – including streaming video – that were once associated only with postpaid phones. Major providers like Boost Mobile are expecting that to drive business in 2010.

“Smartphones will become more accessible; alternative means of connectivity, like broadband will fuel supplement growth; and advanced social networking applications will cascade down into the market,” said Bob Stohrer, CMO of Virgin Mobile USA and VP, Marketing for the new Sprint Prepaid Group.

Juniper Research expects the mobile applications market to be worth $25 billion by 2014. With the rise in prepaid smartphones, prepaid users will be able to access all of the same app stores as those with postpaid phones.

Yakety Yak’s Timlin expects his business to be fully application-centered in the next three to five years.

“There are a zillion applications out there and they are coming to market so quickly now. We are going to get to the point where you can customize those applications; where you can customize [your entire phone],” he said.



VoIP As a Mobile App to Grow in 2010

Part of the mobile application craze will include access to IP minutes and conferencing via mobile device -- and that will of course become available to prepaid users as smartphones go prepaid. In 2009, Apple approved use of Vonage VoIP on iPhones, and BlackBerry is making it possible to access VoIP through enterprise Wireless LANs. It is expected that most smartphones will eventually include client devices to enable at least access to enterprise VoIP if not more consumer based also.

This phenomenon is expected to cause regulatory concerns, according to Edward Maldonado, CEO of Regulatory Back Office.

“SIP and VoIP based applications for mobile phones will continue to boom. The question is how [it will be] defined for regulatory purposes, an Interconnected VoIP Service or something else because of the use of the wireless provider’s data air time?” Maldonado pointed out. “While the functionality of most present offering fits the interconnected VoIP model, some technology innovations are pushing the concept of customer premise equipment and soft phone applications on handsets. It is likely far too early for a statement or rule from the FCC, but the issue will grow during 2010 while providers of such applications take advantage of the growing consumer market looking for a flat fee voice solution for their handsets.”

The mobile VoIP phenomenon will also be fueled by applications that makes reloading of prepaid minutes (including VoIP) automatic through a smartphone, says Arash Vahidnia, CEO of IPsmarx, a provider of wired and mobile VoIP solutions. That will change the course of prepaid calling forever since it will eliminate the infamous PIN, he said.

“If you’re a customer and you want to make a call, you don’t have to enter a PIN, you don’t need to buy a card. You don’t even need to go to a store. You can now recharge your balance automatically,” said Vahidnia, adding that eliminating the PIN also enhances security of prepaid. “That will happen by the end of 2010.”



Wireless Banking Becomes Prevalent in 2010

Banking and financial services are also expected to be part of the mobile applications boom.

“Beyond prepaid, mobile banking could emerge as an effective and popular activity as more and more wireless users turn their cell phones into entertainment centers, checkbooks and banks, and communications controllers,” Stohrer said.

Mobile banking applications that already emerged in 2009 will only become more complex in 2010.

“We’re seeing the main players say ‘how do I view a [bank] balance by phone? How do I do something meaningful with my phone to pay bills [and manage my bank account],’” said Victor Newsom, COO of eCommLink, a provider of prepaid processing platforms. “They’re not where they are going to be in a couple of years from now.”



Mobile Reload/Top Up

In addition to managing accounts, prepaid consumers will look to reload their prepaid debit cards as well as mobile accounts for others via mobile phone.

“We predict 2010 will be the year electronic reload options will gain traction for general purpose reloadable debit cards. There is evidence of growing consumer demand for mobile and online payment capabilities ranging from prepaid reload to person-to-person payments,” said Matt Hall, vice president of business development for Vesta, a provider of prepaid telecom and mobile top-up technology. Mobile phones will also be used for international top-up, in which consumers pay for family members’ or friends’ wireless service and other utility bills abroad through payment systems based in the U.S.



Contactless Payment via Mobile Phone Takes Root in 2010

In the past couple of years, contactless payment technology [or payments through Near Field Communications (NFC) technology] has become more prevalent. This technology enables consumers to merely touch a payment card to a sensor on a POS machine for speedy payment.

But the goal has long been to include this technology in wireless devices – which many believe will cause contactless payments overall to take off. While it’s not expected this will occur in 2010, the roots of mobile contactless are expected to take hold.

“What we’re likely to see is an actual deployment of what I call alternate form factor products that can bridge us to when mobile phone NFC payments start to take hold,” said Charles Walton, executive vice president of the payment business line at Inside Contactless, a provider of chips and other technology for NFC.

Those alternate form factors will include mobile handset stickers and phone skin jackets that contain the memory cards for NFC technology and contactless functionality.

“Most of these will be for prepaid products,” Walton said, adding that this will be the equivalent of a reloadable prepaid credit card on a mobile phone.

As alternate wireless form factors take off, prepaid handset and service providers will begin to build the functionality directly into actual devices in 2011 and beyond. In the meantime, retailers will continue to deploy POS systems that accept contactless payment, said Mohammad Khan, president of ViVOtech, a provider of contactless technology for mobile phones as well as merchant payment systems.

“Prepaid is going to be big to enable cell phones to be a payment device. Phase 1 of this solution has been rolled out and will grow fast in 2010 where you can add a prepaid card RFID enabled sticker at the back of the phone and enable it as a payment device for day to day (small value, up to $50) payments,” said Khan. Examples of this are already on the market by way of the Visa prepaid RF enabled GoTag stickers that are sold at 7-Eleven and Duane Reade in NY. Both types can be used at any merchant that is enabled with Visa payWave contactless readers, such as 7-Eleven, NYC taxis, Duane Reade, Home Depot, McDonald’s and Sports Authority.

“By 2011, we will see the phase 2 where special phones embedded with RF technology will be available in the market for consumers to buy and then just download Prepaid Cards into their phones to load money using mWallet, he added.



Prepaid Mobile Broadband Access Takes Off

Access to broadband on the run has long been a hot commodity, and in 2010 the service is expected to go prepaid. Generally, consumers pay a monthly fee for a device (or use of their smartphone as a modem) to hook up to broadband access from anywhere. But the monthly fee can be costly, and it often outweighs actual use. Enter prepaid.

“For those who use wireline access in the home or office but need mobile access to wireless networks when traveling, prepaid wireless broadband is the perfect solution. Prepaid access allows users to pay for wireless Internet connectivity only when they need it and for only what they use,” said Dennis Henderson, CEO of Ready Mobile, a provider of prepaid mobile services and technology. “With no contract or monthly bill, it is easy, convenient and far less expensive. All of this means that prepaid wireless broadband is the product to watch in 2010.”



New Pricing Plans Breathe Life Into Prepaid Calling Cards

Executives in the prepaid calling card market believe 2010 will be the year for innovative pricing plans on prepaid calling. Rather than charging by the minute, a growing number of companies will sell cards that have unlimited packages or daily rates. Companies like Vonage, for example, already offer flat-rate or cards with unlimited minutes.

“You will see cards that have packages of $2 for unlimted anywhere in North America for the day,” said IPsmarx’ Vahidnia.



PIN-Less Cards Rise

In 2010, the trend toward cards without a PIN or ANI as a PIN will continue. Consumers have been educated, and now they’ll be seeking cards that recognize user caller ID as a PIN or can.

“This year look for key carriers to play a major role in establishing this type of cards,” said Hassan Dabaja, EVP of sales and distribution at Encompass Communications.

Along those same lines, Vahidnia said PIN-less prepaid calling cards will increasingly move toward automatic reload via cell phone or website.



Cleaner Cards … Or So We Think

Prepaid calling plans have suffered in reputation over the years because of hidden fees. 2010 will be the year that providers decide just how to clean up their cards, said Dabaja.

“Consumers are tired of all the over-advertised and under-delivered minutes on cards. Or so we think! Clean cards in the market never take off. … Consumer perception and buying behavior of calling cards will improve a bit towards cleaner cards, but not enough to make a huge difference,” said Dabaja.

Regulatory and Tax Pressure Mounts on Card Providers

If consumers don’t demand that card providers clean up their act, regulators will.

“The industry will be 100% regulated. Carriers paying their bills and taxes will be the only ones to survive,” said Dabaja.

And those regulations are getting increasingly stringent. In 2009, carriers received letters from New York state asking them to pay past due state taxes for non-reported revenue earned within the borders.

“This type of inquiry by state revenue and regulatory agencies is likely increase in 2010,” said Maldonado. “These agencies are targeting carriers for underpaid or unpaid revenues.”

But that’s just the tip of the iceberg, according to Maldonado. The FCC makes it a crime to falsely report to a federal official or agency. If carriers don’t respond with swift payment and proper reporting, things could get sticky.

“Some rumblings are that state audits may follow if there is little response from carriers,” Maldonado said.