Abstract
Fixed prepaid services have failed to meet all of the objectives originally set out by operators, having failed to stimulate fixed line growth or to slow the explosive take-up of mobile services. Whilst they have proven relatively popular, this has been largely at the expense of the fixed post-paid subscriber base. However, they do have their merits. Not only has the introduction of fixed prepaid services led to a large reduction in bad debt (a particular problem facing fixed line operators in developing markets), but with careful pricing and packaging, they could act as an alternative to mobile in the future. Fixed line operators should weigh up the benefits and the costs of launching fixed prepaid services, before abandoning them altogether.
What operators must begin to do is to leverage the benefits of fixed line services over mobile. In practice this means bringing prices down (through improved efficiency) and promoting the superior quality and reliability of the service. Investment in bringing more affordable PCs to low GDP markets could also yield results, stimulating Internet growth, the protector of fixed line services in more developed markets. With fixed prepaid customers more likely to churn than their fixed post-paid counterparts, fixed prepaid providers should concentrate on boosting loyalty (as well as enticing customers to their services in the first place). Operators should take advantage of the fact that the lower marginal cost of a fixed voice minute (in comparison to mobile) is perfectly suited to the bundling of (a limited number of) free calls with the fixed prepaid subscription.
Table of Contents
Key messages
- Mostly a developing market trend
- Failure to deliver on all of their objectives
- Not a match for prepaid mobile
- Still a valuable option
Fixed prepaid in context
Why fixed prepaid?
- The line rental barrier
- Credit management
- The increasing popularity of prepaid mobile
Rationale for fixed prepaid
Has fixed prepaid delivered?
- Failure to stimulate fixed line growth
- Poor defence against mobile
- Cannibalisation of the fixed post-paid subscriber base
- Successful reduction of bad debt
- Revenues: the importance of pricing
Is fixed prepaid a good idea?
- Not a mobile substitute
- The marginal cost of a new subscriber
- Losing the customer relationship
Messages to service operators
- Be careful with fixed prepaid
- Not to be abandoned altogether
- Price sensibly
- Leverage the benefits of the fixed line
- Continue with efficiency improvements
- Boost customer loyalty
Case studies
- Telkom SA
- Telmex
- Fastweb
- Etisalat
- PLDT
