Light Reading
But throttling speeds and capping usage can help an ISP protect its mainstream, pre-paid high-speed service tiers

Pre-Paid Broadband Doesn't Have to Eat Margins

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
9/21/2012
50%
50%

Fine young cannibals -- and old ones, and cash-strapped ones -- represent the biggest threats facing cable operators and other U.S. ISPs that consider developing pre-paid services.

Cannibalizing the existing product line "would be the A-number-one concern I'd have as a marketer," admitted Novation Broadband co-founder and former Charter Communications Inc. Executive VP of Operations and Marketing Ted Schremp, a panelist on Thursday's Light Reading webinar on the topic.

(A replay of the webinar is available here.)

Pre-paid broadband is common in many parts of the world and has been a key component of the mobile services for years, but U.S. cable operators are giving the category a closer look as they consider how to develop low-risk ways to offer broadband to lower-income households, including those that don't have bank accounts or don't qualify for post-paid services because they've been disconnected for non-payment. (See Pre-Paid Opens New Frontier for US Broadband.)

Heavy Reading senior analyst and session moderator Alan Breznick cited research that $20 to $25 per month is the ideal price for a pre-paid broadband service. Schremp acknowledged that the risk of having post-paid customers move to a much cheaper option is a "significant concern."

One remedy would be to make the post-paid options superior to pre-paid ones. That could be done by keeping the speeds of a pre-paid product low and teaming them with relatively strict monthly data usage allowances, Schremp said. The right combination of factors, he stressed, could help cable operators maintain profit margins in a pre-paid world.

ISPs can learn a lot from the mobile service providers that have turned pre-paid into a thriving business, said Richard Siber, founder and president of Siber Consulting LLC. After starting pre-paid services with what was considered the least desirable type of customer -- those with no credit or bad credit -- mobile carriers around the world have developed solid pre-paid brands that have evolved beyond flip phones to coveted, higher-end smartphones.

"Just because you are offering pre-paid services, [the notion] that it's a low margin game is absolutely not the case," Siber said.

One company that wants to help U.S. operators develop pre-paid brands for broadband and hit desirable margins is Wipro Ltd. (NYSE: WIT), which is pitching Accelerate, a managed service that handles billing and cash management, customer care, and technical and operational support via call centers and online self-help.

Cable operators' OSS and IT systems aren't typically equipped for pre-paid, but Wipro thinks it can fill that gap. Wipro is already having these discussions with domestic cable operators, said Stephen Snyder, the global head of business innovation for Wipro's Global Media and Telecom unit.

What's at stake?
Even if it's possible to make pre-paid broadband profitable, is the market big enough to make it worthwhile for U.S. broadband providers? According to Schremp, the potential market is worth about $7 billion when factoring in the subscribers at stake that could be willing to pay $26 for a month of service:



The hardware side
And what about the modem that makes a pre-paid service run?

Shremp said Docsis 2.0 modems can be had for $20 at wholesale, and could be used for kits that could fetch $30 to $40 at retail -- enough to cover the equipment costs and eliminate the need to retrieve the equipment.

And this sort of model could be applied to video products as well, Schremp said, noting that many operators have gone all-digital and can power a pre-paid service using simple Digital Terminal Adapter (DTA) devices that cost about $35 each. (See Pondering Pre-Paid Cable TV.)

— Jeff Baumgartner, Site Editor, Light Reading Cable

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Flash Poll
LRTV Huawei Video Resource Center
The Inaugural Optical Innovation Forum in Nice

9|2|14   |     |   (0) comments


More than 170 attendees from network operators, service providers, analyst firms, and component companies from around the world convened in Nice in June for the inaugural Optical Innovation Forum, co-produced by Huawei and Light Reading.
Wagner’s Ring
Data Centers Drive Telcos Into the Future

8|28|14   |   2:20   |   (2) comments


Data centers are at the heart of key trends driving telecom -- network virtualization, the drive for increased agility, and the need to compete with OTT providers.
LRTV Custom TV
Why SPs Should Consider Cisco's EPN

8|27|14   |   5:40   |   (0) comments


Sultan Dawood from Cisco discusses Cisco's EPN, which enables SPs to build agile and programmable networks delivering new network virtualized services using Cisco's Evolved Services Platform (ESP).
LRTV Huawei Video Resource Center
Huawei’s Showcase @ Big Telecom Event 2014

8|26|14   |   2.56   |   (0) comments


SoftCOM is Huawei's framework for telecom business and network transformation. Haofei Liu, Solution Marketing Manager, Carrier Business Group, Huawei, showcases Huawei's SoftCOM architecture in this video.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of Integrated Solutions on SoftCOM & NFV Monetization

8|26|14   |   4.43   |   (0) comments


Libin Dai, Director of Integrated Solutions, Carrier Business Group, discusses Huawei's SoftCOM and NFV monetization. Huawei believes that NFV monetization should be service-driven rather than network-driven, and that operators should have network transformation, service transformation and a compatible and collaborative ecosystem in place in order to deploy NFV.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of US NFV Lab on CloudEdge & the Future of NFV

8|26|14   |   4.06   |   (0) comments


Sean Chen, Director of US NFV Lab at Huawei, discusses Huawei's new approach to NFV in open collaboration. Huawei believes that through Proof of Concept tests, it could help operators learn and communicate with the industry more effectively. Sean believes that successful implementation of NFV should have its values reaching to end users and discusses how Huawei's ...
LRTV Huawei Video Resource Center
Huawei's Highlights @ Big Telecom Event 2014

8|26|14   |   3.34   |   (0) comments


At the Big Telecom Event in Chicago Huawei showcases its high-level strategy, the SoftCOM architecture, which helps operators reduce the cost of ownership of their network infrastructure and generate additional revenue in the ICT service environment. Huawei showcases over 30 pilot programs from across the globe, focusing on the industry-leading commercial ...
LRTV Custom TV
VeEX – Live from the Show

8|21|14   |   5:58   |   (0) comments


An overview of VeEX Test and Measurement solutions including TX300S multi-service test set with VeExpress cloud-based management system, UX400 universal modular platform supporting 100G testing, and the redesigned RXT modular platform.
LRTV Custom TV
Transitioning CE 2.0 Networks Into the SDN & NFV Era With Telco Systems

8|19|14   |   5:19   |   (0) comments


Telco Systems' Ariel Efrati (CEO) and Moshe Shimon (VP of Product Management) discuss virtualization and how the company's new Open Metro Edge solution utilizes the SDN and NFV concepts to accelerate and orchestrate service delivery through its innovative product portfolio and software applications.
LRTV Custom TV
NFV Myths: Is NFV Still Several Years Away?

8|11|14   |   1:13   |   (0) comments


Some say that NFV (network functions virtualization) is still several years away from being implemented on mobile operator networks. This isn't the case. Operators can get started on their paths to NFV now, as this short video from Skyfire shows.
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Today's Cartoon
Hot Topics
Nokia's Maps Land on Samsung Devices
Sarah Reedy, Senior Editor, 8/29/2014
Now Google Planning Drones-to-Go
Dan Jones, Mobile Editor, 8/29/2014
Music to My Mobile
Sarah Reedy, Senior Editor, 8/28/2014
Be Open to the Freedom of Openness
Kelly Herrell, 8/29/2014
Netflix to FCC: Kill Comcast-TWC Deal
Alan Breznick, Cable/Video Practice Leader, 8/28/2014
Like Us on Facebook
Twitter Feed