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 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.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Light Reedy
Numbers Are In: LR's 2014 Salary Survey

7|24|14   |   1:25   |   (7) comments


Our fourth annual Salary Survey paints a picture of who's hiring, firing, earning, and yearning for a change in the telecom industry.
LRTV Custom TV
Driving the Network Transformation

7|23|14   |   4:29   |   (0) comments


Intel's Sandra Rivera discusses network transformation and how Intel technologies, programs, and standards body efforts have helped the industry migration to SDN and NFV.
LRTV Custom TV
Distributed NFV-Based Business Services by RAD

7|18|14   |   5:38   |   (0) comments


With the ETSI-approved Distributed NFV PoC running in the background, RAD's CEO, Dror Bin, talks about why D-NFV makes compelling sense for service providers, and about the dollars and cents RAD is putting behind D-NFV.
LRTV Custom TV
MRV Accelerating Packet Optical Convergence

7|15|14   |   6:06   |   (0) comments


Giving you network insight to make your network smarter.
LRTV Custom TV
NFV-Enabled Ethernet for Generating New Revenues

7|15|14   |   5:49   |   (0) comments


Cyan's Planet Orchestrate allows service providers and their end-customers to activate software-based capabilities such as firewalls and encryption on top of existing Ethernet services in just minutes.
LRTV Custom TV
Symkloud NVF-Ready Video Transcoding, Big Data

7|9|14   |   3:41   |   (0) comments


Kontron and ISV partner Vantrix demonstrate high-performance video transcoding and data analytic solutions on same 2U standard platform that is ready for SDN and NFV deployments made by mobile, cable and cloud operators.
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 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
Today's Cartoon
Hot Topics
Level 3 Does Big Data Differently
Carol Wilson, Editor-at-large, 8/21/2014
IoT Alert: Samsung Snaps Up SmartThings
Mari Silbey, Independent Technology Editor, 8/15/2014
Comcast Streams Back to School
Mari Silbey, Independent Technology Editor, 8/21/2014
Sprint Drops Prices, But Also Speeds?
Sarah Reedy, Senior Editor, 8/21/2014
Line-Powered Phone Lines: A Hot Topic Again
Carol Wilson, Editor-at-large, 8/20/2014
Like Us on Facebook
Twitter Feed