& cplSiteName &

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        ADD A COMMENT
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 3

3|22|17   |     |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting on the application of technologies and key business verticals such as transportation, smart city, manufacturing, media and finance.
LRTV Documentaries
No Regrets: Cox's Finkelstein on Fiber & More

3|22|17   |     |   (0) comments


At the Cable Next-Gen Technologies & Strategies event in Denver, Cox's Jeff Finkelstein examines the cable capex conundrum.
LRTV Documentaries
Cable Next-Gen: The 'Mile High' View From Denver

3|22|17   |   11:56   |   (0) comments


Alan Breznick kicks off the Cable Next-Gen Technologies & Strategies event in Denver, casting his thousand-yard stare over cable's current competitive landscape.
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 2

3|21|17   |   2:27   |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting digital transformation solutions around IoT, smart data centers, OpenCloud ecosystem and its newly announced storage-as-a-service solution.
LRTV Custom TV
Driving Better Mobile Customer Experience While Transforming the Mobile Network

3|21|17   |   7:47   |   (0) comments


The Citrix NetScaler mobile gateway is an intelligent traffic management solution which can markedly improve the customer experience provided by mobile operators, even when traffic is encrypted. Critical network services can be consolidated and virtualized using NetScaler. Because of the unique architecture, NetScaler can be deployed on any hypervisor, on a ...
LRTV Custom TV
Mastercard: What's Next for Mobile Payments?

3|21|17   |   7:49   |   (0) comments


2017 marks the fifth consecutive year for Mastercard at Mobile World Congress and it was a great time to reflect on the amazing advances the payments industry has made as well as discuss "What's Next' in the digital commerce future. We spoke to James Anderson, executive vice president of digital payments at MasterCard, about digital wallets to tokenization to ...
LRTV Custom TV
Mastercard: 2 Billion Adults 'Trapped' in Cash Economy

3|21|17   |   03:51   |   (0) comments


Despite advances made in the last several years, two billion adults around the world are trapped in a cash economy and lack what we take for granted -- a safe way to receive, save and use money. Shamina Singh, executive vice president of sustainability and president of the Mastercard Center for Inclusive Growth, chats about how Mastercard is developing new ways to ...
LRTV Custom TV
Mastercard: Payment From Every Device

3|21|17   |   5:55   |   (0) comments


A world where everything and everyone is connected creates new points of interaction for commerce. These digital experiences cannot be developed in isolation and instead require an ecosystem to drive mass consumer and enterprise adoption and create better consumer engagement. Predicting when that growth will happen is difficult, but always keeping the end user in ...
LRTV Interviews
InterDigital's Role in the 5G, IoT Era

3|21|17   |   05:47   |   (0) comments


Alan Carlton, managing director and VP for Europe at InterDigital, talks about the company's role in 5G projects in Europe and the prospects for the company in the IoT market.
LRTV Interviews
Lessons Learned From Digital Transformation

3|21|17   |   05:51   |   (0) comments


Ravi Palepu, global head of Telco Solutions at Virtusa, talks about some key takeaways from telco digital transformation experiences during the past couple of years.
Women in Comms Introduction Videos
NetNumber's CMO Shares Her Diversity Do's

3|21|17   |   3:19   |   (2) comments


The telecom industry is transforming the world, and diversity plays a critical role in driving the innovation behind it. NetNumber CMO Kim Gibbons shares why diversity and being authentic is a do amidst all the don'ts women in comms often hear.
LRTV Custom TV
Software-Driven Architecture for 5G & IOT

3|20|17   |   1:56   |   (0) comments


We present Heavy Reading's Jim Hodges's report from Mobile World Congress -- where operators and vendors are working to bring a variety of technologies together to make virtualization a reality in the era of 5G and IoT.
Upcoming Live Events
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
High-Band 5G: Let's Address the Range Question, Shall We?
Dan Jones, Mobile Editor, 3/21/2017
Eurobites: Italy First Pasta the Post for 5G
Paul Rainford, Assistant Editor, Europe, 3/17/2017
5G Faces a Marathon, Not a Sprint
Iain Morris, News Editor, 3/17/2017
Eurobites: A1, Nokia Turn It Up to 11
Paul Rainford, Assistant Editor, Europe, 3/22/2017
Russia's MTS: There Is No 5G Business Case
Iain Morris, News Editor, 3/21/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
At MWC 2017, Qualcomm's CTO Matt Grob talks to Light Reading's CEO and Founder Steve Saunders about the progress being made in the development of the technologies and standards that will underpin 5G.
Animals with Phones
Neither Do We Click Here
Is that a prerequisite?
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.