Light Reading

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
Flash Poll
From The Founder
Last week I dropped in on "Hotlanta," Georgia to moderate Light Reading's inaugural DroneComm conference – a unique colloquium investigating the potential for drone communications to disrupt the world's telecom ecosystem. As you will see, it was a day of exploration and epiphany...
LRTV Documentaries
Verizon's Emmons: SDN Key to Cost-Effective Scaling

5|22|15   |   03:53   |   (0) comments


For Verizon and other network operators to ramp up available bandwidth cost effectively, they need to move to SDN and agree on how to do that.
LRTV Documentaries
Lack of Universal SDN a Challenge

5|21|15   |   04:51   |   (3) comments


Heavy Reading Analyst Sterling Perrin talks about how uncertainty about SDN standards and approaches may be slowing deployment.
LRTV Custom TV
Steve Vogelsang Interview: Carrier SDN

5|20|15   |   05:02   |   (0) comments


Sterling Perrin speaks to Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, about the new Carrier SDN-enabling Network Services Platform and the operator challenges it solves.
LRTV Custom TV
Carrier SDN: On-Demand Networks for an On-Demand World

5|20|15   |   20:52   |   (0) comments


Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, talks about requirements and benefits of Carrier SDN during the keynote address at the Light Reading Carrier SDN event May 2015.
LRTV Documentaries
The Security Challenge of SDN

5|19|15   |   02:52   |   (0) comments


CenturyLink VP James Feger discusses concerns that virtualization could create new vulnerabilities unless network operators build in safeguards.
LRTV Custom TV
NFV Elasticity – Highly Available VNF Scale-Out Architectures for the Mobile Edge

5|18|15   |   5:50   |   (0) comments


Peter Marek and Paul Stevens from Advantech Networks and Communications Group talk about their NFV Elasticity initiative and the company's latest platforms for deploying virtual network functions at the edge of the network. Packetarium XL and the new Versatile Server Module: 'designed to reach parts of the network that other servers cannot reach.'
LRTV Huawei Video Resource Center
Bay Area Spark Meetup 2015

5|14|15   |   3:54   |   (0) comments


Developed in 2009, Apache Spark is a powerful open source processing engine built around speed, ease of use and sophisticated analytics. This spring, Huawei hosted a meetup for Spark developers and data scientists in Santa Clara, California. Light Reading spoke with organizers and attendees about Huawei's code contributions and long-term commitment to Spark.
LRTV Custom TV
The Transport SDN Buzz

5|12|15   |   06:01   |   (1) comment


Sterling Perrin, senior analyst at Heavy Reading, speaks with Peter Ashwood-Smith of Huawei and Guru Parulkar of ON.Lab about the evolution of transport SDN and the integration of technologies.
LRTV Custom TV
Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

5|5|15   |   04:49   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
LRTV Custom TV
DOCSIS 3.1: Transforming Cable From Hardware-Defined Network to Software-Defined Network

4|29|15   |   03:48   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explains how DOCSIS 3.1 can transform cable HFC network to a more agile software-defined network.
LRTV Huawei Video Resource Center
Predicting Traffic Patterns for Quality Mobile Broadband

4|29|15   |   6:45   |   (0) comments


Accessing information ubiquitously creates complexity and creates heavy traffic onto the network, especially at large-scale events like sporting events or festivals. In this video, Huawei's Mohammad Hussain speaks to experts about how to predict traffic and improve user experience during periods of heavy traffic.
Upcoming Live Events
June 8, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Network functions virtualization (NFV) is not the easiest of topics to take on board, so here's a Light Reading infographic, developed following conversations with the folks at HP, that helps make sense of where NFV is taking the industry.
Hot Topics
10 Alternate Uses for Tablets
Eryn Leavens, Copy Desk Editor, 5/22/2015
Bidding War for TWC Looks Likelier
Alan Breznick, Cable/Video Practice Leader, 5/22/2015
Verizon Saves 60% Swapping Copper for Fiber
Sarah Thomas, Editorial Operations Director, 5/19/2015
Comcast Targets 6 New Gigabit Markets
Mari Silbey, Senior Editor, Cable/Video, 5/21/2015
Chattanooga Charts Killer Gigabit Apps
Mari Silbey, Senior Editor, Cable/Video, 5/20/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
With 200 customers in 60 countries, Stockholm-based Net Insight has carved out a solid leadership position in one of the hottest vertical markets going in comms right now: helping service providers and broadcasters deliver video and other multimedia traffic over IP networks. How has Net Insight managed to achieve this success in the face of immense competition from the industry giants?
My ongoing interview tour of the leading minds of the telecom industry recently took me to Richardson, Texas, where I met with Rod Naphan, CTO and SVP, Solutions, ...
I recently popped down to Texas to chat with CEO Eric L. Pratt about his company, Taqua.
Cats with Phones