Pre-Paid Opens New Frontier for US Broadband

The pre-paid model has worked wonders for the mobile market over the years, so why shouldn't it be applied to U.S. broadband?

Wipro Ltd. (NYSE: WIT) is pitching the idea to the nation's cable operators as they think about how to stoke broadband service growth. They'd like to tailor packages to lower-income consumers (or students), but without the associated risks of non-payments and bad debt. (See Comcast: 100K Families Take Internet Essentials Tier.)

"There's sort of a hole out there that's not being addressed," says Stephen Snyder, the global head of business innovation for Wipro's Global Media and Telecom unit. "It could open up a whole new revenue stream."

Wipro's answer is Accelerate, a platform customized to handle the billing, customer care and operational support of a pre-paid service -- basically everything beyond the truck roll and installation of the service itself.

Snyder acknowledges that cable hasn't pursued low-income markets aggressively because they've typically been more trouble than they're worth. Wipro, a Service Provider Information Technology (SPIT) firm and consultancy that also runs an energy management business, claims its ability to optimize the behind-the-scenes processes can make the margins on a pre-paid broadband product consistent with what operators get from their traditional service bundles.

"If we can make that a 40-to-50-percent-margin product, [service providers] should not run away from it," Snyder says, noting that Wipro has been modeling the idea around packages that could be offered for about $9.95 per month.

And Wipro's been at it for a while in other parts of the world, including India, Hungary and in the Middle East, where pre-paid is the first port-of-call for a range of services, including fixed line and wireless.

To provide some separation from an operator's core service packages, MSOs could also create "flanker brands" for a pre-paid offering, Snyder says. Pre-paid broadband could also reach beyond lower-income targets -- to people in vacation rentals, for example.

But Snyder also realizes that that cable operators, particularly the larger ones, like to do things themselves. Wipro is amenable to letting an MSO pilot the idea for two to three months to get a sense of how consumers respond and to test the business case.

Wipro is still in early discussions with U.S. cable operators about this kind of model. Snyder says there's also some potential for pre-paid plans to be applied to video -- something that some operators are already considering as they seek new ways to stem pay-TV subscription losses. (See Pondering Pre-Paid Cable TV.)

(To learn more about the opportunities and challenges of the pre-paid broadband model, tune in Thursday, Sept. 20, at 12:00 noon ET for "Driving Growth Through Pre-Paid Broadband," a Light Reading webinar that will feature a panel with Snyder; Novation Broadband co-founder and former Charter Communications Inc. exec Ted Schremp; and Siber Consulting LLC founder and President Richard Siber.)

— Jeff Baumgartner, Site Editor, Light Reading Cable

shygye75 12/5/2012 | 5:20:48 PM
re: Pre-Paid Opens New Frontier for US Broadband

We need to get Heavy Reading analysts on Twitter so that they can appear as expert witnesses on LR. But here's a question: How do you get (presumably wireline) prepaid broadband service without a broadband access line?

Jeff Baumgartner 12/5/2012 | 5:20:48 PM
re: Pre-Paid Opens New Frontier for US Broadband

This obviously wouldn't apply to areas with no broadband lines... but understand why you'd ask since I stepped in it by bringing up the FCC, which has been more focused on providing access where there is no broadband (but they have also been pushing for more affordable broadband too). JB

Jeff Baumgartner 12/5/2012 | 5:20:48 PM
re: Pre-Paid Opens New Frontier for US Broadband

Teresa Mastrangelo at Broadband Trends weighed in on this on Twitter, noting that she sees a very small market in North America for this, though it could play well in some markets.   While the FCC likes to talk about the millions of consumers out there that haven't adopted broadband, but the size of a potential market doesn't mean it's all there for the taking with the waive of a wand, of course. But I'd have to agree that any success in the U.S. will hinge on how and where this sort of pre-paid offering is marketed. A good question to bring up on tomorrow's panel on this topic. JB


Jeff Baumgartner 12/5/2012 | 5:20:47 PM
re: Pre-Paid Opens New Frontier for US Broadband

Prodigy holding on Line 1; CompuServe on Line 2. AOL...

shygye75 12/5/2012 | 5:20:47 PM
re: Pre-Paid Opens New Frontier for US Broadband

So... prepaid dialup?

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