It's All in the Cards

By Charlene O'Hanlon

Posted: 10/1997

It’s All in the Cards

by Charlene O’Hanlon

The prepaid calling card business is characterized by agents
as a risky game, yielding high commissions or considerable losses
depending on one’s tenacity and luck. Agents have been hustled by
hit-and-run artists who print cards with bogus numbers. They’ve
been hustled by carriers whose platforms deliver more busy
signals than dial tone. And they’ve been outhustled– more like
rear-ended– by other distributors coming in behind them with
dirt-cheap prices.

The prepaid calling card game isn’t easy. However, agents who
do their due diligence before choosing a prepaid calling card
vendor and find creative ways to distribute large quantities of
cards in immigrant/ethnic communities, universities, military
environments and any other lucrative milieu can make serious
money.

"I have somewhere in the neighborhood of 1,000 cards
sitting in my desk drawer," says Dror Mei-Tal, agent and
president of Global Telecom Brokers, Baltimore. "I’ve been
holding them for months because every time I closed a deal,
another distributor came in behind me offering cards at my cost.
It’s tough to compete with some of the prices already out there.
Yet, I know people who are incredibly successful. I have a friend
who makes $10,000 a month in commission selling cards to sailors.
It’s like a market atmosphere when he boards a U.S. Navy ship
with three or four competitors. One says ‘I’ve got a rate for
England.’ Another barks out, ‘I’ve got one that’s better.’ It’s
crazy. But he makes a mint."

Customers and Bad Cards Don’t Mix

An agent’s most valuable possession is his relationship with
the customer. Nothing will injure that relationship more than
selling 100 cards that don’t work–especially if the customer is
running a retail outlet in a neighborhood full of
credit-challenged individuals. That customer will have a lot of
emotional people who’ll want their $10 back or else. Moreover,
the agent will stroll in a week later to see about a reorder and
find his life in jeopardy because one of his customers wants to
shoot him!

The point is that agents need to do their homework when
choosing a prepaid calling card vendor. A provider should be
certified and tariffed in the state an agent plans to distribute,
provide live customer service and possess a capable platform that
is tested thoroughly (by the agent), says Geoff Carroll, director
of alternate channels for American Communications Services, Inc.

"There are providers out there with PC-based platforms
that wield only as much power as some of the computers you can
buy at a department store," says Frank Muschlitz, owner of
Global Tel-A-Com Service Group, an agent and provider of
consulting services and product acquisition assistance. "The
provider only has a certain number of lines coming in and out. If
the cards are being sold dirt cheap, it usually means they’re
connected to an inferior platform."

Furthermore, agents need to be wary of incredibly high
commission structures, especially if the price of the card is
low. If a company is offering a 40 percent commission on a card
with a 12 cent rate, something is wrong. "The best
commissions always come with higher prices," adds Mei-Tal.

There are plenty of reputable companies out there, says Joel
Freeman, a prepaid calling card veteran and president of
Seattle-based Freeman Company, "As in many businesses,
however, agents may have to kiss a few frogs before they find a
prince."

Indeed, the prepaid calling industry is rife with stories
about agents getting ripped off by less-than-reputable companies
who sell minutes way below the market rate, then close up shop
never to be seen or heard from again. "Instances like that
really put a black eye on the industry," Freeman says.
"It hurts those of us who are trying to make our way
honestly."

Buyer Beware

To combat the problem of fly-by-nighters who can ruin an
agent’s business and reputation in one fell swoop, more and more
agents are working with a number of different companies to offer
a variety of calling card platforms to their customers. "The
larger agents are definitely cherry-picking their
platforms," says Ken Rudolph, vice president of IdealDial.
"This selective choosing not only ensures their customers
are getting the products and services they need, but also ensures
the agents are working with financially strong and feature-rich
companies.

"To work with the best, we need to weed the good from the
bad. Agents do the same thing," he adds.

Andy Shipp, director of the carrier services group for
Raleigh, N.C.-based BTI, says agents are more savvy today when it
comes to lower-rate companies, especially when they’ve been stuck
with a handful of bad cards. "The distributors who have been
burned are willing to pay a slightly higher price for a card that
works. (A bad card) hurts their distribution and their business,
especially those distributors who sell telecom products other
than prepaid and use prepaid as an add-on to their product
line."

Consequently, distributors–at least the seasoned ones–are
realizing that high-quality and cheap minutes are a pipe dream.
The best scenario agents can hope for instead is to have
high-quality service coupled with reasonable rates, which many
platform providers are offering agents.

The Name of the Game

As with selling long distance service, the name of the game is
bulk. Volume drives income in the prepaid business, says Freeman.
"If an agent is able to contract with a reputable firm that
is profitable and tends to remain profitable, and will give the
agent a reasonable commission, then the agent’s job purely is to
go out and evolve enough customers to drive (his or her) income
level to where (he or she) wants it."

In other words, agents lured in by the promise of exorbitant
margins should know better, says Todd Eckstein, director of
retail sales for ITS. "Prepaid calling cards allow agents to
tap into the retail market and get a reasonable commission for
selling a product that everybody needs. In the right situations,
they can get a 40 percent commission that they probably share
with the locations and move product fast."

Regarding "right" situations, some argue that the
bread-and-butter market segments already are saturated with
prepaid calling card offerings. As a result, some retailers have
the ability to set their own terms with agents. "Store
owners or managers know there are so many people trying to sell
cards that they can get them on consignment," says
Muschlitz. "In many cases, the store owners can dictate
their own margins, as well as when they’ll pay the agent.

"Consequently, they have zero loyalty to the agent they
buy from," he adds. "The next guy in the door with a
lower price generally gets the business."

Despite the challenges inherent in distributing prepaid
calling cards, agents make a habit of beating adversity, says
Ilene Kaminsky, director of marketing for Houston-based Creative
Communications. "Moreover, the business itself is evolving
in a positive way," she adds. "It’s taken some time but
retailers as well as consumers have accepted the product. As that
trend continues and widens, reputable agents and vendors alike
will see more and more opportunity in the months and years to
come."

It’s not a cakewalk out there. But the business of selling
telecom services never has been. To cynics who suggest that
prepaid calling cards have run their course, Mei-Tal replies:
"Not at all. You just have to find a niche, and
hustle."