Phone Plus Prepaid: By Design

Posted: 9/2003

By Design
Prepaid Service Creation Inspires Profitability

By Tara Seals

Imagine a world where prepaid service
providers can bring new, value-added services to market flexibly and rapidly
regardless of the infrastructure used to deliver them and, while theyre at
it, achieve a faster return on investment. In this utopia, Joe Prepaid Inc. can
roll out a new prepaid voice-mail card within days, using existing equipment and
with all the necessary network services and content for support and quality
control.

Some say the keys to that worthy, profit-making vision are
service-creation platforms that enable service providers to define, deliver and
manage network services from connectivity (often across many network layers)
to business applications.

The future of always-on/always-available internetworking is
about the seamless and faultless delivery of compelling information interchange
experiences over best-performing, next-generation networks, says Peter
Bernstein, president of telecom consultancy Infonautics Consulting, in a
briefing for industry group, Service Creation Community.

[The mission of service creation community] is the delivery
of compelling and valued services to the market and hence service providers
time to revenue and profits, he adds. It is the ideal accelerant, since
the collaborative efforts of its members will enable service providers to
confidently deploy tested and proven solutions over heterogeneous networking
elements and environments quickly, effectively and efficiently.

Versatel Networks Inc. is bringing the open standards message
to the prepaid market with its family of service creation switches, launched in
North America in 2002. In terms of [next-generation network] architecture,
many of the players are beginning to combine components into a unified offering. You can get all of the next-generation components in a single
package, from Versatel, says Alec Saunders, Versatels vice president of
marketing. People are looking for a platform that they can quickly and
easily, without a lot of pain, bring new services to market.

The service creation message is gaining momentum with the
high-profile Lucent Technologies Inc. decision in June to spin off subsidiary Excel Switching Corp.
Excel now is a private, standalone entity focused on service creation for
prepaid and postpaid environments. In an OEM deal, Lucent will act as a sales
channel for the companys openarchitecture Converged Services Platform (CSP),
an any-gen platform that supports PSTN, packetswitched IP or hybrid
networks.

As a separate business, Excel will be able to maintain its
position as a provider of open platforms, and serve its developer customers with
greater focus and dedication, says Ron DeLange, vice president and general
manager of Lucents OPENet Solutions. At the same time, Lucent will be able
to concentrate its investments on the critical parts of its portfolio … while
continuing to market Excel-based solutions as part of its converged solution
offerings that address service provider needs.

The fledgling company has many boosters. As a long-standing partner of Excel, we are pleased with
this deal, says Mary Stanhope, general manager for the Oryx product group at
SchlumbergerSema. As an independent player with strong financial backing, we
feel confident that Excels CSP will continue to be a core technology of our
converged IP/PSTN products, unified messaging services which target wireless, fixed line
and IP carriers.

For its part, Versatel has concentrated on delivering
applications that offer value-added revenue to prepaid operators. Its latest
initiative is prepaid conferencing. The company has collaborated with developer
S&S Professionals to offer the service capability.

Weve been quite laser-like focused in on the prepaid
market, and were continuing to focus on where things might be going in the
conferencing market, because we think theres going to be an awful lot of
value created there very shortly, says Saunders, who recalls the early days
of prepaid long-distance when there was dramatic arbitrage play.

The same opportunity exists in conferencing,he says. It will charge you somewhere between 20 and 28
cents per minute and it really costs only a penny or two to provision. I think
that will open up some fresh and interesting new business opportunities.

Voice over IP applications also are hot, says Saunders, and
stand as examples of how convergence is changing the face of the prepaid
industry. Virtually every customer that weve quoted in the last
quarter has been a voice-over-IP opportunity, says Saunders. Its just really taking off. The reasons are efficiency and new opportunities to create
services.

Versatel also is working with S&S Professionals on a
unified messaging initiative. The notion is that youll be able to phone
up, and under voice control be able to speak to the system at the other end and
have it read your voice mail or e-mail and be able to send messages the same
way, explains Saunders.

For some operators the idea of investing in an expensive
platform seems prohibitive, but Versatel has two initiatives for spreading the
service creation message. First, the company did an in-depth analysis for the
prepaid market on the margin impact of owning a switch versus operating in a
service bureau environment. Its a pretty dramatic analysis, because what
it ends up showing is that even with as little as 2 [million] or 3 million
minutes of traffic per month, a modest cash outlay or lease will result in gross
margin improvements of 70 percent, 80 percent sometimes as much as 90 percent,
so its just huge, says Saunders. He says the company is contacting
providers that use services bureaus and, for no cost, will take their VoIP or
PSTN circuits, plug them in and demonstrate what ownership could mean.

Versatel also is targeting companies with the Cisco Systems
Inc. Summa IV switch that was discontinued in December. The vendor has teamed up
with Compro Technologies Inc., which has Ciscos worldwide support contract
for the Summa IV platform, to offer an upgrade path.

The big issue facing people in prepaid is the fact that
margins are so skinny, says Saunders. I look at the operators, and if
margins are your problem you can really only do one of two things: Find new ways
to create margins, or become more efficient about the way you run your business.
So if you look at what were doing, the service bureau migration is all about
being more efficient in how you operate your business, because now you take some
of the margin you were giving the service bureau and you can retain it yourself.