From: Duncan Frissell <frissell@panix.com>
Date: Fri, 18 Sep 1998 09:20:03 +0800
To: Chip Mefford <cmefford@video.avwashington.com>
Subject: Re: Mobile phone tracking, pagers, etc
In-Reply-To: <19980917222329.A1364@die.com>
Message-ID: <199809181411.KAA24933@mail1.panix.com>
MIME-Version: 1.0
Content-Type: text/plain



At 08:13 AM 9/18/98 -0400, Chip Mefford wrote:
>
>
>Actually, 
>
>there seems to be a screw up out  there.
>
>Right now, one can go down the 7/11, and pay 
>cash for a prepaid cellphone, and renew it with 
>cellphone time cards also purchased with cash.
>
>No paperwork, NONE.
>
>I have one.

I pointed this out two years ago when the first prepaid cellular phones
appeared in NYC.  

This is an example of the problem with regulations that depend on keeping
"bad" people from having bank accounts, net accounts, phone accounts, etc.
These depend on *all* sellers of these account services conspiring with the
government in a cartel to deny services (a Government Denial of Service
attack).  But such a cartel (even if backed by law) is impossible to
maintain.  There is too much profit in breaking it.

DCF



>From Wednesday's WSJ:

"In a depressing turn for law-enforcement authorities, prepaid service has
caught on with drug dealers and other criminals. With no contract and no
bills, there is no paper trail -- a feature that also makes the service
attractive to tax evaders."


September 16, 1998

Prepaid Plans Start to Open Up The Cellular-Phone Market

By GAUTAM NAIK Staff Reporter of THE WALL STREET JOURNAL

Warren Pippin, a police officer in Savannah, Ga., ditched his traditional
cellular-phone contract two years ago. "I couldn't stand paying bills every
month," he says. "This is so much simpler."

Now he uses prepaid cellular-phone service, a plan that was hatched in
Portugal four years ago, took Europe by storm and is finally catching on in
the U.S. A user simply buys an off-the-shelf phone, along with a card
representing a certain financial value. The phone is activated by dialing a
phone number and a personal identification number printed on the card. When
the money runs out, the card can be replenished via a fresh payment.

Those are just the basics. In Portugal, refinements let prepaid users
replenish their cards at automated teller machines. And wherever it is
used, the prepaid method is democratizing a product and service long
confined to the well-heeled. Although only 2% of America's 54 million
wireless subscribers use prepaid service today, most are people who
otherwise wouldn't dream of owning a mobile phone: inner-city residents,
students, people with poor credit.

While rates for prepaid service are generally higher than regular cellular
plans, users have no 12-month contracts or monthly fees to contend with.
All told, compared with regular "leisure" users, prepaid customers spend
roughly 15% to 25% less per month.

"Prepay is enabling people that have wanted wireless phones for a long,
long time to finally get one," says Terry Hayes, a marketing executive at
Omnipoint Corp., which recently launched a "no monthly fee" prepaid
offering. The company, which operates from Maine to Maryland, sells prepaid
phones in colorful packages at gas stations, Duane Reade drugstores and its
own outlets. Every second Omnipoint customer has prepaid service.

'Best Thing for Kids'

Page Tel, a wireless-service reseller in Detroit, has signed up 85,000
prepaid mobile-phone users, most of them students and inner-city residents.
One popular product costs $39, and includes a Motorola flip phone. "It's
the best thing for kids," says Laith Korkis, the owner of Page Tel. "They
buy a $39 phone and a $10 prepaid card and walk down the street looking cool."

In a depressing turn for law-enforcement authorities, prepaid service has
caught on with drug dealers and other criminals. With no contract and no
bills, there is no paper trail -- a feature that also makes the service
attractive to tax evaders.

Europe's prepaid users number some 14 million, or 20% of all mobile
subscribers. By the end of 1998, the number of prepaid users will rise to
22 million, or 25% of the total European market, according to Salomon Smith
Barney. In the U.S., playing catch up, virtually every big wireless
provider has jumped into prepaid service: Half of PrimeCo Personal
Communications LP's customers are prepaid, while 40% of BellSouth Corp.'s
subscribers are. Prepaid will make up 25% of all new wireless sign-ups this
year, estimates Donaldson, Lufkin & Jenrette.

U.S. providers remain technologically behind their European counterparts,
who adopted digital standards far earlier. European digital phones have a
special card that can be inserted into the phone to activate special
features such as Portugal's ATM replenishment. In the U.S., users can only
replenish their prepaid phone by paying cash at a store or via credit card.

Portugal Telecom SA, Portugal's main phone company, got the idea for
prepaid cellular service when executives realized that the nation's
sophisticated network of ATMs could be used as mobile-phone "refueling"
stations. The service was launched in 1995; today, 68% of all Portugal
Telecom's mobile-phone customers are prepaid.

Telecel Communicacoes Pessoais SA, a rival wireless carrier that is 50.9%
owned by Airtouch Communications Inc. of the U.S., has been equally
aggressive. Its Vitamina prepaid phones are sold in brightly colored
packages, each shaped in the form of a pill. One popular brand is aimed at
corporations: The company can specify exactly how much credit it wants each
employee's phone to have, and how often the credit should be topped up.

The Frog Factor

Another product, Vitamina K (for kid), is for children ages eight to 15.
The phones look like frogs and have six colorful buttons that can be
programmed by a parent. "One is for mummy, two for daddy, three for
grandma. That's all the kid has to know," explains Joao Mendes Dias,
Telecel's product-marketing director.

An especially big hit is Vitamina R (for radicals), sold to the
15-to-24-year-old set and featuring only fashionable Ericsson or Nokia
models. If a Vitamina R customer calls another Vitamina R user, the call is
35% cheaper than calling someone else. And the advertising slogan has its
fans, as well: "Vitamina R. It heals everything but hangovers."

Sandra Santos, a 21-year-old student in Lisbon, likes her snazzy Vitamina
phone because it provides a running display of the credit available at any
time. When she runs low, there is always a cash machine nearby. Thanks to
special calling rates, her Vitamina bills are half what she paid with a
previous subscription plan. And her previous phone? "I gave that to my
dad," she says.

Airtouch now hopes to apply Telecel's ideas-especially the savvy marketing
-- in the U.S. The San Francisco company is pitching prepaid to students in
Ohio and Michigan. During the World Cup soccer tournament, it targeted
Hispanic customers in Southern California. In the last 12 months, about 10%
of all new Airtouch customers joined on the prepaid plan. That number could
double in the next 12 months, says Airtouch.

Dave Whetstone, director of the company's prepaid business, noting that his
company has extensive interests in European wireless carriers, adds: "We
look at our European operations and say, 'Wow, prepaid is exploding there.
There may be some cultural differences, but there's got to be something
there' " for U.S. consumers.

Airtouch won't have to convince Jenifer Borrusch, an 18-year-old student at
Eastern Michigan University. Ms. Borrusch's parents wanted to give her a
traditional mobile phone in case of emergencies during her 45-minute drive
from Livonia, Mich., to college. But because she might overspend, they gave
her a prepaid device instead. The ploy worked. "I won't even let my best
friend use it," she says.