History of the prepaid mobile phone
Encyclopedia
The history of the prepaid mobile phone begins in the 1990s when larger markets were being sought after by the mobile phone operators. Before this date, all mobile phone
services were offered on a post paid basis
, which excluded people with a poor credit rating
as well as children since you have to be over 18 to sign a mobile phone contract.
Nowadays the prepaid mobile phone is found across the world.
. HCTC introduced a service offering branded "calltrac" based on Voice Systems Technology, Inc.'s telephony platform with RPAC-2 billing during the first quarter of 1994.
HCTC initially offered prepaid mobile phone as a non-advertised alternative way to provide service to the more than 40% of cash-carrying, walk-in consumers who were being denied cellular service each day due to lack of credit. The plan was very expensive for the day, most subscription plans were double that of their postpaid subscribers and the prepaid subscriber still had to pay for their equipment (handsets) and anticipated call usage up front. HCTC used the Calltrack prepaid cellular program as a credit development vehicle until they developed subscriber reports intended to show that "Calltrack" was not a profitable venture.
The reports showed that a Calltrack prepaid subscriber was actually more profitable than their traditional postpaid subscribers by a huge margin. This was because, at that time it cost an average of 17% of their gross proceeds to collect on their bad debt postpaid subscribers, plus HCTC paid for all the postpaid handsets. HCTC was poised to become the first U.S carrier to go primarily prepaid, but it did not happen. Voice Systems Technology Inc. was sold to Boston Communications Group
(BCGI) and the subsequent sale of prepaid cellular platforms in the US was immediately curtailed and the prepaid cellular service bureau was born. U.S Carriers spent several years trying to catch-up and develop their own solutions but patent litigation has kept prepaid from becoming the dominant form of payment.
AT&T's monopoly. Prior the 1968 Carterfone
decision, it was not permitted to connect non-Bell (Bell Labs
or Western Electric
) ancillary devices to the telecommunications network.
A provider of prepaid mobile phone was Banana Cellular, founded by Andrew Wise in 1993, which covered the provisioning of prepaid wireless services. Banana first sold prepaid mobile phone services in April 1993 in a small office located in Phoenix, Arizona
.
The first practical implementation of prepaid wireless originated in the United States from a small group of entrepreneurs at Voice Systems Technology, Inc. The first European PAYG deployment was in Portugal
in 1995 when Portuguese
operator TMN
deployed a PAYG solution called MIMO .
The concept was also developed by Eircell (then owned by incumbent Telecom Éireann
) in the Republic of Ireland
in 1997, as a method of letting different types of people (those under the age of 18, those without bank accounts and those without proof of identity) obtain a mobile phone. Originally limited to one TACS handset, costing £
99 upfront, the system was an amazing success, despite the high price of calls and a 7p service charge on every operation. The system was branded as Ready To Go, a name still used by Vodafone
, who now own Eircell.
The concept has since been copied in many other countries, with virtually every network in every European country supporting it. On many networks, such as Ireland's Meteor, pay-as-you-go is the main mode of operation, with pay monthly account phones being very much second-class. Conversely, in the United States, account phones offer the best features with pay as you go services being far more restricted in functionality. In developing countries pre-pay tariffs are chosen by the overwhelming majority of subscribers.
and switching equipment did not have the capacity that it has today, so prepaid was relegated to being the second choice for most US carriers.
Modern prepaid mobile phone solutions use an out-of-band signalling called the Intelligent Network
to monitor the credit without the need for hairpinning trunks. These are developed as international standards which allow prepaid use of a phone all over the world.
Mobile phone
A mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...
services were offered on a post paid basis
Postpaid mobile phone
The post-paid mobile phone is a mobile phone for which service is provided by a prior arrangement with a carriage service provider . The user in this situation is billed after the fact according to their use of mobile services at the end of each month...
, which excluded people with a poor credit rating
Credit rating
A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are...
as well as children since you have to be over 18 to sign a mobile phone contract.
Nowadays the prepaid mobile phone is found across the world.
First US prepaid mobile phone installation
A patent for prepaid mobile phones (Patent Number 5826185) was filed on November 16, 1994.. Among the first, if not the first large metropolitan area implementation of prepaid mobile phone service in the United States was in the early 1990s at Houston Cellular Telephone Company, Houston, TX. HCTC was then an independent wireless carrier owned jointly by PacBell and BellSouthBellSouth
BellSouth Corporation is an American telecommunications holding company based in Atlanta, Georgia. BellSouth was one of the seven original Regional Bell Operating Companies after the U.S...
. HCTC introduced a service offering branded "calltrac" based on Voice Systems Technology, Inc.'s telephony platform with RPAC-2 billing during the first quarter of 1994.
HCTC initially offered prepaid mobile phone as a non-advertised alternative way to provide service to the more than 40% of cash-carrying, walk-in consumers who were being denied cellular service each day due to lack of credit. The plan was very expensive for the day, most subscription plans were double that of their postpaid subscribers and the prepaid subscriber still had to pay for their equipment (handsets) and anticipated call usage up front. HCTC used the Calltrack prepaid cellular program as a credit development vehicle until they developed subscriber reports intended to show that "Calltrack" was not a profitable venture.
The reports showed that a Calltrack prepaid subscriber was actually more profitable than their traditional postpaid subscribers by a huge margin. This was because, at that time it cost an average of 17% of their gross proceeds to collect on their bad debt postpaid subscribers, plus HCTC paid for all the postpaid handsets. HCTC was poised to become the first U.S carrier to go primarily prepaid, but it did not happen. Voice Systems Technology Inc. was sold to Boston Communications Group
Boston Communications Group
Boston Communications Group, Inc., more commonly called bcgi, was one of the largest prepaid mobile phone companies in the United States until 2007. In 2005, they settled a patent lawsuit brought by Freedom Wireless, a private intellectual property firm based in Phoenix, Arizona. bcgi and its...
(BCGI) and the subsequent sale of prepaid cellular platforms in the US was immediately curtailed and the prepaid cellular service bureau was born. U.S Carriers spent several years trying to catch-up and develop their own solutions but patent litigation has kept prepaid from becoming the dominant form of payment.
Early Providers of prepaid services
The possibility of "prepaid wireless" in the United States actually came from Judge Green's decision to break upBell System divestiture
The Bell System divestiture, or the breakup of AT&T, was initiated by the filing in 1974 by the U.S. Department of Justice of an antitrust lawsuit against AT&T. The case, United States v...
AT&T's monopoly. Prior the 1968 Carterfone
Carterfone
The Carterfone is a device invented by Thomas Carter. It manually connects a two-way mobile radio system to the public switched telephone network , making it a direct predecessor to today's autopatch....
decision, it was not permitted to connect non-Bell (Bell Labs
Bell Labs
Bell Laboratories is the research and development subsidiary of the French-owned Alcatel-Lucent and previously of the American Telephone & Telegraph Company , half-owned through its Western Electric manufacturing subsidiary.Bell Laboratories operates its...
or Western Electric
Western Electric
Western Electric Company was an American electrical engineering company, the manufacturing arm of AT&T from 1881 to 1995. It was the scene of a number of technological innovations and also some seminal developments in industrial management...
) ancillary devices to the telecommunications network.
A provider of prepaid mobile phone was Banana Cellular, founded by Andrew Wise in 1993, which covered the provisioning of prepaid wireless services. Banana first sold prepaid mobile phone services in April 1993 in a small office located in Phoenix, Arizona
Phoenix, Arizona
Phoenix is the capital, and largest city, of the U.S. state of Arizona, as well as the sixth most populated city in the United States. Phoenix is home to 1,445,632 people according to the official 2010 U.S. Census Bureau data...
.
The first practical implementation of prepaid wireless originated in the United States from a small group of entrepreneurs at Voice Systems Technology, Inc. The first European PAYG deployment was in Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
in 1995 when Portuguese
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
operator TMN
TMN
TMN is an abbreviation for:* The Music News, an online iNews Magazine.* tuberomamillary nucleus of the hypothalamus* The Mafia Network, an online game* The Movie Network, a Canadian television network...
deployed a PAYG solution called MIMO .
The concept was also developed by Eircell (then owned by incumbent Telecom Éireann
Telecom Éireann
Telecom Éireann, or formally Bord Telecom Éireann - The Irish Telecommunications Board, was created by the Postal & Telecommunications Services Act, 1983 from the Department of Posts and Telegraphs, Ireland, under the leadership of the Minister for Posts & Telegraphs...
) in the Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
in 1997, as a method of letting different types of people (those under the age of 18, those without bank accounts and those without proof of identity) obtain a mobile phone. Originally limited to one TACS handset, costing £
Irish pound
The Irish pound was the currency of Ireland until 2002. Its ISO 4217 code was IEP, and the usual notation was the prefix £...
99 upfront, the system was an amazing success, despite the high price of calls and a 7p service charge on every operation. The system was branded as Ready To Go, a name still used by Vodafone
Vodafone
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
, who now own Eircell.
The concept has since been copied in many other countries, with virtually every network in every European country supporting it. On many networks, such as Ireland's Meteor, pay-as-you-go is the main mode of operation, with pay monthly account phones being very much second-class. Conversely, in the United States, account phones offer the best features with pay as you go services being far more restricted in functionality. In developing countries pre-pay tariffs are chosen by the overwhelming majority of subscribers.
Technical evolution
Early solutions to monitor the amount of credit remaining were called "hairpin solutions". They were so called because they connected the caller in and out of a central platform to monitor usage, meaning that it took two extra dedicated trunks on the cellular switch to make one call, one for the inbound connection to the telephony platform and the second back to the switch to complete the call. Trunks were an expensive resource in a large metropolitan Mobile Telephone ExchangeNetwork Switching Subsystem
Network switching subsystem is the component of a GSM system that carries out call switching and mobility management functions for mobile phones roaming on the network of base stations...
and switching equipment did not have the capacity that it has today, so prepaid was relegated to being the second choice for most US carriers.
Modern prepaid mobile phone solutions use an out-of-band signalling called the Intelligent Network
Intelligent network
The Intelligent Network , is the standard network architecture specified in the . It is intended for fixed as well as mobile telecom networks...
to monitor the credit without the need for hairpinning trunks. These are developed as international standards which allow prepaid use of a phone all over the world.