Looking to put its success as a market leader in prepaid phone cards to work connecting Internet users, AT&T recently launched its flexible pay-as-you-go Internet service to subscribers. Could such a program work for your ISP?

by Patricia Fusco Managing Editor ISP-Planet [October 24, 2001]

For ISP businesses, prepaid phone cards are nothing new. It's a way to reach another segment of your target market that enjoys the ease and simplicity of a pay-as-you-go billing plan for Internet access. But does it work? Is it an effective way to market your Internet services?

AT&T thinks so.

The communications company is looking to put its success as a market leader in prepaid phone cards to work connecting AT&T WorldNet users to the Internet. Aptly dubbed PrePaid Internet Service, AT&T WorldNet started offering its flexible, pay-as-you-go Internet service this week.

According to AT&T, the service offers the same flexibility that has driven prepaid phone card growth. With AT&T's prepaid Internet service, consumers can purchase Internet access minutes in participating retail stores without paying a monthly recurring charge or even using a credit card.

The startup package contains a CD with all the software needed to access the Internet from home, while traveling or from most computers equipped with a modem. Subscribers simply load the software and go.

The commitments
Mark Evans, AT&T Prepaid Card vice president of marketing and sales, said it brings to Internet service all the convenience, flexibility and control of prepaid phone cards.

"AT&T prepaid Internet is a great way for consumers to surf the Web and e-mail on their own terms—no monthly recurring fees, no monthly or long-term commitment."

Ed Chatlos, AT&T Consumer Internet Products and Services vice president, contends that prepaid phone card connectivity is a great way to test drive AT&T WorldNet Service, a winner of six awards for performance and customer satisfaction this year.

"This offer gives consumers the ability to sample WorldNet's fast log-on times and fewer disconnects on a prepaid basis," Chatlos said. "It's easy, it travels well and it'll whet the appetite for more."

Why users stick with one service provider or switch to another is a topic of much debate. Ease of use at the point of setup is a critical first threshold to overcome. If an inexperienced user, the lowest common denominator of the average ISPs subscriber base, can't get their computer configured to connect, then what's the point of offering a prepaid sample of your system?

According to AT&T, after loading the CD from the startup package on most computers equipped with a modem, consumers only need the PIN and serial number printed on the handy AT&T prepaid Internet card included with the CD to access the Internet, set up their email account or check the minutes remaining in their account.

Profit potential
For the ISP, prepaid connectivity cards are a sweet deal. Users pay upfront fees, which might or might not translate into actual usage. The authentication scheme is left to RADIUS, with a PIN number acting as a password to a finite number of access hours, based on the serial number of the temporary account. The greatest task for the ISP business is to inventory each and every prepaid connectivity card on an AAA server at the network operation center.

For AT&T WorldNet Service, prepaid phone card sales translate into immediate revenue. Startup packages are available in two denominations—eight hours of Internet access time for $9.99 or 20 hours for $19.99. Thirty hours of additional Internet service minutes can be purchased for $29.99.

Most U.S. ISPs charge about $22 a month for unlimited Internet access plans, except for America Online, which charges $25 a month. According to Nielson Net Ratings, the average Internet user currently spends about 18 hours online each month. So the average Internet user pays about $1.22 for each hour of Internet access a month. Of course, AOL users pay about $1.38 per hour used on average.

Based on these average figures, AT&T WorldNet is not charging premium prices for its prepaid services. Its eight-hour plan costs about $1.25 per hour while AT&T WorldNet's 20-hour plan costs about a buck a minute. But there's a catch.

AT&T WorldNet prepaid phone card users can dialup to a local number, or a national toll-free access number. Internet service minutes are used up more quickly with the toll-free number. So it's in the users best interest to program in a local dialup number while it's in AT&T WorldNet's best profit potential for users to dial in with the national toll-free number.

Dissemination equals circulation
If your ISP business already offers a national toll-free dialup plan, you too could be selling prepaid connectivity cards today. But there is one more business matter to consider before jumping on AT&T WorldNet's bandwagon—distribution.

AT&T said likely users of its new service include people who want to control their budget by paying for what they use, rather than incurring a monthly fee, have Internet access at home or office and want an Internet service for travel, or want a back-up Internet service.

In order to reach these potential users, AT&T PrePaid Internet Service is available now at WHSmith USA Travel Retail stores located in airports and hotels around the country. In early November the startup kit will be available at Eckerd drugstores and, in the months ahead, at many of the other major participating retailers that carry AT&T PrePaid Phone Cards. Of course, the prepaid connectivity card can also be purchased online.

Prepaid connectivity cards are a great deal for nearly any ISP business. It's money in the bank for potential services rendered. But if you can't get your startup kit in front of people that would buy your program, there's not much point in initiating such a marketing endeavor.

It would take a vast association of independent ISPs offering the same type of program via affiliates and alliances to rival AT&T WorldNet's nationwide distribution capability. Or it would require that an independent local ISP have a lock on a particular community, like a college campus, that would buy the prepaid access plans while temporarily residing in your ISPs service area.

As it stands, startup CD distribution is where AT&T WorldNet's prepaid connectivity service breaks away from the pack of rival ISPs. AT&T's success in prepaid phone cards is due to its vast retail distribution system. If AT&T WorldNet can translate its parent company's success in this venue into its own service fold, then AT&T WorldNet has a winner of an access program here.

— End