Prepaid mobile

phone

A prepaid mobile device, also known as a, pay-as-you-go (PAYG), pay-as-you-talk, pay and
go, go-phone, prepay or burner phone, is a mobile device such as a phone for which credit is
purchased in advance of service use. The purchased credit is used to pay for
telecommunications services at the point the service is accessed or consumed. If there is no
credit, then access is denied by the cellular network or Intelligent Network. Users can top up
their credit at any time using a variety of payment mechanisms. ("Pay-as-you-go", "PAYG", and
similar terms are also used for other non-telecommunications services paid for by advance
deposit.)
Typical sign showing where top-ups can be made.

The alternative billing method (and what is commonly referred to as a mobile contract) is the
postpaid mobile phone, where a user enters into a long-term contract (lasting 12, 18, or 24
months) or short-term contract (also commonly referred to as a rolling contract or a 30-day
contract) and billing arrangement with a mobile phone operator (mobile virtual network
operator or mobile network operator).

Overview

A prepaid mobile phone provides most of the services offered by a mobile phone operator.
The main difference is that with prepaid phones, payment for service is made before use. As
calls and texts are made, and as data is used, deductions are made against the prepaid
balance amount until no funds remain (at which time services stop functioning). A user may
avoid interruptions in service by making payments to increase the remaining balance.

Methods of payment:

Credit card, debit card,[1] or online payment processors.

Direct draw from bank account using an ATM[2][3][4]

Retail store purchase with a "top-up" or "refill" card at retail. These cards are stamped with
a unique code (often under a scratch-off panel) which must be entered into the phone in
order to add the credit onto the balance.

Retail store purchase using a swipe card where the balance is credited automatically to the
phone after the retailer accepts payment.

Retail store or online purchase: a person can top-up a prepaid phone in another country by
asking for "international top-up". Often, migrant workers will send prepaid top-up
internationally as a form of support.

Other mobile phones on certain networks which provide international top-up services,
where the initiator of the top up is often a migrant worker wanting to add minutes to the
prepaid mobile phone of a family member back home.

Direct from some open-loop prepaid cards featuring a mobile refill service.

Through electronic reloading where a specially designed SIM card is used to reload a
mobile phone by entering the mobile number and choosing the amount to be loaded. This
 process is widely implemented in the Philippines and India so that any person can be a
prepaid load retailer, creating a nationwide availability of reloading stations, even in remote
areas.

Credit purchased for a prepaid mobile phone may have a time limit – for example, 120 days
from the date the last credit was added. In these cases, customers who do not add more
credit before expiration will have their remaining balance depleted through expiration of the
credits.

There is no compulsion on a prepaid mobile phone user to top up their balance. To maintain
revenues, some operators have devised reward schemes designed to encourage frequent
top-ups. For example, an operator may offer some free SMS to use next month if a user tops
up by a certain amount this month.

Unlike postpaid phones, where subscribers have to terminate their contracts, it is not easy for
an operator to know when a prepaid subscriber has left the network. To free up resources on
the network for new customers, an operator will periodically delete prepaid SIM cards which
have not been used for some time, at which point, their service (and its associated phone
number) is discontinued. The rules for when this deletion happens vary from operator to
operator, but may typically occur after six months to a year of non-use.

By 2003, the number of prepaid accounts grew past contract accounts, and by 2007, two-
thirds of all mobile phone accounts worldwide were prepaid accounts.

History

The history of prepaid mobile phones 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 poor credit.

Prepaid mobile service was invented by Subscriber Computing, Inc., an Orange County
company, (1986-1998), founded and directed by Arlene Harris. The patents covering this
invention are:

US-5291543-A (http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=
PALL&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=5291543.PN.&O
S=PN/5291543&RS=PN/5291543) , filed 12/5/1990 and awarded on 9/15/1992.

US-5148472-A (http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=
PALL&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=5148472.PN.&O
S=PN/5148472&RS=PN/5148472) , filed 6/24/1992 and awarded in 3/1/1994.
These patents describe the ability to access the cost of a call and deduct the cost of the call
from the user's account balance in near real time. If the user's balance is below the carrier-
defined threshold, the next call that the user makes is routed to an Interactive Voice
Response (IVR) device that announces to the user that the account balance is low and
suggests they add funds to the account so their service is not interrupted. When the user's
account balance is depleted, the service is suspended until they added funds to their
account. If the user's account balance is depleted, all call attempts are routed to the IVR.
These patents expired in 2010 and 2012 respectively.

The prepaid service was sold to Metro Mobile in June 1989, and was implemented in
November 1989.

The prepaid service was also sold to carriers in Mexico; Celcom in 1994, and implementation
took place in Monterrey, and to Telcel, where implementation began in November 1997 and
production took place beginning in April 1998.

Ericsson also became a partner in the prepaid service; a Memorandum of Understanding

(MOU) was signed in June 1997 and the final agreement was signed in late 1997. The
announcement (https://www.rcrwireless.com/19980126/carriers/ericsson-and-sci-team-to-o
ffer-in-based-prepaid-billing-system) was made on January 26, 1998 (or listen (https://oned
rive.live.com/?authkey=%21AE%2DpIrSrSNDbGmw&cid=A6B002708B42B160&id=A6B00270
8B42B160%2110842&parId=A6B002708B42B160%217848&o=OneUp) to it).

Prepaid service enabled carriers in third world countries to add subscribers without having to
print monthly statements or having an accounts receivable department, and gave them the
ability to add subscribers without concern for their ability to pay their bills.patent holder (htt
p://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fne
tahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=5291543.PN.&OS=PN/5291543&RS=P
N/5291543) ).

In 1996 MTN became the first mobile operator to introduce a prepaid cellular service in
Africa, popularizing "pay as you go" in emerging markets.[5]

The first Prepaid card was called "Mimo" and was launched by TMN, the mobile phone
operator of Portugal Telecom, in September 1995.[6] In 2006 Swisscom celebrated ten years
with its product and service "NATEL® easy" which also holds a patent on "Prepaid mobile
subscriber identification card and method implemented thereby".[7][8]

Versus postpaid
Advantages

A prepaid plan may have a lower cost (often for low usage patterns e.g. a telephone for
emergency use) and make it easier to control spending by limiting debt and controlling
usage. They often have fewer contractual obligations – no early termination fee, freedom to
change providers, plans, able to be used by those unable to take out a contract (i.e. under age
of majority). Depending on local laws, they may be available to those who do not have a
permanent address, phone number, or credit card. This makes them popular among travelers
and students away from their hometowns. Additionally, they are popular with parents who
wish to have a way to stay connected with their college age students and have some control
over the costs.

Disadvantages

Sometimes, pay-as-you-go customers pay more for their calls, SMS and data than contract
customers. In some cases they are limited in what they can do with their phone – calls to
international or premium-rate telephone numbers may be blocked, and they may not be able
to roam. These limitations are usually the results of deficiencies in the prepaid systems used
by the wireless carriers, as technology has evolved to the point where these are easily
managed by triggers or APIs to third-party solution providers. Current models being deployed
by wireless carriers are capable of setting the price points for all services on an individual
basis (via packages), such that higher pricing is a marketing decision.

Churn

As described above, prepaid accounts require a subscriber to have a credit balance in the
account to make outgoing calls (except emergency calls, which are always allowed). In the
US, incoming calls are also barred, while in some other countries, a prepaid mobile with zero
balance may still receive calls and texts.

This results in an "on/off" or "all or nothing" proposition for the prepaid service providers and
their clients (i.e. the account either has enough credit to use the phone, or it does not). Some
operators (e.g., Orange) allow their pre-paid customers to have a small negative balance to
allow short calls or texts when the customer's credit has been completely used. This is then
deducted when the customer next adds more credit.

The time most likely for a prepaid customer to switch to a different service provider is when
the prepaid account reaches a "zero credit balance". Like other service providers, mobile
service providers losing a mobile account call it "churn".
Roaming

In the early years, a prepaid mobile phone could only be used within the network of the
operator from which the customer purchased the phone. It was not possible to roam onto
other GSM networks when using the phone abroad. This was because the operator had no
way to bill calls in real time from another network.

However, most prepaid phones now offer roaming using one of the following methods:

The prepaid mobile phone user dials a "trigger" number from the foreign location using a
USSD message which is not charged for while roaming. Upon receipt of the USSD, the
customer's operator will then return the call. When the service calls back, the user is being
charged for the cost of the service from the credit available in the home network. The
service will then prompt the user to enter the dialed number of the party to be called. The
disadvantage of this method of roaming is that the user will not be able to dial numbers
directly from the handset. The advantage is that it works in almost all locations around the
world since USSD is ubiquitous and free.

The user can direct dial from their handset if the network they are roaming in supports
CAMEL (Customized Applications for Mobile networks Enhanced Logic). This allows real
time billing by the home operator without having to dial the customer back. The advantage
is that it is more natural and works seamlessly. The disadvantage is that not all networks
support CAMEL so the list of countries where a prepaid customer can use their phone
abroad is smaller than for postpaid mobile phones.

Privacy rights

Since July 2013, at least 80 countries globally (including 37 on the African continent) have
mandated, or are actively considering mandating, the registration of prepaid SIM users.[9] As
of January 2020, researches found that governments of 155 countries have been mandating
SIM registration laws; in some countries, prepaid users must submit biometrics like photos
and fingerprints.[10]

The reason is a concern by police and security agencies that anonymous use of prepaid
mobile services facilitates criminal or terrorist activities.

Prepaid phone users can be anonymous for two reasons:

In certain countries, the prepaid SIM card can be sold in a shop like any other goods. There
is no need to register them at point of sale, unlike postpaid phones who have to credit
check the user before allowing them to purchase and enter into a contract.
 As prepaid services can often be topped up using cash and vouchers, there is no way to
trace the payment and thence determine the identity of a prepaid phone user from payment
records.

While there is no doubt that criminals and terrorists use prepaid SIM cards to help stay
anonymous and avoid easy detection, to date there has been no empirical evidence to
indicate that:

1. Mandating the registration of prepaid SIM users leads to a reduction in criminal

activities.

2. The lack of any registration of prepaid SIM users is linked to a greater risk of criminal or
terrorist activities.

In fact, a publicly available policy assessment report from Mexico showed that mandatory
SIM registration introduced there in 2009 had failed to help the prevention, investigation
and/or prosecution of associated crimes. As a result, policymakers decided to repeal the
regulation three years later.[9]

A prepaid phone number specifically purchased to be used briefly and then replaced is known
colloquially as a burner phone or burner.[11] A Los Angeles technology company developed a
mobile application of the same name that replicates this functionality for a smartphone.

United States Senators Chuck Schumer (D-NY) and John Cornyn (R-TX) introduced legislation
requiring consumers to produce identification before buying pre-paid phones in
2010,[12][13][14] which was not passed.

International branding

In an effort to differentiate the prepaid from post-paid service for their customers, CSPs have
branded prepaid services differently from the post-paid services. A variant of post-paid
service has emerged in recent years that comes closer to the prepaid service, by offering a
"pay monthly" contract.

Prepaid phones and SIMs in the United Kingdom are known as "Pay as you go".[15][16]

Usage

Usage of prepaid cellphone service is common in most parts of the world. Around 70% of
customers in Western Europe and China use prepaid phones with the figure rising to over
90% for customers in India and Africa.[17] 23% of cellphone users in the United States of
America were using prepaid service as of 2011, a share that was expected to rise to 29% by
2016.[18] Prepaid SIM cards are also becoming a variation of the traditional prepaid cellphone
plans. Rather than needing to purchase an entirely new phone, existing phones can be used
by simply replacing the SIM card within the device.[19] Prepaid service has also evolved to
include rate plans and buckets traditionally seen in postpaid plans but with a lower cost of
ownership for the network operator. Such Advance Pay plans are often monthly plans with
either Unlimited Voice/SMS/MMS (or monthly buckets for some of these) and Prepaid Data
Volume Add-ons and throttling mechanisms.

See also

References

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Last edited 6 days ago by Apparition11