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Students' Enthusiasm For Prepaid Telecommunication Alternatives Makes College Market A Laboratory For Tomorrow's Technology

Posted On: 10/25/2000

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U.S.A. - As commencement-exercise speakers have observed since time immemorial, college students are the leaders of tomorrow. This truism is especially evident in the spread of demand for new products and services from college campuses to the larger retail marketplace.

College students were among the first United States consumers to accept prepaid telephone cards, and they did so enthusiastically. The benefits of the media to youngsters away from home for the first time, and to their parents, were obvious. They provided low long-distance rates and made budgeting simple. And, while many institutions of higher learning make long-distance service available to students, these programs typically involve a dollar limit on monthly calling time. This has created a two-part demand for telecards: by students who wish to call home more often, and by those who wish to make calls without leaving a paper trail for their parents.


It thus is not a coincidence that prepaid phone card use in the United States is most prevalent among young adults (ages 18 to 34). Market research conducted by CPR Group, LLC and TMR, Inc. has found that 40 percent of all members of this age cohort use prepaid phone cards regularly, compared to 27 percent of 35- to 54-year-old consumers, and 30 percent of those aged 12 to 17 (see V/T, August).

Student use of prepaid calling cards purchased from retail outlets appears to be incremental to the range of programs being tested by the institutions themselves. These programs are constantly evolving as new technologies appear; meanwhile, telecard use remains popular.

Writing in Intele-CardNews, telecommunications expert Beverly Norum reported that campus telecommunications departments generally "have not seen the windfall expected from sharing in long distance proceeds." They are looking for attractive products and service packages that students will purchase.

These can include everything from the institution's own line of prepaid phone cards, available for purchase in the bookstore, to multifunction student cards that either can double as telecards which students recharge as necessary, or feature "smart" technology, allowing them to serve as "electronic purses" that can be read and debited by suitably equipped pay telephones.

Among niche services that have found favor in the academic market is "Hotline Home," Norum explained. Based in San Antonio, TX, this offers toll-free numbers to parents, so students can call home whenever they like. Norum reported that the service now is cobranded with some 90 institutions of higher learning.

However, students often have additional calling needs that cannot be met by services specifically designed for calling home, and which students are unwilling to meet by programs incurring documented charges that parents will see. And the prepaid phone cards in the bookstore may or may not offer rates and surcharges that are competitive with products readily available off campus.

The bookstore also is not open at 2 AM, when someone may experience the sudden need to make a transcontinental phone call.

For all these reasons, student purchases of prepaid calling media are outside the effective control of the educational institution. Sensible telecommunications departments know this, and work with prepaid phone card suppliers to offer competitive products that students will buy. Less sensible ones may oppose the installation of prepaid phone card venders on campus, on the premise that students will be more likely to use the "official" program if outside alternatives are less available. This does not suggest deep insight into student beliefs and practices.


Norum pointed out that "prepaid phone card sellers find the college market to be ready-made for their products." She cites David Crane of ConeXus, whose company has been selling successfully to the college market for several years, as saying that repeat business is strong if the product is competitively priced.

"Students in general are very savvy when it comes to telecommunications needs," he told her. "If a parent is not paying the freight, and they need to call friends across the country, they still need to communicate. Typically, they are familiar with prepaid cards and, in most cases, are aware of what they're getting."

Norum also reported that Intellicall has developed an entry-level switching platform that can allow an educational institution to manage its own telecard business. She noted that Intellicall's Paul Daigle believes the switch to be a problem-solver because it allows the institution to eliminate the problem of bad debt, and it's popular with parents as a budgeting and accounting tool.


Students who learn to regard prepaid phone cards as convenient and practical "friends" will carry that perception into the general retail marketplace after they graduate. This certainly contributes to the preponderance of prepaid card use by 18-to-34-year-old consumers ascertained by CPR's research. Reporting on that research in Intele-CardNews, Debra Wolfe noted that 18- to 34-year-olds exhibit not only the highest incidence of prepaid phone card use, but the highest incidence of planned (not impulse) purchasing. CPR's study found that 50 percent of telecard users in that age group reported planning their telecard purchases, while 19 percent buy on impulse and the remainder sometimes plan and sometimes don't. Comparable figures for the total consumer base show that 44 percent of all buyers plan their purchases, while 22 percent always buy on impulse. The age cohort that is moving into the workplace has become accustomed to buying telecards the way it buys groceries.

Wireless communication, by cellular telephones or the newer "personal digital assistants" equipped with cellular or other radio-frequency modems, has been attracting much attention of late, and vending technologies have been developed to merchandise "shrink-wrapped" cellular telephones, preloaded with airtime, as well as prepaid cards that can be used to replenish the phones when necessary. Norum reported that wireless is expected to prove very popular on campuses. ConeXus's Crane predicted that "Prepaid wireless is going to grow exponentially in the student environment, because students want wireless phones."

Sprint's Janet Taylor, who oversees the college market, told Norum that radio pagers formerly were the instruments favored by college students, but the swift adoption of pagers by the high school set has led the college crowd to regard them as unfashionable.

Cell phones are the obvious alternative. In addition to their use in making a fashion statement, they can offer real benefits to students, just as they do to other semi-transient populations that tend to share living quarters under circumstances that do not favor establishing an account with the local telephone company.

The traditional value of pay telephones to customers away from home has been eroded by the expansion of telecard use and the swift adoption of cellular telephones by the general public.

Norum spoke with Intellicall's John Hird, who explained that the company has developed payphones specifically designed to facilitate international calling, and to accept different types of card (including prepaid media and student IDs), as well as coins. This is necessary, he said, because "Ten years ago, most callers at payphones used coins or calling cards to call home," Hird told her. "Starting about five years ago, with the introduction of prepaid cards and toll-free calling, coin and calling-card traffic has been reduced and replaced dramatically."

Another technological response that Norum found is a device that permits a "dumb" phone to be activated by simply inserting a smart card. The microprocessor on the card communicates the identity of the caller to the service provider's computer, which performs all the necessary accounting and control. This works with combination student ID/smart cards, such as one developed by CyberMark, Norum explained.


It hardly needs be pointed out that this is a high-tech alternative to a prepaid phone card, simply transmitting the Personal Identification Number automatically, rather than requiring the user to make a toll-free call and then use the keypad to enter the PIN. And its use is restricted to instruments equipped to interrogate the chip on the card, while a prepaid phone card can be used with any instrument capable of dual-tone multifrequency dialing.

Norum also reported that the convergence of communications and computer ("information") technology that is transforming the world also is transforming universities. "Some schools already are combining telecom and IT departments, with mixed results," she found.

This has led to a clash of departmental cultures, and the telecom people (who regard their area of expertise as a profit center) appear to be losing out, Norum noted. She added that the widespread enthusiasm for multimedia transmissions requiring extensive bandwidth is shared by university IT departments, which are trying to find ways to get students (and faculty) to pay for the necessary bandwidth.

While all this is going on, prepaid cards are proving adaptable to new types of telecommunication service (cellular, for example, and Internet telephony) , and students are using them, evidently to their satisfaction. As they leave the groves of academe and enter the world of work, they reinforce the movement of telecards into the American retailing mainstream.