Prepaid Phone Cards – a brief history

Prepaid Phone Cards HistoryPrepaid phonecards were invented in Europe in the mid-Seventies. Calling cards took another 11 years to reach the US. Since then the calling card and phone card industry has grown exponentially worldwide. Today, the international phone card is sold in over 185 countries around the world.

1975: Phone cards were invented in the fall of 1975. The company involved, SIDA, was not in the telecommunications industry, but was a manufacturer and supplier of vending machines.

1976: The first prepaid phone cards were produced and put on the market in Italy to combat payphone vandalism. In fact there was a shortage of coins in Italy at the time and payphone theft was common. Cards were introduced with a magnetic strip on the back for use in special phones to combat the coin shortage. The first cards were too thin and jammed frequently.

1977: Prepaid calling cards using magnetic strip authorization spread to the rest of Europe. In particular to Austria, Sweden, France, and The United Kingdom. They became reasonably popular.

1978: Inductive technology was invented in 1978 by Nelson G.Bardini in Brazil. The system uses a series of coils embedded in the card including on which blows when the card is used up. The card was first shown at a national inventors’ exhibition in 1982.

1982: Japan’s Nippon Telephone and Telegraph introduced the first Japanese pre-paid phone card. Japanese commuters had to use a large coin to operate payphones on their subways. The Japanese card was considerably more convenient and was sold to tens of thousands of daily subway riders in Osaka and Tokyo.

1987: World Telecom Group is the first company to launch a significant phone-card product in the United States. GPT, a consortium formed by Siemens and GEC (General Electric Company), developed and issued cards with their own magstripe technology. This is now among the most widely used magstripe cards.

1988: The first catalog of telecards for phone card collectors was published by Dr. Steve Hiscocks, in England.

1989: AT&T enters the prepaid calling card market. The first remote telecards appeared in Hawaii.

1990: NYNEX (New York’s RBOC or Regional Bell Operating Company) offers the first non-magnetic based calling card in the U.S. These were prepaid calling cards that used a PIN (Personal Identification Number) as a means of identification. Nynex’s card permitted the cardholder to dial an 800 number and enter his PIN to make long distance phone calls. This method permitted the caller to make phone calls from any telephone anywhere in the U.S. without the need for coins or incurring hotel surcharges, encountering call-blocked numbers, or any of the other additional items routinely used to bloat public phone bills.

Gold Line, Canada’s leading provider, enters the Canadian market and spends 10 years growing to own approximately 50% of the market in 2001.

1992: All of the major regional and long distance phone companies including Sprint, and many of the smaller carriers were offering pre-paid phone cards. Industry-wide revenues reached $12 million with projections calling for double that over the next several years. This projection proved to be radically short of things to come.

1993: Phonecard sales exceed $25 Million, more than double that of the previous year.

1994: Displaying exponential growth, calling card sales exceed $250 Million.

1995: Sales hit $650 million. US West provides the first chip-based prepaid cards. Sprint releases “FONCARD” and Bell Atlantic temporarily discontinues its calling card efforts.

1996: Calling card sales reach an unprecedented $1 Billion.

1997: Sales reach over $2 Billion.

2000: Sales of over $3 Billion are achieved with no end to the expansion in sight. Projected sales for calling card industry reaches 10 Billion dollars per year by the year 2010. The combined reach of the new markets has expanded the distribution of phone cards from a few hundred thousand in 1992 to hundreds of millions in 2003. Calling cards are now sold through virtually every conceivable channel, from convenience stores and corner cafes to vending machines. The prepaid international phone card now co-exists with and in many cases have replaced collect calling and coin pay phones as the preferred method of placing both domestic and international calls.

How the calling card industry grew so quickly

What is all this fuss about phone cards?? Why has the industry experienced such extraordinary growth?

The phone card industry’s exponential growth is a direct result of the consumers need for cheap and convenient communications services. Pre-paid phone cards and monthly billed calling cards often offer considerably lower long distance rates than the more traditional phone services such as coin, cellular and collect calling. Additionally pre-paid phone card rates remain constant no matter what time or day the call is placed. Pre-paid cards were introduced in the U.S. in the early 90’s and the large phone companies used traditional channels to market their cards to their customers. Until 1996 the phone companies made no significant effort to sell their cards as they already had a thoroughly established and entrenched profitable market. New products and concepts were also hard to sell to a public who already had a system that worked.

The advertising industry and a number of small telecommunications companies eager for some of the massive communications market first identified the power and “sellability” of the pre-paid card and before the big phone companies wiped the sleep out of their eyes the phonecard industry exploded. Mass production, the pre-paid card’s relatively low cost and the ability to produce low denomination cards suddenly produced a new advertising medium. By printing a company name on a card or information commemorating a specific event, innovative telecom companies began marketing the cards as promotional items. Cards were sold as prizes or incentives and tourist souvenirs. They also became collectors items exactly like stamps and baseball cards due to their being run in limited editions. The retail phonecard had arrived and was turned into an expendable bulk consumer product like gum, toothpaste, film and razors. All this with the added incentive that you could, at very low cost, deliver a consumer message to the holder who has to look at the card to make a call. Combine this with the fact that a calling card actually allowed you to call long distance cheaper than your regular long distance company and you have a winning combination. To add the icing to the cake you had a number of cards to choose from and you weren’t bound to the captive suppliers of old. The combined reach of the new markets expanded the distribution of phone cards from a few hundred thousand in 1992 to over 70 million in 1995. Calling cards are now sold through virtually every conceivable channel, from convenience stores and corner cafes to vending machines. Pre-paid cards now co-exist with and in many case have replaced collect calling and coin pay phones as the preferred method of placing calls. Calling cards are also extensively used to make local or intralata calls where the local phone company is unable to provide competitive rates. Phone cards are here to stay. They are now being packed with additional services. Pre-paid internet accounts, e-mail services, paging, SMS messaging, voicemail, cellular phone service, international callback, and a variety of audio, text and digital information and entertainment services. WAP technology is here too.

The industry is still full of surprises and the first disposable cellphone cards are already edging into the market. This is a wafer thin phone card complete with a keypad, microphone and earpiece which you use as a combined phone/calling card. When its used up you throw it away and buy a new one!