GETTING SMARTER?

Advanced technology is expected to change prepaid phone cards and the market.is technology will undoubtedly impact the prepaid-phone-card market. Not only can smart cards do prepaid calling, but also they have the capability to go much further with new services, security and convenience.However, smart-card technology is still in its infancy. In the meantime, as prepaid calling becomes more sophisticated,

Advanced technology is expected to change prepaid phone cards and the market.

is technology will undoubtedly impact the prepaid-phone-card market. Not only can smart cards do prepaid calling, but also they have the capability to go much further with new services, security and convenience.

However, smart-card technology is still in its infancy. In the meantime, as prepaid calling becomes more sophisticated, there will be more applications and uses made of the cards to further expand the market. Here's how those involved in the industry view the future:

SN: What's your prognosis for the industry's future?

SCHLOSS: I am sure things will change so pay phones will accept smart cards. Smart cards are coming. It will be a whole new category that will open up within the next five years. We will see the elimination of checks from supermarkets. People will use smart cards. The customer will say, "Give me a $25 or $50 swipe for grocery." Every time it is swiped, it lowers the value of the card. Smart cards will happen first in supermarkets. They are being tested right now in Hong Kong.

CAPKA: A lot of people will go to smart-card technology in the future. Not everyone will sell them because we have so many small coin operators and not all pay phones will be able to accept that type of magnetic strip. There are probably 25,000 different owners of pay phones. We will never see a situation where every phone card is magnetic stripped. Smart cards won't work in every phone. The consumer will still have to punch in the digits.

The little chip in the smart card will be able to do all kinds of things. It may be able to tie into the Internet, do voice mail, call forwarding and conference calls. The number of things that will be available will be staggering.

KAMINSKY: Smart cards are down the road because there is such competition. But the infrastructure has to be streamlined. A lot of people have to get it together. The technology that goes into every single chip has to be regulated.

CANTY: If the consumer has a smart card with $10 on it, he can use it for anything, as opposed to a $10 phone card that can only be spent on long distance. Open-system cards pose a threat to prepaid phone cards because they are more flexible. The problem with them is they are based on smart-card and chip technology. The pay phones around the United States will not all be outfitted with smart-card readers anytime soon. That is one reason remote-access cards like prepaid-long-distance cards that use an 800-number will continue to exist. No one company owns all of the pay phones and can set a standard that applies to all of them. If and when smart cards kick in, they could definitely pose a threat. By then, prepaid phone cards will have adapted.

GOLDBERG: Smart cards are used for phone calls in France. Too many pay phones were being robbed. It is hard to find a pay phone in Paris that takes cash. France has been using the technology for smart cards about five years.

With a debit card, you are limited to what is in your bank account. A smart card can get charged up like a prepaid calling card. More information can be put on it. The smart card functions like a credit card. People don't carry credit cards in France. It is a different kind of culture. Most Americans have multiple credit cards. Fifteen to 20 years ago, everyone carried cash. With a smart card, you need equipment that can read the chip.

At the Olympics in Atlanta, Visa had smart cards. There were sites throughout the Olympics that accepted them. But they were not as widely accepted as regular Visa. You could use the smart card to buy something at a food stand. The amount of purchase was automatically deleted from the value of the card. It was like carrying a $20, $50 or $100 bill. That was one of the first large-scale tests of the technology in the United States.

CANTY: The ATM-dispensed phone cards and multifunctional cards will help sales. Consumers will never use the cards constantly or for the majority of their calls. Except there will be those already using the cards for the majority of their long distance. Even occasional use, however, means a lot of business.

KAMINSKY: ATM-dispensed phone cards are another venue. Why would I buy phone time from a bank? It is an obvious place.

I see phone cards in the future offering additional services, such as voice mail, call forwarding and fax on demand. People travel, and not everyone uses or has access to a cellular phone. Marketing aspects of prepaid phone cards can change through ATMs, smart cards and the Internet. By really applying technology to the marketing of phone cards, consumers will be able to buy a PIN and an 800-number over the Internet.

CAPKA: There will be two classes of cards. There will always be credit-challenged consumers who won't have a bank account and would not be able to use the debit type of phone card. Some people will certainly have it. A credit card can be used as a phone card. The difference is, you are paying exorbitant rates by using a credit card for long distance. With travelers coming and going, how could a debit system be established? A debit card just takes money from your checking account. It can also act as a phone card. But you have to have money in your account. There are platforms to tie that in together.

CANTY: I see prepaid phone cards becoming more multifunctional. They will end up having to work with more open-system cards. Long-distance providers will need to work with providers of open-system cards to act as a carrier for their card.

In the future, smart cards will not only store cash, but may also have different capabilities. They may hold information about you, such as your medical history so a hospital can plug into it. There is a push to move prepaid calling toward smart-card technology. This doesn't mean the remote-access phone card will go away. There are still opportunities for that.

CAPKA: In the future, you will see small school children with prepaid phone cards with their pictures on them. There will be phone cards that can be used as lottery tickets. There will be value added to the prepaid cards. You will be able to buy a $10 phone card and have the potential to win $500. The card might be used as a coupon. For example, if you use all the minutes on a $10 card, you can bring it back to the supermarket and get $2 off your next phone card or $1 off a six-pack of a soft drink. These things are being done now. But in the future, phone cards will get more sophisticated as to what they can do.