Internet goes pre-paid

Like the mobile phone business, the pre-paid card has widened Internet usage.

"Of the 4.5 million local Internet population, about 70% or 3.1 million are pre-paid card users," said Domingo Angelo Lopez, chief executive officer of UNO, a private labeler of Internet cards. Based on the same UNO survey, 40% of total Internet users belong to the 20 to 29 age bracket, half of whom live in Metro Manila. About 12 % of the users are above 40 years old.

The study also showed that only 13% of Internet users belong to the A-B income group. The bulk of users or 43% come from the C market.

Internet has been in the country since the mid-1990s. The high cost of internet service providers and post-paid charges (a fixed monthly fee paid to a service provider, whether or not the Internet is used) have, however, limited Internet usage to corporations and a few well-off individuals. Another factor that has stunted the growth of the Internet is the low phone density in the countryside.

Price and quality

"There is a noticeable shift among consumers from post-paid to pre-paid cards. Even telephone companies are getting into the pre-paid card business," said Lopez, who used to do product development for Infocom, a subsidiary of the Philippine Long Distance Telephone Co.

Right now, UNO’s entry, Matrix, ranks among the top three pre-paid Internet cards in terms of service and pricing. For one, dialing up and downloading is faster than others in the business. For another, the Matrix, which comes in P100-denominated cards, has two-tier pricing: the higher end is good for eight hours and the lower tier is good for 16 hours.

"There’s one group of card users who use the Internet for basic e-mailing services and go off-line as soon as they are finished. Another group of users, and these make up the higher tier, go for web surfing," said Lopez.

Because of their flexibility, pre-paid cards can be used in Internet kiosks and cafes as well as in schools that offer rentals of Internet services. The cards can also be used in homes with computers but without connections to an Internet service provider or, in areas of the country without phone lines, to a satellite service providers.

With an estimated 37 brands of Internet cards in the market and over 100 ISPs, competition is heating up. "Stability is the key in this business and the bigger ISPs have the edge," said Lopez. "To compete, you must have the resources and the necessary financial backing that translates to more capacity, more lines, more efficiency and better economies of scale. Flexibility means you do not rely on a single telephone company or telco to provide your capacity. You have to maintain two or three telcos to back you up in case one is in trouble," Lopez said.

And with bigger, more market-responsive ISPs, the number of Internet pre-paid card users and their frequency of Internet use could just possibly follow the same growth pattern experienced by the mobile phone business.