The changing face of Public Payphones

Telecommunications International, Nov, 2001 by Nicholas Bloch

Multimedia payphones and kiosks offer service and content providers an important new revenue-spinning opportunity.

You may have thought that the days of the public payphone were numbered due to the boom in wireless phones but, according to leading industry executives and analysts, you should think again. They believe that the new internet-based multimedia payphones and kiosks will open the door to greater web-browsing, e-mail and e-commerce activities by the general public which will result in greater profits for payphone service providers.

Perceptions of payphones are changing due to the advent of multimedia versions and kiosks. With these new generation of payphones, users pay for minutes of high-speed connect time to the internet where they will web browse, retrieve email, connect to accounts, or access links to travel, entertainment, games, sports, stocks and news web sites. In some instances, access to the web is supported by advertisers and is free to the user. There are even pilot projects of video email and video conferencing. A customer will also be able to send birthday photos by e-mail from the nearest payphone.

And while the experience is richer, the technology has become simpler. A user can type in uniform resource locators (URLs) and e-mails using large touch-screens and high quality graphics. In addition, although some multimedia payphones and kiosks still require integrated services digital network (ISDN) connections, more operators are rolling out terminals supporting higher bandwidth digital subscriber line (DSL) services. Plus, voice over IP (VoIP) makes the replacement of old style payphones with internet-capable devices cost-effective and desirable.

The aggressive rollout of multimedia payphones and kiosks in Holland is a case in point. The Dutch are the closest to achieving a national multimedia payphone network. They have replaced nearly 7,000 voice-only payphones with multimedia ones and kiosks which allow users to send e-mails, bank and gamble online. In the UK, BT has started adding multimedia upgrades to its network of 140,000 public payphones across the country. The phones feature twelve-inch touch-sensitive colour screens. ISDN connections provide 64Kbps internet access on one channel and phone calls carried on the other. Free information is provided on the screen without a web connection, such as the latest news, sport, travel and entertainment services. In addition, BT payphones have a portal site as a home page and use internet filtering software to block access to objectionable material. Other countries with active public and private rollout programmes include France, Mexico, Switzerland and the Czech Republic.

Revenue projections

With more countries rolling out systems, industry analysts expect multimedia payphones and kiosks to go mainstream. According to new market research by Frost & Sullivan, the annual global revenue from the sales of multimedia payphones and kiosks is projected to reach US$ 170 m ([euro]185 m) by the end of this year. This figure is expected to rise to about US$ 682 m ([euro]744 m) by 2004 and US$ 1.3 bn ([euro]l.4 bn) by 2006.

Despite web kiosk terminals costing about US$6,000 ([euro]6,545) each, the lure of a quick return on investment (ROI) should entice many payphone service providers to offer multimedia services. "The cost of the terminal is quickly off-set by the US$15 to US$20 ([euro]16 to [euro]22) that a typical terminal generates each day," says Roger Stopford, vice president at Ascom's kiosk development subsidiary, King. "The ROl can take less than a year."

Looking at the US experience, browsing online is charged at US$1 ([euro]1.1) for four minutes, with the payphone accepting credit cards -- cash is accepted in US$5 ([euro]5.5), US$10 ([euro]11) and US$20 ([euro]22) denominations. In a study, AT&T found that a typical phone or internet/e-mail user session had a captive audience rating of anywhere from five to 15 minutes.

In addition to 'money in the box', service providers can earn extra revenues from advertising. In the US, AT&T said a major source of revenue from its line of multimedia payphones -- in addition to internet access and telephony capabilities -- is sales of advertising space on the full-motion video screens. It found such advertising to be more targeted than internet banner ads and particularly effective in reaching business travellers.

Illustrating how effective such ads can be, a group of 50 multimedia payphones which displayed an ad in one US airport for l-800-FLOWERS.COM (a provider of floral and gift products) saw over 500 calls go to the company in one month. Meanwhile, 1,000 standard payphones in the same airport generated fewer than 50 calls over the same period. "Currently, income from advertising is small but when combined with good content, revenues can grow quickly," says Stopford. "Web kiosks and payphones represent a valid business model."

Database marketing, targeting customers and building loyalty will also offer greater revenue possibilities. "Information capturing and processing can start at the web-based kiosk resulting in targeted advertising, such as offering sports clothing at stadiums and giving payphones as part of loyalty card programmes," says Dr Ernest Eugster, individual consultant for Data Consulting International, a Colorado US-based consulting firm which specialises in technology planning. "This will help push multimedia payphones outside traditional high traffic volume sites [airports and shopping centres] to other end-user markets [restaurants, petroleum and convenience stores]. This provides service and content providers with a wealth of knowledge and produces a competitive advantage."