The Development of the Calling Card Industry in the United States

In 1975 the idea of calling cards was brainstormed. One year later, in 1976 phone cards were released in Italy for public use. They were originally created as a way of dealing with the on going coin shortage problem. They also created an easy way to make phone calls from a pay phone without change.

It wasn't until 1987 that calling cards became available to the public in the United States. World Telecom Group at the time was the dominating player in the industry with no major competition. In 1990 New York's Regional Bell Operating Company decided to launch a calling card campaign with the first non-magnetic based phone cards. Instead their prepaid phone cards required dialing an access number and a PIN to terminate calls.

For the next two years more and more competitors entered the industry and by 1992 all major companies had released their own brand of calling cards. However, they continued to heavily market their long distance services as they were more profitable and easier then trying to convince the public to switch to a new, less convenient service. Industry wide sales hit about 12 million dollars with huge growth potential expected.

In the consumer's mind prepaid phone cards had become an easy way to obtain discounted long distance services. Rates per minute were cheaper then what was offered from traditional residential long distance service, credit card calls, pay phones or cell phones. In addition using a prepaid calling card provided a way of putting all calling on one bill, regardless of where the call was made from. Cards could be used from consumer's residential lines, pay phones, work phones or even at a friend's house.

Unlike using a long distance service, where rates per minute changed depending on the time of day, calling card rates remained constant. Callers no longer had to be concerned about the time of day they place their calls.

By 1996 the industry had started booming. Industry wide sales had reached an all time high of one billion dollars. Smaller telecom companies began launching their own brands of calling cards and for a short while caught the major telecom companies off guard, while they were promoting long distance services, and took a large portion of the market.

Innovative telecommunication companies quickly realized the uniqueness of calling cards. That in order to use the card, the customer must look down and read the information written on the card. Telecommunication companies began selling all sorts of advertising on phonecards. Companies would purchase and label calling cards with their own names as promotional material. They were passed out as prizes, incentives and tourist souvenirs.

Through the mid to late 90's the calling card industry continued to boom. Cards were widely used by immigrants calling home to their mother country, people interested in low rate domestic long distance calling and tourists. As a result the collect calling market saw a decline in use.

By the year 2000 and with the help of the dot com boom, the United States calling card market had become saturated. Thousands of Internet companies launched their own brands of calling cards. Calling card sales hit an all time high of 3 billion dollars and continues to grow even today.

In 2001 the industry revolutionized its self again. The first prepaid mobile phone became available. This was a cheap cell phone that had prepaid minutes on it. After the minutes were used up, the phone could either be recharged or discarded and a new one purchased. A prepaid cell phone was all the convenience of a phone card, with out the hassle of trying to find a phone to use. Prepaid wireless phones work identical to contract phones in terms of service quality and portability. Like the calling card market, analysts are predicting the prepaid mobile phone market to increase exponentially.

Like the calling card industry, the prepaid mobile phone industry is expected to continue thriving. Sales have skyrocketed to the millions since the first release on prepaid phones. Last September, 2005, IDT launched a new brand of prepaid cell phones targeted at the Latino and Hispanic population.