Please Discard Your Phone
By Jeff Goldman, Thu Oct 11 00:00:00 GMT 2001

With one model ready for release and more on the way, disposable phones are here. And the timing couldn't be better.


One of the more memorable moments in the shamelessly entertaining summer blockbuster "Charlie's Angels" came when Kelly Lynch smashed a mobile phone against a rock because the caller didn't give her the answer she wanted.

For some people, those moments can be the seeds of great ideas.

One day in 1997, New Jersey-based toy designer Randi Altschul kept losing her connection while talking on her cell phone in the car. She got so frustrated, she recalls, that she wanted to throw her phone out the window, but of course she couldn't afford to do so. From that frustration, an idea was born. In October of that year, she filed a patent application for a disposable cell phone made of paper, with metallic ink in place of wires: Altschul's phone is cheap enough to be thrown out the window any time you like.

Her patents, both for a prepaid wireless phone and for a disposable electronic device, were granted in October and November of 1999. Since then, Altschul has been issued more 20 patents for other products, including a disposable laptop computer. Her company, Dieceland Technologies has entered into a distribution agreement with GE Capital for the disposable phone, but no release dates have been set.

And while Altschul may have been the first to announce a disposable phone, she won't be the first to market: a competing device will soon be available at over 35,000 retail locations across the United States.

The disposable phone


Hop-On Wireless, based in Garden Grove, California, has created its own disposable cell phone, about the size of a deck of playing cards. The phone uses a handsfree earbud/microphone, and works with voice recognition dialing. To provide access, the company is currently buying minutes in bulk, from Cingular Wireless for the North American market, and from BellSouth for the Latin American market.

The Hop-On phone was introduced in July at the Las Vegas Convention Center. The basic model will cost $30, with 60 minutes of talk time included. The minutes expire six months after purchase, though the phone's batteries last for up to two years and will still work in emergencies. The phone itself is fully recyclable, and customers who return an old phone before buying their next one will get a $5 discount on the new phone.

Hop-On's CEO, Peter Michaels, sees the disposable phone as a great way to increase the availability of wireless communication. In the United States, where wireless penetration rates are lagging behind the rest of the world, cheap and disposable phones could be a great way to grab consumer interest. "If I'm out traveling and I need a phone, I'll go buy a phone," Michaels said. "If my battery dies on my cellular phone, I'll use a disposable phone as a backup."

For the time being, at least, the phones won't be able to receive incoming calls-but in every other way, the technology is the same as any other mobile phone. "What we do is we take existing technology and de-feature it," Michaels said. "We utilize products that are out there; we don't try to reinvent or create anything new. We buy in such huge volumes that we get good prices on it: we're taking advantage of the market conditions."

Still, as conventional mobile phones get cheaper and cheaper, how much of an edge will disposable phones really have?

Phone in a box


Companies like AT&T Wireless and TracFone offer prepaid plans for traditional phone models, with the phones themselves costing as little as twenty dollars. You can receive incoming calls, choose a ringtone, even set up voicemail; and since the phone looks just like any other, using their phones doesn't tell the world you can't afford a 'real' mobile phone.

While AT&T's prepaid plan wasn't initially set up to allow incoming calls, company spokesman Ritch Blasi says they changed their policy at the end of last year, for one good reason: customer retention. "You buy the phone, and you know you've made an investment," he said. "You've got a phone number, you've got a lot of the kinds of features that come on a postpaid plan, and the only difference is you're prepaying for it."

AT&T currently offers a Nokia 5165 in a box for $100, with $25 of prepaid minutes included, but Hop-On's Michaels says his disposable offering is targeting the exact same sales pitch at a much cheaper price. "AT&T has a phone in a box for $100; we'll have Hop-On Wireless in a box for under $50 with prepaid minutes-cheaper than AT&T," he said. "We'll go after them and that business model."

Blasi agrees there may be a market for disposable phones; it's just a different one, he says, from AT&T's prepaid wireless market. He suggests that people who want a phone to keep in their glove compartment for emergencies would be perfect disposable phone customers. In fact, such "glovebox users" would do well to choose a disposable phone: minutes on a prepaid phone expire more than twice as fast as those on Hop-On's disposable phone.

Nick Regas, Senior Consultant with ATLANTIC-ACM, notes that there's also money to be made from another established market: business travelers who now use calling cards are likely to switch to disposable cell phones. "A lot of business travelers that had traditionally used prepaid calling cards, now given this bucket of minutes, they'll just use their cell phone as opposed to going to a payphone," he said.

Paul Dittner, Wireless Analyst with Gartner Research, offers another potential market for disposable phones: the international vacationer. "One target may be the vacationer that only leaves the States once or twice a year for a vacation, so they would buy a disposable phone for the week," he said. "That's not a traditional wireless market, so that has potential, but I don't think it's a significant market in terms of size."

And that's the real question. These phones aren't cheap to support: will calling card users, occasional travelers, and glovebox users make up a sufficient market? Dittner suggests that manufacturers will face their biggest challenge in keeping prices low enough to compete. "They may be able to make something competing against phone cards, those kinds of things," he said. "But are they really going to be able to deliver a product at the price points that they're targeting and make any money? That remains to be seen."

Changing the delivery model


One company that's offering a way to keep prices down is the San Francisco-based Telespree Communications. Telespree's web site shows an oddly-shaped phone that looks a like a brightly colored remote control. Attached to the back of the device is an AirClip, which both tracks the minutes used and supplies power to the phone. The AirClip is disposable; the phone itself is not. Still, that device isn't what the company is selling.

Gail Redmond, Telespree's Vice President of Marketing, is quick to explain that the phone itself is just a prototype to demonstrate the company's software offering; a carrier that partners with Telespree could use any device they like. "We're not a device company," Redmond said. "We're a software company." The company's Secure Instant Wireless Access (SIWA) software simplifies and economizes the wireless connection process.

How does SIWA work? The company's web site describes it as "the DHCP of the wireless world." The concept is similar to dynamic IP addressing in that it requires less commitment of resources to each individual user. And that, Redmond says, is what really matters. "It's not about making the device inexpensive," she said. "It's about trying to change the way wireless is delivered and managed, so that a smaller sale of incremental wireless is profitable, which in the past it wasn't."

Once you've economized the delivery system, Redmond says, you can attract customers at every level without worrying about whether they're going to use enough minutes to justify supporting them-and that, not a cheaper device, is what will make wireless a viable option for everyone from glovebox users to occasional travelers. "It's not a toy or a gimmick or a gadget or a throwaway thing, a Bic razor or something like that," Redmond said.

In order for Telespree's model to work, of course, carriers will have to be willing to adapt to the company's delivery system: Hop-On's model, while more expensive, is easier to arrange with the carrier. Redmond contends, though, that most carriers understand that today's occasional user is tomorrow's committed user. "You want them to have a close affinity with the wireless carrier," she said. "They're great brand adoption right now, and they're also future customers for other products that the wireless carrier wants to offer."

Still, that remains to be seen: while Redmond says she has a number of major carriers interested, no announcements have yet been made.

A new world


There's one new factor that's likely to have an impact on the disposable phone market. On September 17th, six days after the terrorist attacks, United States Attorney General John Ashcroft painted disposable phones as a key security risk. "Given the nature and availability of literally disposable telephones in modern society, we need to be able to have the court authority to monitor not the phone, but the telephone communications of a person," he said.

Hop-On's Michaels points out, though, that disposable phones are a somewhat random target for such concerns. "I'd be more concerned about pay phones," he said. "You're going to have to take out every pay phone in America if that was the case, and that's not going to happen. If people have a criminal intent, they'll find a way to break the law."

In the current environment, having a couple of extra phones lying around seems like a particularly great idea.

Jeff Goldman is a freelance writer covering a wide range of topics for a number of online journals. He currently writes regular articles for Internet.com's ISP-Planet. Brought up in Belgium, Jeff spent the last decade in New York, Chicago and London; he now lives in Los Angeles.