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| Percy Miller, better known as rapper Master P, displays a favorite area code and a prepaid phone card from No Limit Communications. |
Yo! Yo! Yo! Master P is in the house ... and the pager, the cell phone, the calling card and the Internet. Percy Miller, better known as rap artist Master P, launched No Limit Communications (www.nolimitcommunications.com), a company designed to bring prepaid competitive telecom services to the young, urban market.
But this is no ordinary competitive telecom service provider. It's a marketing machine that has a potential audience of well over 30 million young, urban consumers seeking prepaid local and long-distance telephony, wireless, paging and Internet access.
Master P started his No Limit franchise in 1989, when he opened No Limit Records in Richmond, Calif., using $10,000 he inherited from his grandfather. He then turned No Limit Records into a recording company, from which he recorded his first gangsta rap album "The Ghetto Is Trying to Kill Me." No Limit now represents rappers such as Mystikal, Silkk the Shocker, C-Murder, Mia X, 504 Boyz and TRU. He strengthened his recording empire when he pulled off a coup by luring Snoop Doggy Dogg away from Death Row Records in early 1998.
But Master P hasn't settled for just being a record industry mogul. He has leveraged the No Limit brand in other retail endeavors, including lines of clothing and toys. Master P also is busy directing movies, such as his 1998 release "I Got the Hook Up," which was about cellular phone scams. And in his spare time, he's on the basketball court. In 1999, he made it to the final cut for the Toronto Raptors. This summer he's honing his hoop skills in the U.S. Basketball League's Atlantic City Seagulls and hoping for another NBA tryout this fall.
Needless to say, No Limit Communications is just another extension of Master P's enterprise. But the prepaid communications business wasn't his brainchild. The idea for No Limit Communications came to G. Lenn Brown, vice president of sales and marketing for Alliance Network (www.alliance-network.net), when he caught the last half of Master P's video for the song "I Got the Hook Up."
"I thought it was the perfect message to reach a young urban crowd," says Brown, whose company is a New Orleans-based CLEC that offers both prepaid and postpaid telecom services.
No Limit Communications is set up as a joint venture, which is majority owned by Alliance. Alliance is certified as a CLEC in 11 states, and is seeking regulatory approval in the remaining 39 states by late this year. In areas where Alliance is not yet certified as a CLEC, the company will work with other service providers to deliver the full line of its prepaid offerings.
So far, the response has been tremendous, Brown says. For instance, on July 10, Master P was featured on Black Entertainment Television's (www.bet.com) "BET Tonight with Tavis Smiley." When Master P showed off the prepaid cell phones, which have removable face plates to color-coordinate with clothing or show off the users' favorite rap stars, Brown says the phones at No Limit Communications started ringing off the hook. In fact, Brown reports that within two days of Master P's appearance on Smiley's show, No Limit Communications sold 6,200 prepaid cellular phones. "We only had two T1s into the call center," says Brown. "And we had an abandonment rate [the rate of unanswered calls] of about 92 percent."
Beyond public appearances where Master P hawks his wares, No Limit Communications is planning to sponsor concerts and do crossover marketing in which ads for prepaid services are included in about 20 million jewel cases of CDs put out by No Limit artists.
Next up from No Limit is point of sale (POS) displays developed in conjunction with VTech Holding Ltd. (www.vtech.com), the manufacturer of the cell phones (called P-Phones), 900 MHz phones for local wireline service, and the P-Pliance, which is an Internet appliance consisting of a keyboard and screen that will be used for the prepaid Internet access offering.
No Limit and VTech have developed a display, similar to a sunglasses rack, that will be featured in retail stores such as Target, Wal-Mart and Circuit City. These displays will be in stores by Oct. 15, Brown says.
National brand recognition, like that which Master P and Alliance are achieving with No Limit Communications, is something of a rarity for prepaid CLECs. For the most part, many of these providers have focused their service on specific geographic regions. To acquire customers, prepaid service providers have had to struggle to market their own brand, or partner with an entity that has a well-known brand in order to sell service.
The brand name affinity relationship between No Limit and Alliance is a perfect fit, says John Patton, managing director for telecommunications at MCG Credit Corp. (www.mcgcredit.com), and vice chairman of the National ALEC Association-Prepaid Communications Association (www.nala-pca.org).
Today there are more than 300 prepaid CLECs serving about 1.5 million customers, says Doyal Bryant, president of Sun Technology Solutions LLC (www.suntechsolutions.com), a consulting firm, and past chairman of NALA-PCA.
However, as prepaid companies begin to bundle services, Bryant believes national prepaid programs will begin to develop. Prepaid CLECs will even begin to target a more credit-worthy niche market, referred to as "controlled pays." Controlled pays are customers that are seeking ways to limit their monthly cell phone or long distance bills. This market includes college students, elderly people on a fixed income, and parents who want their children to have cell phones for emergency--not gossiping--purposes.
Industry estimates predict the total prepaid service market will reach $10 billion by 2003. The PELORUS Group (www.pelorus-group.com) reported that calling cards dropped from more than 50 percent of the total prepaid market in 1998 to less than 30 percent in 2003. Calling cards are being replaced by prepaid dial tone, which is expected to grow from 3 percent to more than one-third of the prepaid market in 2003.
The reason calling cards are on the decline is because "most people were buying prepaid cards because they didn't have access to phone service," says Bryant.
The pioneers in the prepaid telephony business had virtually no telecom experience, but were in the rent-to-own or other businesses that dealt with customers who had bad credit. The companies ran simple operations, faxing phone service orders to the telcos or long-distance companies that were providing the service.
Today, though, Bryant says, more and more telecom industry veterans are making a play in the prepaid business. With their telecom experience comes sophisticated back-office systems that help streamline the flow of orders to the incumbent and maximize the profits on the services they're reselling.
