A telephone card, calling card or phone card for short is a small card, usually resembling a credit card, used to pay for telephone services (see how to dial a rotary Telephone, telephone history clip).

The idea of prepaid phone card was first discovered by SIDA in 1975; a vending machine manufacturer and distributor located in Italy. A Payphone vandalism coin in Italy in 1975 was a big problem. Thieves were breaking the payphones to steal the coins – there was a shortage of coins at that time. SIDA, in 1976, introduced the first magnetic strip phone cards so people wouldn’t need coins.

Other countries throughout Europe felt that the advantages outweighed the disadvantages and quickly adopted the magnetic strip phone cards. The first countries to follow Italy were Austria, Sweden, France and the United Kingdom.

Nelson G. Bardini, a clever Brazilian scientist, in 1978 developed inductive technology – a system that used a series of coils embedded in the phone card. One of the coils would burn out after the time on the card was used up. Although this technology was created in 1978, it wasn’t actually presented to the world until the national inventors’ exhibition in 1982.

The first public prepaid remote memory phone card was issued in the United States in December 1980 by Phone Line.

In 1982, Nippon Telephone and Telegraph, a Japanese company, introduced their first prepaid phone card. This development was also a response to a growing need. When using pay phones in Japan, users were required to use a large coin to operate the public phones on the subways. The phone card was extremely popular in Japan, and tens of thousands were sold daily to subway commuters in Osaka and Tokyo.

In 1984, France, having introduced their phone cards soon after Italy, worked on improving the technology. They sought to increase the use of the magnetic strip by inserting a computer chip. This was the beginning of “smart cards”.

In 1987, World Telecom Group, a partnership of Siemens and General Electric Company, was the first significant company to launch phone cards in the USA. They developed their own magstripe technology, and this technology is now among the most widely used of its kind.

In 1988 in England, Dr. Steve Hiscocks created “The Collectors’ Book of Telephone Cards”, the first world catalogue of telephone cards and, indeed, the first printed telephone card catalogue of any sort. It covered 61 countries - all those that were issuing cards at that time (except for Singapore and Japan). It had 108 pages – that’s a lot of phone cards!

In 1989, in USA AT&T quickly introduced their own prepaid phone card. At the same time the first remote telecards also appeared in Hawaii.

The next company to get a piece of the phone card pie was New York’s Regional Bell Operating Company (NYNEX). In 1990 they came out with a much simpler phone card: the first non-magnetic-based calling card in the U.S. NYNEX’s prepaid cards used PINs (personal identification numbers) that identified the cardholder. This made international phone cards even more convenient. All the cardholder had to dial an 800 number and enter his PIN to make a long distance phone call. This allowed callers to make calls from anywhere in the USA.

By 1992, over $12 million in sales were made from international calling cards, with projections of double that over the next several years. However, their projections weren’t even close. Phonecard sales jumped way beyond expectations every year after that.

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.

IDC estimates that the total number of United States households using prepaid calling cards will grow from 29.8 million in 2000 to 49.3 million in 2005. Furthermore, the market for prepaid calling cards will expand from $3.4 billion in 2000 to $5.3 billion at the end of 2005, which represents a compound annual growth rate (CAGR) of 9.2 percent over the forecast period. Revenue estimation for 2010 year is about 10 billion.

There are several reasons for the rapid market expansion of prepaid telephony. Prepaid calling cards serve as an alternative to typically more expensive, traditional (postpaid) telephone cards, often acting as a budget control mechanism for business or personal use. Prepaid cards also facilitate travel to foreign countries and are helpful in emergency situations. In addition, prepaid telephone services offer an easy-to-use alternative in areas where residential service is difficult to obtain, and, they provide flexible options for customers with poor credit ratings.

See Telecom Dictionary

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