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Sunday, May 30, 1999
BLACKSTONE PREPAID BUSINESS ISN'T SEXY BUT FILLS A BIG NEED
If AT&T is positioning itself at the top of the telecommunications food chain, the purveyor of everything from local phone service to cable TV and Internet access, Luis Arias is at the other end. From a cramped office above a gas station in West Dade, Arias runs Blackstone Communications Group. His business is selling all things prepaid. He started out with prepaid phone cards in 1993. He has added prepaid cellular phones and branched out into bilingual prepaid Internet access last week. He doesn't have big corporate customers or multi-million dollar contracts. As a distributor of the phone cards and the other services, Arias' customers are bodegas in Little Havana, convenience stores in Little Haiti, restaurants, newsstands and gas stations. Much like the prepaid industry, which barely existed a decade ago and should see about $2.5 billion in business this year, Arias' business has expanded rapidly, too. In 1993, he was selling some 200 prepaid phone cards a month in one of the gas stations he owned back then. This year, he expects Blackstone will post sales of $160 million from cards, phones and Internet access. Blackstone is one of the largest distributors of prepaid cards in this state. Nowadays, prepaid cards make up one of the fastest growing segments of the telecommunications industry. The demand for the cards has moved from travelers, immigrants and credit-challenged consumers to students and businesses who find the prepaid services an accessible way to control expenses, says Laurette Veres, publisher of Intele-Cardnews, an industry trade publication. The growth of the industry has attracted the big players, such as AT&T, Sprint and MCI Worldcom. Arias began co-branding a prepaid card with AT&T this year. That means the card says Blackstone, but the long-distance services comes from AT&T. ``What I can offer a big company is distribution,'' says Arias. ``Why reinvent the wheel? We consider ourselves specialists in distribution.'' He also deals with medium-tier, long-distance service providers such as Hackensack, N.J.-based IDT Corp. and RSL Communications, based in Bermuda. There are also some purely local players such as Gloria Envia, a Miami company that specializes in money transfers and package shipments to Colombia. Usually, Blackstone buys blocks of time from a carrier such as AT&T or IDT Corp., prints the cards and distributes them to outlets in Florida and New Jersey. The company has a sales staff of 60. Blackstone has branded several of the prepaid cards it sells: "Pepe'' cards are marketed for calls to Central and South America; Pepe Colombia offers rates specifically for Colombia. Florida Friends is a prepaid card for calls to Cuba. Blackstone's TeleTalk cards are for Africa. Arias created another card, ``3B,'' for calls to Jamaica and Haiti. The 3B stands for bueno, barato y bonito, which means good, cheap and cute in Spanish. The three words have absolutely no connection with the Jamaican or Haitian markets, but Arias just liked the sound of the three words. As a young industry, the prepaid card business has had its share of growing pains. Consumers and distributors, such as Blackstone, have been burned by less-than-credible operators. Some cards haven't provided services as promised. Others have charged rates that far exceed what they advertised. Florida is one of the first states to regulate the prepaid card business, helping clean up the industry. Thus, issuers here must provide information on rates and surcharges. Cards must carry the name of the service provider, a customer-service phone number and be good for at least one year. The arrival of major players has given consumers confidence, and helped the market grow, says Veres at Intele-Cardnews. ``It's comforting to deal with AT&T, which is a big, reputable company,'' adds Arias. But he still has had a run-in with bad fortune. In 1997, Blackstone bought long-distance time from a Frontier Communications Services salesman for a special calling card promotion for Father's Day. The salesman pocketed the cash, never filed the required rate applications with regulators and disappeared. Frontier cut off service on 100,000 cards two days before the holiday. Blackstone was forced to buy the cards back from retailers. Blackstone sued Frontier and won a $5.7 million judgment earlier this year. Frontier is appealing the judgment. Since Blackstone and its sales force are the faces retailers see, Arias feels he owes them some old-fashioned customer service. Consumers will turn in cards that don't work to retailers, who, in turn, kick them back to Blackstone. The company tries to work out problems with carriers, retailers and consumers. He says consumers now rarely lose money, but distributors are the ones who bear the burden of bad cards. When the company moves to new, much-larger quarters just off the Florida Turnpike, it will have space for a full-fledged customer-service department as well as training rooms for the sales staff. Arias says the industry is evolving so rapidly, he must update these folks constantly. The latest update will be on the launch of Nuestra Voz, the nation's first bilingual Internet service. The access is provided by IDT. After prepaid Internet access, what might lie ahead?