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Comment by johndoughy | Hacker News Reader

I've never understood why ISPs and cellular carriers aren't prepaid by default, which would avoid the credit system entirely. Do these companies benefit somehow by being post-paid and relying on credit?

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It's a massive benefit. There's a couple parts to it, but a huge thing is you need to remember is there's effectively zero marginal cost to the ISP/cell carrier for the next customer - it's nearly all fixed costs.

If a pre-paid customer doesn't have the money, they'll either go without or downgrade their service. Less revenue for the company.

If a post-paid customer doesn't have the money...they might later. Their bill can be rolled forward, half paid, eventually sold to collections, whatever. More revenue in the long-term no question. Also, if you can charge your post-paid customers for all the things they opted into but didn't think too hard about the pricing on - SMS messages used to be $0.10 in my market, lots of parents opened up bills with 2000 text messages on them. Long distance and overseas calls were hugely expensive (and still are, in some cases) - big money makers for the carriers.

And contracts, of course. Customer acquisition is one of the biggest problems in the industry, getting people on a monthly billing cycle keeps them from easily switching.

Late fees, payment plans with service fees, and locking people into contracts are all incredible profitable.

You are overestimating customers' willingness to prepay. Using the service all month and getting a bill at the end is a hardwired habit and how all utilities have operated forever. Increasing the up-front cost for a new customer by $50-100 is going to be a huge hit for the business.

True, with one big but. Once a customer is established, especially if you can get them in the autopay system, the prepaid charge becomes just another bill as well. Most customers won't think too hard about whether they are paying last month's bill vs next month's service charge.

> Most customers won't think too hard about whether they are paying last month's bill vs next month's service charge.

Sure, but you still have to switch the billing cycle from end of month to beginning of month somehow. Customers are definitely going to care if they are suddenly hit with a 2x charge.

Let’s also not forget that 2-3 contracts exist and are pretty standard for most people with a phone. That’s years of lock-in on a post-paid customer.

I'd assume the late payment fees and cancellation fees make up a good chunk of their income.

Or instead of credit just require a one-time deposit like utilities do when you don't provide a SS# for the credit check. It can still be post-paid, just pocket the deposit and kill the service if they miss paying a month.

Using centurylink now. It's prepaid.

And it's fantastic until you need anything beyond the most basic service. Their IPv6 deployment is awkward and requires a fairly complex script to work on my router. I called asking to add on static IPs and learned they aren't supported on the prepaid plan.

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