How The Modern Telephone Card Was Invented

The Bretton Woods system of international monetary management established the exchange rates between western nations up until 1972 when there was a return to convertibility with the breakdown of the agreement.

The subsequent inflation created a shortage of coins in Italy which lead to a very high incidence of payphone vandalism and theft. To counter this the first prepaid phone card was developed to use in payphones that did not use coins but only phone cards.

These cards were made by SIDA a vending machine manufacturer. They were thin and had a magnetic strip on the back of the phone card.

The idea soon picked up and spread to other European countries in 1977. The phone cards didn’t work very well, they kept getting stuck or jamming. Nippon developed Japan’s first pre-paid phone card which worked very well and was adopted more widely.

The next big development step came when World Telecom in the USA developed a reliable phone card with Siemens and General Electric in 1987. Two years later AT&T also entered the market in the USA when they released their first pre-paid phone cards in Hawaii.

Phone cards were first introduced into Australia in 1989 when Telecom Australia (now Telstra) carried out a trial Victoria. About 300,000 phone cards were printed for 6 different cards. They were $1.50, $3 and $6 denominations. Telecom New Zealand also trialled phone cards in Christchurch in the same year.

It was in 1990 that NYNEX in the USA developed the first pre-paid phone cards based on a PIN (Personal Identification Number) as a means of identification rather than reading a magnetic strip. They used a free phone 800 number for their access number.

Since then pre-paid phone cards sales volumes have grown steadily to more than $5 billion per year globally.

Chip based smart phone cards were first experimented with in France in 1984 but didn’t really reach the market substantially until Sprint developed its “Foncard” product in 1995. PIN based phone cards have dominated the market because they are much cheaper to manufacturer.

Six years ago the first prepaid mobile phone – phone card combo was first produced.

More recently there has been the rise of shops such as www.ephonecards.com.au that sell phone card ePINS. ePINS are phone card PINS delivered electronically over the internet. They also allow the customer to compare phone cards and choose the best phone card for their call.

It is anticipated that newer technologies such as VOIP or free services like SKYPE will take over from phone cards. VoIP has not made a great impact on the phone card market yet. This is unlikely to happen until about 2012 to 2015 when broadband and internet connections are more widely available throughout the world. Until that time phone cards remain cheaper than VOIP off-network calls.

Oh and by-the-way, Italy sorted out inflation and its coin shortage by switching to the Euro from the Lira!