Abstract: A prepaid cellular telephone system and a method of providing prepaid cellular telephone services is provided. The telephone system includes a server operatively connected to a local exchange carrier for placing and receiving telephone calls and a handset for placing and receiving telephone calls over a cellular network. All non-emergency calls placed by the handset are direct to the server. In addition, the handset places a telephone call to the server in response to the receipt of an incoming telephone call by the handset. As a result, all non-emergency telephone calls placed or received by the handset may be monitored by the server for billing purposes.