Once upon a time pre-paid cell phone service didn’t offer anything but voice. The prices per minute were high and the market was not very attractive to cell phone service companies. Cell phone service providers saw their riches in the two-year contract plans where users rarely use all of the minutes that are provided and this in turn lines the coffers of the telecoms. This is changing and the change is drastic. With the current recession people are looking for ways to cut expenses without having to cut quality.
Most pre-pay plans have the consumer buy the phone up front. Depending on the plan, the user can buy minutes per month or longer or opt for an unlimited plan without a two-year commitment. In a recent article it states that:
A generational shift away from voice calls to text messages, Facebook, Twitter, and other data-based methods of communication is also playing a role in the shift toward prepaid offerings. Providers are targeting the price-sensitive youth market with new pay-as-you-go options for data-only or data-centric plans and devices.
Whatever the cause, more people are buying prepaid wireless plans than ever before, and the trend shows no signs of slowing. During the last quarter of 2009, prepaid customers accounted for 65 percent of all net new cellular subscribers, according to IDC.
The bigger cellular service providers–which include AT&T, T-Mobile, and Verizon–have significant numbers of prepaid wireless customers as well.
Meanwhile, as a result of heightened competition among cellular device providers, better handsets are appearing on prepaid providers’ shelves, contributing to what one provider has called “kind of a perfect storm” of opportunity meeting need. The upshot: Prepaid providers can now offer devices like the BlackBerry Curve 8330 smartphone, which comes with app support, e-mail support, and a full QWERTY keyboard, among a bevy of other features.
Sprint Nextel’s Boost Mobile brand sells the Curve for $149, and can combine it with a $60 per month plan that permits unlimited text, Web, e-mail, national calling and other extras, putting the Boost Mobile Curve into competition against the top carriers’ higher-priced devices and postpaid plans.
Dallas-based MetroPCS Communications, which operates in select markets across the United States, has ridden the wave of prepaid popularity, adding nearly 1 million new customers over the first six months of 2010 while significantly reducing customer “churn,” the term used to describe users who discontinue service. “We’re getting close to postpaid [provider] churn numbers, which means our message of being affordable and predictable is letting us enjoy a lot of success,” says Thomas Keys, MetroPCS’s chief operating officer.
According to Keys, the ability of a smaller provider like MetroPCS to move a significant quantity of handsets wasn’t lost on the device manufacturers; and they, in turn, helped MetroPCS beef up its device offerings. “We now have 18 to 20 different [phones] in our lineup, with smartphones and [BlackBerrys] right now, and Android devices due out later this year,” Keys says. As the economic downturn continues in most parts of the country, and as more potential customers come to the end of their previous postpaid contracts, prepaid providers will continue to reap benefits, Keys predicts.
“Every month, more of those contracts expire and it’s a chance for more people to take a look at [prepaid],” Keys says. “They’re going to see a MetroPCS that is a lot different from the company they might have heard about in 2005 or 2006.”
Walmart’s recent decision to sell its own Walmart-brand wireless phone service (alongside household goods and bargain-priced food) is perhaps the most telling sign that cellular plans are fast becoming a commodity, with no-contract plans helping more people get in on the wireless fun. Walmart’s new service, Walmart Family Mobile (which will run on the T-Mobile network), is actually a hybrid plan: Customers will pay at the end of each month, but won’t have to sign a contract or make a multiyear commitment.
It is interesting to see how many consumers, including myself, have made the switch to pre-paid plans. I have four neighbors who made the switch after their commitment plans ended. Those with children are delighted when they see the cost drop from $200 a month for cell service down to $120 with the same basic features.