Rise Of The No-Contract Smartphone?

by , Nov 23, 2009, 2:07 PM
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Motorola i410

Boost Mobile, Sprint's prepaid unit, today touted the release of its latest handset-the Motorola i410-a no-frills flip phone for anyone not in the market for an iPhone. Boost offers several other Motorola phones, including the higher-end Clutch, sporting a full Qwerty keyboard. But like other prepaid services, it doesn't offer a true smartphone, like the new Motorola Cliq or HTC Hero sold by Sprint for contract customers.

With its $50 a month all-you-can-eat plan covering voice, text and data, Boost has among the best service plans out there. Since launched last year, the plan has proven a hit with customers. Boost has added 2.1 million customers in the first three quarters of 2009 even as Sprint continued to hemorrhage contract subscribers.

T-Mobile has just come out with a no-contract BlackBerry offering as part of its new prepaid Even More Plus plans that start at $50 a month for unlimited voice.

The move capitalizes on two of this year's biggest trends-widening use of smartphones and the consumer shift from contract to prepaid plans as a result of the economic downturn. Further, mobile consulting firm Chetan Charma estimates that 50% to 60% of those who've made the switch aren't going back to contract plans anyway.

As more people become accustomed to no-contract plans, they're also getting used to more versatile handsets. Boost could unite what are now seen as two distinct markets-prepaid customers and smartphone users-with the launch of a prepaid smartphone. As it is, Sprint and other wireless carriers want to use the hottest devices to lure more lucrative contract subscribers.

But a prepaid smartphone wouldn't necessarily have to be subsidized. T-Mobile is selling the BlackBerry Curve 8520 for $299, for example. Consumer pay more upfront but perhaps less over the life of what would have been a one- or two-year contract. While the more limited range of Boost's push-to-talk (iDEN) network could make adding a smartphone more challenging, analyst Avi Greengart of Current Analysis expects prepaid smartphones won't be an oxymoron much longer.

"There is tremendous competition at the low end of the smartphone range, and Moore's Law ensures continued falling prices, making prepaid smartphones more palatable over time," he said. Call it the democratization of the smartphone.

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