Virgin Mobile widened
the mobile price war Thursday when it announced it was cutting its monthly unlimited calling plan from $80 to $50. The move more directly pits Virgin against rival prepaid services MetroPCS
Communications and Leap Wireless International, both of which offer unlimited plans for $35 to $50 in regional areas.
It also follows the $50 unlimited plan launched by Boost Mobile
-- Sprint Nextel's prepaid brand -- in January, to keep pace. Unlike MetroPCS, Leap and Boost, however, Virgin's $50 plan covers only voice rather than unlimited voice and data. Even so, it further
establishes $50 as a new standard price for second-tier carriers.
Does that many any of the major wireless operators will soon follow suit by slashing monthly contract plans to $50? Don't bet on
it, say analysts. With only a fraction of the subscribers of giants such as AT&T and Verizon Wireless, services such as Virgin and MetroPCS will not put enough pressure on the big carriers to match
their prices.
"So that's not going to happen," said Bill Ho, research director for wireless services at technology research firm Current Analysis. But he suggested the price war among second-tier
players could lead carriers such as AT&T and T-Mobile USA to revamp their own prepaid plans to remain competitive.
AT&T's prepaid "Pick Your Plan" offering provides monthly calling plans ranging
from $30 to $70 for 200 to 650 anytime minutes and from zero to unlimited weekend minutes. T-Mobile offers only pay-as-you-go or daily prepaid plans ($1 a day/10 cents a minute) rather than a
competing flat-fee monthly plan.
Because T-Mobile is considered the most value-oriented of the major carriers, Ho said it may be the one most threatened by the new $50 prepaid plans. And with no
termination fees for quitting a prepaid service, consumers can more easily switch to a competitor with a better deal.
Through Boost Mobile -- and by supplying the network powering Virgin Mobile
-- Sprint, meanwhile, may stand to benefit the most from the growth of prepaid services. "Sprint can use Boost and Virgin as proxies" to participate in the prepaid market, said Ho.
The economic
downturn is leading more cell users to trade their contract plans for prepaid alternatives. Almost one in five people who use a prepaid phone said they switched from a contract service within the last
six months as a result of the recession, according to a study last month by the New Millennium Research Council. Two-thirds said they are saving money by making the switch.
MetroPCS, which is
expanding in markets such as New York and Boston, added 684,000 customers in the first quarter -- up nearly 60% from a year ago. But those lower-tier customers are not necessarily attractive to major
carriers trying to boost data revenues by pushing smartphones and $100 all-you-can-eat plans.
"I doubt you'll find iPhone, BlackBerry and other smartphone users converting to prepaid in any
significant numbers, so the competition will be at the low end of revenue," said Eric Bader, a partner at mobile marketing firm Brand In Hand. "It remains to be seen how hard the major carriers will
fight to keep lower-revenue customers when their priorities are on growing big data users and high-revenue upcharge services."