Commentary
Smartphones And Prepaid Plans On Collision Course
- by Mark Walsh @markfwal, April 5, 2010
Smartphones may be all the rage at one end of the market, but prepaid plans for regular phones are hotter than ever. A recent study released by the New Millennium Research Council (NMRC), showed pay-as-you-go customers accounted for nearly two-thirds of the 4.2 million net new subscribers added in the fourth quarter of 2009. Owing in large part to the recession, the prepaid segment of U.S. wireless market grew 54% in the quarter, compared to just 3% growth for contract-based plans.
Reflecting that growth, Hitwise Friday released an analysis showing a parallel rise in searches for terms related to "Prepaid" and "Pay As You Go" options. They increased 33% for the four weeks ending March 27 and 91% compared to the same time frame in 2008 before the recession started. Who benefited the most from the spike in search activity? One might assume one of the wireless brands that specialize in prepaid service like Virgin Mobile, Boost Mobile or MetroPCS.
But the major carriers including AT&T, Verizon Wireless and T-Mobile USA received both the highest share of search clicks overall and were the most reliant on paid search traffic among the top ten sites getting prepaid-related traffic. (Virgin Mobile ranked No. 7.)
With the distinction between feature phones and smartphones (which typically require contracts) gradually disappearing, it raises the question of what the impact will be on pricing. If all wireless subscribers eventually own what today is called a smartphone, will everyone be on a contract plan or prepaid?
Recent trends point to more plans and pricing options that get around contracts. Google, for instance, sells its Nexus One smartphone without a contract and prepaid services like Boost Mobile and MetroPCS have begun offering no-contract (albeit more expensive) plans for BlackBerry phones.
Sprint, which now owns both Boost and Virgin Mobile, and has been aggressive in cutting pricing, could end up leading the way in expanding no-contract smartphones. But a collision between the growth of smartphones on one hand, and the popularity of prepaid plans on the other, is inevitable. Because they're expanding so rapidly, Smartphones And Prepaid Plans On Collision Course
Smartphones may be all the rage at one end of the market, but prepaid plans for regular phones are hotter than ever. A recent study released by the New Millennium Research Council (NMRC), showed pay-as-you-go customers accounted for nearly two-thirds of the 4.2 million net new subscribers added in the fourth quarter of 2009. Owing in large part to the recession, the prepaid segment of U.S. wireless market grew 54% in the quarter, compared to just 3% growth for contract-based plans.
Reflecting that growth, Hitwise Friday released an analysis showing a parallel rise in searches for terms related to "Prepaid"and "Pay As You Go" options. They increased 33% for the four weeks ending March 27 and 91% compared to the same time frame in 2008 before the recession started. Who benefited the most from the spike in search activity? One might assume one of the wireless brands that specialize in prepaid service like Virgin Mobile, Boost Mobile or MetroPCS.
But the major carriers including AT&T, Verizon Wireless and T-Mobile USA received both the highest share of search clicks overall and were the most reliant on paid search traffic among the top ten sites getting prepaid-related traffic. (Virgin Mobile ranked No. 7.)
With the distinction between feature phones and smartphones (which typically require contracts) gradually disappearing, it raises the question of what the impact will be on pricing. If all wireless subscribers eventually own what today is called a smartphone, will everyone be on a contract plan or prepaid?
Recent trends point to more plans and pricing options that get around contracts. Google, for instance, sells its Nexus One smartphone without a contract and prepaid services like Boost Mobile and MetroPCS have begun offering no-contract (albeit more expensive) plans for BlackBerry phones.
Sprint, which now owns both Boost and Virgin Mobile, and has been aggressive in cutting pricing, could end up leading the way in expanding no-contract smartphones. But a collision between the growth of smartphones on one hand, and the popularity of prepaid plans on the other, is inevitable. Because they're expanding so rapidly, Nielsen expects smartphones in the U.S. to outnumber feature phones by the end of 2011. How many will still require a contract remains to be seen.
Mark Walsh can be reached at walsh@mediapost.com
I was with my previous carrier because of my ability to have a Smart Phone. The problem with having such a phone is both the contract you are tied into as well as plans to accomadate such phone are often steep and not useful. Despite loving the phone, I made the switch to prepaid and really feel comfortable with my choice. I went with Net10 and while the phone selection does not allow me to have a Smart Phone, I was able to purchase a phone for a fraction of the price without dealing with a contract. Where I was paying more than $100 a month previously, I am now paying less than $40 so saving more than $60 is a major plus. Net10's calling network has the same stability of any carrier - TMobile in this case. I will say that prepaid companies like Net10 are really meant for moderate users since the plans offer low prices for a fixed, low amount of minutes. That being said, trading a Smart Phone for savings and no contract makes prepaid companies like Net10 a very attractive fit for some.
Prepaid is definitely the way to go. With Net10, I basically got my phone for free since the phone comes with 300 min. and 2 months of service upon activation. I've been using Net10 for about 2 months now and so far so good. It also like that unused minutes get rolled over so I end up with more min. each month :)
Hey Kimberly, though I'm not a user myself, I gave the NET10 to my daughter who is 12 as her first phone this year. I agree, it's not for heavy users, but it is the perfect phone for kids who are just being introduced to the world of cell phones. By limiting the amount of minutes she can use each month I hope to instill in her some degree of consciousness about the true purpose of a cell phone. I suggested she uses it on emergencies or for the social call when, at the end of the month, there is time remaining (though she can always save the minutes for the next month). I only pay $15 a month for it, which gets her about 150 minutes. Perfect for her valuable lessons on budgeting, right?!
Consumers are tired of being ripped off by contracts that enslave us to one provider for years even if the service or the company deteriorates. That is why prepaid sales are up. People are getting smarter and realizing that you only need a contract if you MUST have the newest, coolest, and expensive phones. If you think about it for a few minutes you realize that most of the features on the 'smart' phones are just frosting. I text and talk just fine on my NET10 phone. It works for me. When people get tired of all the gizmos and gadgets on their phones they stop using them and wonder a year later why they went for a contract. It's really expensive buyer's remorse.
Why not have the best of both worlds- Prepaid AND a top of the line smartphone- FUZION MOBILE is the only one that allows this benefit- no contract/ no credit check/ UNLIMITED....AND A SMARTPHONE- Keep yours or upgrade to the best one available- Fuzion Mobile.com! I love it.....
Prepaid wireless has saved my family in this struggling economy. We used to have a monthly cell phone bill, but the prices just seemed to get higher and higher. Switching to prepaid has saved us a tremendous amount. We use the Net10 service and I have to say the phones are of high quality and the pricing couldn't be better. Prepaid wireless really is a big money-saver and it is a smart decision to switch and give it a try :)