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.