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Is prepaid becoming a haven for voice-heavy users?
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Clearly the U.S. wireless market is experiencing a surge in prepaid growth. This trend was particularly apparent in the numbers reported earlier this month by Sprint Nextel, which gained a net 764,000 prepaid iDEN customers to its Boost Mobile service in the first quarter. But Sprint wasn't alone: MetroPCS, Leap and Virgin Mobile also benefited from this trend.
The obvious reason for the prepaid surge is the economy--in tough economic times consumers are much more price conscious and flat-rate prepaid price plans alleviate fears of unexpected overage charges and unpredictable monthly bills. But will this prepaid popularity stick, even after the economy turns around?
I think this shift to prepaid will continue, particularly for voice-heavy users who have no need for data-centric smartphones. I spoke with Dan Schulman, CEO of Virgin Mobile USA, earlier this week and he believes a fundamental change is occurring. Prepaid is becoming the solution for voice-centric consumers because of the value proposition, and postpaid is the landing area for data-intensive subscribers who want "iconic" devices and smartphones. "AT&T and Verizon have postpaid franchises to protect," says Schulman. "They have differentiation with handsets and I expect them to always be competitive. But I think they will focus on postpaid and data service."
Of course, AT&T and Verizon also have subscribers locked in family plans and two-year contracts so I don't expect voice-heavy consumers to suddenly dump their Tier 1 carrier in favor of some of these primarily prepaid operators. But I do believe prepaid carriers are smart to exploit this opportunity. The economy may be driving this switch from postpaid to prepaid, but subscribers will stick with their prepaid carriers as long as they get the value they want and the network coverage that they have come to expect from the Tier 1s. --Sue
P.S. For all you Twitter users out there, you can now follow @FierceWireless, our new 140-character edition. The entire FierceWireless news team will use Twitter to point you to the sources we're following when breaking industry news happens.
Comments
Posted by DavidB | May 16, 2009 - 8:32am
Don't forget the attraction of prepaid to low minutes users also! The "big guys" have left behind any pricing plan that makes sense for some like my parents. They are both in their 70's, on fixed income, and each has a cell phone. V makes them pay close to $80/month, which is crazy for the 10-20 calls and maybe 200 minutes each uses per month. I've encouraged them to switch to prepaid as soon as their contract is up or pay the ETF and get out now. The big boys obviously care not about retaining them so why not go prepaid and save every month?!? They inheritance they're wasting on minutes they could never use! :)
Posted by Tomas - University Place, WA | May 16, 2009 - 7:48pm
Yup.
Just analyzed my 83 year old mother's cellular use over the past 18 months, and it comes out to just a hair under 20 minutes a month.
She uses no wireless data, she doesn't text, she's a voice only, low minutes user currently stuck with a 500 minute/month, unlimited text, unlimited web post-paid plan from one of the Tier 1 carriers.
Trust me, that WILL change at the end of her current contract.
I don't know who she is going with, yet, but it will not be an "all the extras, all the time" post-paid plan from any of the top five.
It will likely be a much more reasonable plan from some little reseller using the very same towers and network she is stuck with now... Too bad it will probably take a new phone to do it.
Tom
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