What is the future of prepaid unlimited? Page 2

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"They're doing a lot of things to try and narrow the gap already," said Bill Ho, an analyst at Current Analysis. "The prepaid guys' encroachment and dropping price points has moved the big postpaid guys to drop their price points," he said, noting that T-Mobile USA launched its new unlimited plans as the prepaid price war was kicking into high gear last fall.

T-Mobile's no-contract plan gives subscribers unlimited voice, texting and Web browsing for $79.99 per month. Other postpaid carriers also offer prepaid services. Last October, AT&T Mobility threw its hat into the prepaid unlimited ring with its $60 per month unlimited prepaid voice and text package through its GoPhone service. Verizon offers its own prepaid service with a $3.99 daily access charge for unlimited voice and a 1 cent per text message charge. There are other players in the market, of course, including Virgin Mobile USA (which is now owned by Sprint).

Slipping in some smartphones

One way that the prepaid players are trying to bridge the gap between themselves and their larger, postpaid competitors is through device selection. Although smartphones and their attendant data plans are dominant growth engines for postpaid carriers, because of the prepaid carriers' price structure smartphones are still relatively rare.

Last year, MetroPCS began selling a BlackBerry from Research In Motion, for use in limited markets, as well as the Samsung Code, which runs Windows Mobile 6.1. The phones sell for $499 and $299, respectively.

Leap has yet to introduce a smartphone, though Toig said it will later this year. TracFone does not have any smartphones in its lineup, but it has a touchscreen Samsung device, the Finesse.

Boost recently launched its first BlackBerry device in conjunction with its move to Sprint's CDMA network (previously Boost had mainly been limited to Sprint's iDEN network). The device, the BlackBerry Curve 8330, is the same that MetroPCS launched, and sells for $250 on a $60 per month plan.

Sprint CEO Dan Hesse said in a recent interview that the main difference between prepaid and postpaid data plans are the selection of smartphones, and the huge price difference between prepaid and postpaid devices.

"I don't think you're going to see a whole lot of iPhones or BlackBerry Tours on prepaid plans," he said. "If a customer sees a $600 price on a phone, they're not going to go there."

However, he said he does see a trend toward more data-centric devices, which might not be high-end smartphones, but will definitely be a step up from what most prepaid carriers are currently offering. "When we launched Boost on CDMA, you're seeing the data-friendly devices on that service," he said. "What we would call mid-tier data devices--you'll begin to see those on prepaid plans more often."

Technology Business Research's Byrne said there likely will be more and more cheap smartphones based on Google's Android platform coming onto the market this year.

Is mobile broadband a savior?

Both Leap and MetroPCS could turn to next-generation data services to gain a competitive edge, but it's not entirely clear how much that will help them in the short term.

MetroPCS runs a CDMA network now, and plans to start offering LTE services, and offer a dual-mode LTE/CDMA handset from Samsung, in its major metropolitan markets late this year.

Ho of Current Analysis said that MetroPCS is jumping on the LTE bandwagon early so that it can increase its data revenues as well as improve operational efficiencies by delivering voice and data at a lower cost per minute.

However, as Piecyk of Pali points out, the company faces a host of challenges on that front, including how LTE roaming and voice will work. "I don't think they're in a position to have any of that impact their business in 2010," he said.

Leap's Toig said that while Leap sees LTE in its future, it's not rushing toward the technology. "Based upon where we are with our network technology and our network footprint, we don't feel as much urgency," he said.

That could change though, Byrne said, if Leap continues to struggle with subscriber growth. "I think if they have a couple of quarters of disappointing subscriber results, then that's going to put them in a mode where they have to start thinking about an aggressive LTE deployment and focusing on the broadband side of the business more aggressively," he said. However, for now, Leap, like all of the other prepaid carriers, will still have to compete on price.

"In the short term, they're just going to have to bite bullet," Byrne said.

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