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Summary:

Last week, Stacey came up with five reasons to consider prepaid mobile phone calling plans, especially in these tough economic times. Some wondered why we wrote about that topic, and to them we say: look at the recent trends. There is growing body of evidence that […]

Last week, Stacey came up with five reasons to consider prepaid mobile phone calling plans, especially in these tough economic times. Some wondered why we wrote about that topic, and to them we say: look at the recent trends. There is growing body of evidence that the demand for wireless services is dipping, especially in the growth of post-paid subscriptions, a trend that was first evidenced in the 3Q 2008 and has continued since then.

Service Providers New Pre-Paid Adds
MetroPCS 249,000
Leap Wireless 155,000
T-Mobile 377,000
Tracfone 341,000
Verizon Wireless 90,000

On the flip side, there is a growing demand for unlimited prepaid services, and that is helping budget service providers like Tracfone, Leap and Metro PCS. A UBS report suggests that they are in fact beating down the national phone companies. Data collected by UBS research group shows that there are 45 million prepaid subscribers in the U.S. representing 17 percent of total customers. In the third quarter of 2008, 870,000 new pre-paid subscribers were added to the ranks, with national carriers (Sprint & AT&T were big losers) adding only about 120,000. If you look at the table, it is evident that some of the smaller players are doing relatively well as a large part of the population looks to saving money on everything — from heating bills to wireless phones to broadband connections.

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  1. Never thought we would see the day when this would become true. I had written the obit for Metro PCS long ago. But now it seems there is a handsome reward, however brief, for those smaller wireless operations who soldiered on to this point.

  2. The New Millenium Research Council published a report last week on why more Americans don’t use prepaid cards. They say that 25M people could be saving more money by going on prepaid than keeping their current postpaid plans. I was on the conference call with the researchers of this report and published my article on Muniwireless:

    http://www.muniwireless.com/2008/12/04/why-more-americans-dont-have-prepaid-plans/

    I posed the question on Linked In and got interesting answers, which are also in the above-mentioned article. The researchers believe that the No. 1 reason Americans don’t go more for prepaid is that they don’t know they can get out of the termination penalty. Some believe it’s permanent, others don’t know the date on which it expires.

  3. “…a large part of the population looks to saving money on everything — from heating bills to wireless phones to broadband connections.”

    For the most part, pre-paid is not as economical as post-paid. The number of people with bad credit is increasing and those with good credit are not as willing to sign a contract, betting that they will keep their jobs for the duration.

    In other words, this trend is not so much of an indication of the increased attractiveness of post-paid as it is a sign that more people are in trouble and others are lacking confidence in their own economic futures.

  4. correction on above:

    “…increased attractiveness of PRE-paid…”

  5. @Walford,

    You make a good point — but who is going to define people with good credit and bad credit. After all the geniuses who were supposed to measure our credit and keep us safe — the banks – doled out debt like heroin. and now they are themselves “bad credit worthy” and as a result it is hard to believe that.

    On your specific comment, yes I do agree — people are facing a different kind of reality today.

  6. The comparison is similar to the situation where you visit a city one a month on different days. If you rent a studio you have peace of mind that you can show up anytime. You’ll pay monthly whether you’re there or not. For some people, prepaid would be wise, but they swallow the koolaid of a free phone or a cheap iPhone.

  7. PrepaidWirelessGuy Monday, December 8, 2008

    This makes a lot of sense. Aside from the handset subsidy available on postpaid plans, postpaid really makes no sense as a payment option. Prepaid has become so competitive, and provides tremendous value, that it will continue to grow. Just look at other countries like Europe where prepaid has always been the predominant payment method. The stigma that prepaid has in the States will ultimately change, and prepaid will take over!

    I’ve compiled the major per minute, per day, per month, and monthly unlimited plans on my site to help consumers zone in on the best option to meet their needs.

    Cheers,
    PrepaidWirelessGuy
    http://www.prepaid-wireless-guide.com/compare-prepaid-plans.html

  8. Very interesting ideas here, and I was able to ditch my phone company for MetroPCS for a few months. I saved on the handset by flashing my old Helio Ocean, and was ready for the savings. I signed up for $50 a month for unlimited talk and text, but was effed in the a when I actually used the service. Metro’s service is incredibly weak, even in San Francisco, and only one corner of my apartment got service. I’d get dropped calls, and would have to send a confirmation text to make sure it went through.

    Like everyone else here said, the U.S. also has been conditioned to get subsidized phones. I know it’s the opposite around the world, but we’re America darnit, and we don’t like to change. Not to mention we have at least 120 million subs on CDMA technology, ridiculously separate 3G bands, and controlling carrier – making the unlocked SIM-swapping culture much more difficult to maintain.

    Still, pre-paid does have its place, and AT&T will tell you that they sold far more Go Phones last year than iPhones. It’s just the sexy gadgets get most of the press attention.

  9. Agree that prepaid as a trend is accelerating. One important prepaid carrier you haven’t mentioned, however, is Boost Mobile.

    It seems with prepaid growing, some new prepaid users believe they are sacrificing cool phones and reliable service. Not so with Boost. Boost is wholly owned by Sprint Nextel and therefore runs on its dependable nationwide iDEN network – and we’re talking real nationwide that reaches over 15,000 cities – not a few hundred cities that other prepaid companies have been claiming equals nationwide. And in 1Q of 2009, Boost will be rolling out an Unlimited plan, so everyone get excited! Boost phones are hip, durable, and come with great features like GPS, camera, ringtones, Web, and more. While Boost is not the cheapest prepaid option out there, it is definitely the best value for your buck. For more info, check out http://www.boostmobile.com.

  10. I have to say, that as someone outside the US, I find the predominance of contracts a bit sad at times.

    Part of the problem is Image as many have already mentioned, and a large part is also the limited options.

    In the rest of the world, Pre paid is a much more viable option because carriers understand that different people have different usage needs and offer flexiable affordable plans as well as cool handsets.

    Here in the UK (Whee I am now), most carriers have 3 to 4 if not more Prepaid plans, which you can choose based on whether you call more in network, out network, text,etc and most if not all also offer competitive pricing on things like 3G data (avg £15 = $25 for 3GB per month) as well as cheaper international calling rates etc.

    So while contracts offer the most expensive phones free or heavily subsidised, you can also get them on prepaid, though you might have to pay a higher price, but you at least have the option. As such if your usage is not high enough for you to justify paying such high monthly costs, you can still get the phone you want, while keeping cotrol of your monthly spending.

    And the easy availability of Unlocked phones, and Number portability on prepaid phones means that carriers have to be competitive if they want to hold on to their customers.

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