Wal-Mart Crashes the Prepaid Party

wal-martThe cutthroat prepaid market will get even more competitive this weekend when Wal-Mart begins offering no-contract plans at bargain-basement rates. The planet’s largest retailer said it will roll out TracFone Wireless’ Straight Talk, which offers a $30-a-month plan as well as a $45 monthly rate that includes unlimited text messaging and mobile web access. 

But the big question in the prepaid segment is just how cheap plans can be and still be profitable — particularly when it comes to delivering data. Text messaging doesn’t command nearly as much bandwidth as other data applications, and TracFone’s antiquated lineup of phones surely limits its customers’ use of the mobile web, which can weigh down the network.

The recession has sparked a surge of consumer uptake of cut-rate prepaid services (GigaOM Pro, sub. required), and service providers such as MetroPCS and Leap Wireless have engaged in brutal price wars to increase their share of the growing market. (Prepaid has become so attractive, in fact, that Stacey has taken the plunge.) Sprint is hoping to join the mix, too, with its $483 million acquisition of Virgin Mobile USA. Wal-Mart’s move could up the ante in two key ways: Not only do the price points undercut most competitors’ offerings, the chain will sell Straight Talk at more than 3,200 stores nationwide.

But as the race to the bottom approaches the finish line, the prepaid guys will have to choose between offering older handsets that aren’t optimized for data consumption or surrendering in the prepaid price war. I’m sure plenty of users don’t mind phones with limited memory and shoddy mobile browsers — in fact, some of my friends are very happy with those kinds of devices — but offers of “unlimited mobile web access” won’t be nearly as compelling when they’re packaged with dated handsets.

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