Prepaid wireless market hot in U.S. during recession

Computerworld - The hottest segment of the U.S. wireless communications market is made up of customers who prepay for their service, with that group accounting for 65% of all net new subscribers in the fourth quarter of 2009, research firm IDC said.

The number of prepaid customers grew during the recession and its aftermath as wireless users sought ways to avoid the long-term contracts and related costs borne by postpaid customers, said IDC analyst Richard Murphy.

Prepaid plans can also result in tremendous savings in comparison with the monthly costs of postpaid plans, Murphy noted. For example, a savvy consumer can get unlimited voice, text and Web access for $45 a month with the prepaid TracFone Wireless Straight Talk plan, he noted.

In contrast, a postpaid subscriber can easily spend more than $100 a month for service for an iPhone or other smartphone, he noted. "Some customers are more driven by the phone they want, so if you go for an iPhone you are probably not going to really care about the monthly cost at 100 bucks or more a month," he said.

Some careful consumers, however, might realize they only need a phone for voice and text messaging and will do their Web browsing on their PCs to save on monthly costs, he noted.

"The prepaid market in the U.S. will remain very competitive," said Murphy, noting that certain carriers are most active in that niche of the wireless market. At the end of 2009, TracFone Wireless Inc. led with 14.4 million prepaid customers, Boost Mobile (with the addition of Virgin Mobile) had 10.6 million, T-Mobile USA had 7 million, MetroPCS had 6.6 million, and Leap Wireless had 4.9 million.

It appears as though the nation's largest wireless carriers, Verizon Wireless and AT&T, have been moving away from the prepaid model in recent months, even though they each had about 5.4 million prepaid customers at the end of 2009. AT&T actually lost 800,000 prepaid customers in 2009, while Verizon gained 500,000.

In the fourth quarter of 2009, IDC reported, the nine largest carriers added 4.2 million net subscribers, and 65% of them were prepaid customers. Overall, there were 285 million wireless subscribers in the U.S. at the end of 2009.

Some carriers are focused on bringing in customers on postpaid plans, luring them to use smartphones that rely on data plans. "To keep their revenues up, they have to focus on selling data plans," Murphy said.

"The first step for a consumer walking into a carrier's store is to pick out a phone, and that often means getting the customer toward a smartphone that obligates the user to [subscribe to] a data plan," he said. "That's just the way the marketing is, since the wireless business is very competitive and the carriers are competing for every dollar."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.

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