Prepaid Wireless Proves Popular During Recession

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

Pre-paid customers grew during the recession and its aftermath as wireless users sought ways to avoid long-term contracts and related costs paid by post-paid customers, said IDC analyst Richard Murphy.

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

By 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 customers, however, might realize they only need a phone for voice and text messaging, and will reserve their Web browsing for a desktop or laptop to save on monthly costs, he noted.

"The prepaid market in the U.S. will remain very competitive," said Murphy, noting that several carriers are most active in the space. At the end of 2009, TracFone led with 14.4 million prepaid customers, Boost (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.

The nation's largest wireless carriers, Verizon Wireless and AT&T, both appear to be 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.

IDC recorded that 4.2 million net subscribers were added by all the nine largest carriers in the fourth quarter of 2009, with 65% of them pre-paid 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 post-paid 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 a data plan. 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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