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Oct 21, 2015

Wireless Industry Continues to Evolve

Prepaid/No Contract a Favorite Consumer Choice

Arlene Hauben

In the days when no contract wireless was still called prepaid, service providers struggled to gain acceptance of their plans and products. Some people referred to the prepaid phone as the “product of thieves.” Gradually, prepaid became exciting – was reinvented as “no contract” and went mainstream as recession-hit consumers became value-conscious.

“In previous years, the prepaid/no contract market was mainly geared towards $5 and $10 top up and the underbanked consumer. Today, consumers are savvy and do their research before making decisions,” said Anthony Martinez, VP-Wireless Business Development, InComm.

The stigma of prepaid has long vanished as wireless service competition grows and better handsets offer more coverage and functions. “Convenient payment technologies are in demand and expanding as consumers look to top up their wireless accounts beyond just traditional pins and cards,” noted Martinez.

Mobile technology and handset design are invigorating the market. On top of the list of consumer preferences is data. Subscribers want super fast internet access because they have gotten used to using their mobile phones for watching videos, shopping on the internet, and using apps. This all requires a lot of data bandwidth. 

Martinez said that the growth of smartphones can be attributed to lower product pricing on the prepaid/no contract side and more choice. Other innovations include the introduction of handset financing and Bring Your Own Device, as well as a continued drive towards unlocked devices.

In terms of category growth, prepaid/no contract subscribers are 77M today and are expected to reach 93.8M by 2019. No contract service revenue was $25.7B in 2014 and is forecasted to reach $32.9B by 2019.

There is another piece of the pie that continues to grow, which are Lifeline programs, according to Martinez. Lifeline is a government assistance program to provide cell phones and wireless airtime to underprivileged US citizens.

Courting the Demanding, Deal Watching Customer

Promotions and deals serve to shake up the prepaid wireless market. At a Boost store in Delray Beach, FL, the emphasis is on service and great deals. “Boost is cheaper, but you have to get a Boost phone,” said the salesperson. “Every month we have new deals and promotions. If someone comes from T-Mobile, AT&T or Metro PCS, they can keep their own phone but get a new phone free, just pay to activate.” 

Customers can have unlimited talk and text on plans valued at $35, $45 and $60 a month; respectively, data is 2GB, 5GB, and unlimited data for three months.

An example of what consumers want is the HTC Desire 510 on the Sprint 4G LTE network. With ultra fast speeds, users browse quickly using the Qualcomm Snapdragon quad-core processor. The handset delivers high performance with a beautiful design together in an affordable package. It is available at Boost Mobile retail stores in white, according to Danielle Babbington at Sprint. She said that Virgin Mobile customers will be able to order the blue device online soon. Both Boost and Virgin Mobile offer the device for $99.99.

The Big Four carriers are competing with successful MVNOs, such as Cricket Wireless, Virgin Mobile, and Ultra Mobile, to name a few, by offering prepaid/no contract plans of their own. AT&T has introduced a family-friendly four-user plan that works out to $40 per user per month, with 10GB of data to share between them.

At Best Buy, Go Phone plans from AT&T had two choices for $45 and $60, no contract variety. The less expensive plan comes with unlimited talk, text and data, with the first 1.5GB at high speed. The other, more expensive plan, differed in that it came with 4GB at high speed and unlimited calling to Mexico and Canada. The one-time handset costs were listed as $119.99 for an Asus Zen and $59.99 for a ZTE Maven, representing economical product pricing and choice.

Virgin Mobile, a Sprint prepaid brand, teamed up with Walmart to offer the first prepaid 4G LTE data share plan, called Virgin Mobile Data Share. Such data sharing plans have been popular with the major US wireless carriers.

Virgin's plans start at $30 per line. You can pay $90 a month for three lines, with unlimited talk, unlimited text and 8GB of shared data. A two-line plan with 4GB of shareable data fetches $65 monthly.

Virgin's so-called "Data Done Right" sharing options are also available. The deals are exclusive to Walmart and limited at the moment to four specific 4G LTE-capable smartphones: the HTC Desire 510 ($99.88), LG Tribute ($79.88), LG Volt ($149.88) and Samsung Galaxy Core Prime ($129.88).

SIM Cards the Identifier

The availability of SIM cards is also driving the mobile market. Mara, a sales associate in the prepaid department at Best Buy, explained that iPhone owners can use a SIM card to go on a T-Mobile plan. If they want service with AT&T or Verizon, they can go to go to that carrier to buy a SIM card, a portable memory chip in cell phones that operate on other networks. 

SIM cards are convenient and popular with many users and are a key part of cell phone technology. They can now also be used in iPads and iPhones. The main benefit of a SIM card is that you can easily swap phones on your own. Travelers going abroad can buy a SIM on a local carrier and use that as a way to avoid expensive roaming fees (carrier restrictions and lockouts may apply).

In Q2 2015, nearly 90 percent of new phones purchased within the prepaid/no contract wireless market were smartphones. With the recent announcement by Apple regarding iPhones and unlocked phones, the direct-to-consumer conversation is being brought to the forefront by the industry and other OEM's, Martinez said.

“This will support the growth of the Bring Your Own Device programs, which provides a SIM card and airtime for unlocked devices. The growth of unlocked phones and trade in's will expand as consumers will have more choice for second hand quality devices,” said Martinez. “Many of these consumers will choose prepaid to activate these devices. Prepaid/no contract is now a consumer choice that offers immense value, quality handsets and greater wireless freedom.”

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