Survey says prepaid phones are gaining popularity

The weakened economy is causing many Americans to take a hard look at their budgets, and a recently released survey by the New Millennium Research Council suggests that their monthly cellphone bill is one of the primary expenses people are trying to reduce. Over 60 million consumers are likely to eliminate some of their cell phones services and features if the economy continues to worsen, according to the survey of about 2,000 respondents.

In the last six months, about 15 percent of those polled have decided to eliminate extras such as internet connectivity and text messaging. An additional 40 percent of respondents who currently have these features replied that it is somewhat or very likely that they would get rid of these extras if the economy continued to decline.

Allen Hepner, a scholar with New Millennium Research Council, said in a statement that “The era of cell phone penny pinching is officially here. Thanks to the recession, the U.S. cell phone marketplace is undergoing fundamental changes that will just get bigger as the economic downturn deepens. What we see in these survey findings is clear evidence that most consumers will keep a cell phone during this recession, but only after shifting to less expensive cell phone plans, such as prepaid, and also by scaling back on cell phone extras...”

Prepaid plans have become more popular with consumers who are trying to cut costs because they require very little commitment which is often attractive when finances are uncertain. Over sixty percent of respondents with prepaid phones believe they are saving money compared to what they were paying for a contract-based or land line plan. The Telecommunications Research & Action Center, a non-profit education and advocacy organization, has also recently emphasized that many consumers could reduce their monthly bills by switching to prepaid phone service.

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--Bridget O'Sullivan

Prepaid cellphone plans gain popularity

Many consumers are looking to cut as many expenses as possible out of their budgets, and the long-term cellphone contract seems to be the next casualty. Once the plan of choice for shifty characters who wanted to change their phone numbers frequently, prepaid options are rapidly gaining popularity with frugal shoppers.

Providers are also offering a variety of choices that make prepaid plans more attractive to consumers. Some plans allow customers to buy one-time-use cards in increments of $25 or $50 dollars, for example, and the balance is debited as calls are made or text messages are sent.

Other plans resemble the more traditional long-term contracts. Customers pay a monthly fee for a predetermined service plan, but they pay up front and the agreement is only month to month.

As the popularity of these services has increased, so too has the selection of phones and other hardware that accompany the prepaid plans. A major difference between choosing a long-term contract and a prepaid plan is that prepaid customers often have to pay for the phones themselves. To entice customers to sign on often for several years at a time, providers have traditionally offered phones for free. Over time, however, a prepaid plan plus the purchase price of a phone could still be more cost-effective than a long-term contract.

Prepaid contracts may also be a welcome vehicle for growth for the wireless industry. According to CTIA, a wireless trade group representing wireless communication providers, wireless penetration reached 85% in the United States as of June 2008.

Additionally, The New York Times reports that over half of the customers T-Mobile added in the fourth quarter of 2008 were prepaid customers. In some metropolitan areas such as Boston, providers such as MetroPCS are entering the market offering only prepaid plans.

--Bridget O'Sullivan