Prepaid services are continuing their march up the feature-rich ladder with an increasing number of operators beginning to offer wireless Web browsing services to their noncontract subscribers. Many operators offer basic text messaging or even more advanced access to downloadable content to their prepaid customers, but more carriers are beginning to open up the Web to their prepaid subscribers.
The move is supported by many analysts as a way to further entice the roughly 35 percent of the U.S. population that has shied away from wireless services so far, though some question the potential market for a customer base often more interested in price and coverage than premium features.
Prepaid mobile Web browsing services are offered by nationwide operators Cingular Wireless L.L.C. and T-Mobile USA Inc. as well as by prepaid-specific operators like Boost Mobile L.L.C. and Virgin Mobile USA L.L.C., which launched its prepaid mobile Web browsing service late last month.
Virgin Mobile USA Chief Marketing Officer Howard Handler said the company’s launch of mobile Web browsing for its prepaid service was a logical step following the launch of its data-capable Virgin XL service last fall. The Virgin XL service uses Sprint Nextel Corp.’s CDMA2000 1x network to provide wireless Web services to Virgin Mobile USA customers.
“It was a natural progression for us to offer mobile Web browsing,” Handler said. “Many of our subscribers have been using the Web for most of their life and to offer an extension of that to their mobile life just made sense.”
Handler added that while Virgin Mobile USA does not expect a rush of customers to jump on the offering, the company is confident it will find a niche among its users.
Analysts appear mixed on the adoption and usage of Web browsing services by prepaid customers.
The Yankee Group’s 2004 Mobile User Survey found that 21 percent of prepaid customers said they were active mobile browsing users, which was just below the 23 percent of postpaid customers who claimed they actively used mobile Web browsing. Prepaid Web browsing scored higher than downloading ringtones, graphics, screensavers and games and equaled active instant-messaging use.
“It might not be the most asked-for prepaid service, but there is definitely interest in prepaid Web browsing,” said Yankee Group analyst Marina Amoroso. “By offering the capability, carriers are making a good step in moving prepaid up from the second-class status it has been given by many operators to being on near-equal footing with postpaid.”
Current Analysis senior wireless services analyst Weston Henderek downplayed the marketing advantage of offering the capability to a customer base that has traditionally been more interested in pricing and coverage.
One challenge facing consumer adoption of the service is how carriers plan to price access. Most operators have settled on either charging a flat rate per month-which is favored by many analysts-or on a per-kilobyte model for postpaid Web browsing, but there appears to be a mish-mash of models for prepaid customers.
Cingular charges 1 cent per kilobyte of data sent or received on its network, while Virgin Mobile USA charges $1 per day for up to half a megabyte of Web browsing. T-Mobile USA charges a flat $1 per day for unlimited Web browsing, e-mail, text messaging and instant messaging from its Danger Inc. Sidekick device, while Boost Mobile charges a flat 20 cents per day for unlimited Web browsing privileges.
“We did a lot of research and talking with our customers on how to price the service, and found that simpler was better,” explained Virgin Mobile’s Handler, who noted that half a megabyte of data transmission equaled roughly 50 Web pages. “We are definitely not big fans of charging people for stuff they don’t want to use.”
The Yankee Group’s Amoroso applauded companies offering Web browsing to their prepaid customers, but said work still needed to be done on pricing models.
“I think many of the plans are just first steps that will allow the operator to get a handle on how people are using the service,” Amoroso explained. “It’s always easier to lower prices if adoption is slow than it is to raise prices if you start out too low.”
Analysts also have noted that prepaid consumers are prepared to spend slightly more for services as a trade-off to not having to sign a contract.
Carriers have been extremely aggressive during the past several months in re-pricing prepaid services in an attempt to lure customer segments that are expected to support future growth. A number of operators have introduced per-day charges that include lower per-minute pricing, while others have launched hybrid plans that include flat-rate monthly charges for a bucket of minutes.
“[Carriers] are definitely not afraid to try new pricing models in trying to lure prepaid customers, and I expect they will follow a similar pattern for prepaid data,” Amoroso added.
