Just like Ronald Reagan claimed with his trickle-down economic plan, wireless customers are beginning to see unlimited offerings filter down to cheaper price points and in some cases to offerings that do not require a cumbersome contract.
Last week Tracfone Wireless Inc. subsidiary Net10 jumped into the increasingly popular unlimited-service-plan play with its new Net10 Unlimited Plan, which offers unlimited calling and texting for $80 per month. Per Tracfone’s modus operandi, the unlimited offer does not require a contract or credit checks, though a customer does have to set up a recurring payment system using a credit card.
The offering one-ups rival Virgin Mobile USA Inc. – that carrier’s recently launched Totally Unlimited plan also offers unlimited calling without a credit check or contract for $80 per month – with the unlimited texting option, unlimited usage of Net10 Mobile Web and unlimited calls to directory assistance. Virgin Mobile USA allows customers to add unlimited texting for an additional $10 per month as well as unlimited data services.
Both offerings trump plans from the nation’s largest operators in that they do not require a customer to sign up for a contract and in some cases also undercut their larger competitors on price. AT&T Mobility and Verizon Wireless offer unlimited calling plans for $100 per month, while T-Mobile USA Inc. provides unlimited texting with its $100-per month calling plan and Sprint Nextel Corp. throws in a bushel of data offerings with its unlimited plan.
The plans also could pressure flat-rate, unlimited calling plans from regional operators Leap Wireless International Inc. and MetroPCS Communications Inc.
Changing perceptions
William Ho, analyst at Current Analysis, said in a report that, although Net10 isn’t quite as well known as the Virgin Mobile USA brand, launching this plan is a good way for Tracfone to draw in higher-value customers and possibly improve its $11 average revenue per user.
However, prepaid plans are typically known as being an outlet for lower-value customers and those who don’t use quite as many minutes each month, begging the question, will prepaid customers be drawn to unlimited talk plans?
Jayne Wallace, of Virgin Mobile USA, thinks the answer is yes.
“I know in general that there’s a misconception that prepaid is only for those who don’t talk a lot, but if that was the case, we wouldn’t have 5 million customers,” Wallace said. “It’s really for anybody out there who wants unlimited talk.”
However, Wallace did note that the majority of Virgin Mobile USA’s customers do not participate in the higher rate, more expensive plans with more minutes. She would not disclose where the majority do reside.
“We certainly know that a lot of our customer base is profiled as those who are very budget conscious,” Wallace said. “By what we offer, you can gauge who our customers are.”
Tracfone declined to comment on the new offering.
Providing a package
When asked about the new Net10 Unlimited Plan, Virgin’s Wallace said the mobile virtual network operator competes on a different level, not just voice plans. She isn’t worried about the fact that texting and data cost extra for Virgin Mobile customers.
“When we came out we were one of the most compelling offers,” Wallace said. “[We have] no roaming charges, no activation fees, the whole package. Not everybody needs the data services and not everybody uses the Web browsing. We hope that people look at our offers holistically.”
Wallace did say that adding unlimited text and data to its unlimited plan is something Virgin Mobile USA may consider down the line, but she didn’t offer any specifics.
“Different companies have totally different business models,” Wallace said. “[There’s] always things that we’re looking at from that perspective.”
National response?
The nation’s large operators are not expected to alter their current prepaid plans in an attempt to match the offerings, but analysts note they need to keep on eye on the segment.
Carriers have traditionally had a love-hate relationship with prepaid offerings; on one hand, they typically boost customer growth numbers, but on the other hand, prepaid plans also typically drive up churn and drag down ARPU numbers.
Verizon Wireless spokeswoman Brenda Raney said pre-pay is not a large part of Verizon Wireless’ business. “Given that we view pre-pay as one more option to make available to our customers, it’s different than a carrier who it’s a whole business for,” Raney said. “We don’t even feel they’re our competition.”
Regional response?
However, the Net10 plan may be more of a concern for regional carriers like Leap and MetroPCS, which have made their living targeting the no-contract crowd with unlimited offerings.
Leap noted that its offerings undercut the new entrants by as much as $50 per month and customers can fine-tune their plans if they are interested in adding data services, messaging or international long distance. Of course, the lack of a nationwide footprint could prove a detriment for customers looking to stay away from signing a contract, but that also need the convenience of broader coverage.
“Even with the latest unlimited entry, Leap Wireless and MetroPCS should continue to tout their cut-rate unlimited plans against rival postpaid and even prepaid unlimited plans from Virgin Mobile and Net10, leaving out mention that true nationwide roaming is excluded from their offerings,” said Current Analysis’ Ho. “These carriers still cater to a large population that does not need to travel outside their regional calling areas.”
Leap said it’s in the midst of expanding its reach and also has roaming agreements with nationwide operators.
