It’s a prepaid future

The one-time rock of the wireless industry appears set to crumble. And I think that crumbling can’t come soon enough.
That rock is postpaid, contract-encumbered rate plans. These were necessary evils when the industry was rife with hundreds of wireless operators, each trying to poach each other’s customers. But times have changed. We are now operating in a near-monolithic market where there are only a handful of carriers, each offering nearly identical coverage and rate plans. The reasons for customers to jump ship are few.
Thus the rise of no-contract, prepaid services. The reasoning is sound: Why should I pay for something that I might use when I can pay for something that I am using.
Smaller players like Tracfone, Virgin Mobile USA, Leap and MetroPCS have made the no-contract space ultra-competitive and to this point have been relatively free of fierce competition from nationwide operators. But with growth among the postpaid, contract crowd slowing, that is no longer the case.
Fourth-quarter results showed both AT&T Mobility and T-Mobile USA relied heavily on the non-contract crowd for growth during the quarter, and Verizon Wireless, which has traditionally posted modest prepaid acquisitions, reported its slowest quarterly growth in more than five years. That could change as Verizon Wireless recently revamped its prepaid lineup in an attempt to make it more competitive with other offerings.
Perhaps the loudest shot across the bow came from Sprint Nextel’s Boost subsidiary, which last month unveiled its unlimited everything offering at $50 per month with no contract or credit check. The service undercuts the $100 per-month contract offerings from nationwide carriers, including its parent company.
This is not a new topic; carriers have dabbled with prepaid offerings in an attempt to attract more customers in the past. But, this time, with wireless penetration at nearly 90% and an economy that makes long-term financial commitments less favorable, the move toward no-contract offerings has more impetus.