The makeup of the cell phone market has changed in recent times. The overall cell phone market continues to increase, but standard post paid programs are decreasing in entire overall market share. Contract plans are quickly becoming replaced by lower priced prepay mobile phones.
The two basic varieties of phone service plans are prepay and contract plans. With prepay, you pay for your airtime ahead of time. With contract plans, you pay for your minutes after you’ve used them. Contract programs require a credit verification because you are essentially using your minutes on credit.
The mobile cellular market continues to grow every year. In the US, about 80 percent of the country uses cell phones. That trend will continue to expand, however a great deal less quickly today than in recent years.
Traditional contract cell phone programs have been the prime segment within the mobile phone market and that sector has increased every year. However, in 2008 the growth trend of contract plans began to slow. From 2008 to 2009 the total additions of new contract plans fell 58%. In 2009 contract subscriber growth in fact reversed and the industry share is now getting smaller.
Meanwhile, prepay subscriptions are increasing. In 2008 in excess of 50% of new cellular phone users signed up for prepay phone service. The next year, in 2009, in excess of 80% of mobile cellular buyer growth came from prepay service plans.
Traditionally, prepay mobile cellular service plans were used by several types of people: students and people bad credit scores. Since traditional post-paid programs require a credit verification, some bad credit history have comprised the bulk of the prepay market. The one downfall of prepay programs was that they have been more expensive than contract plans.
Two years ago the price tag of prepaid plans started to drop. Currently prepaid cell phone service plans are substantially less costly than post-paid service plans. Quite a few prepaid providers are even providing unlimited airtime plans that are less expensive than equivalent post-paid service plans that have 500 minutes of airtime. The present affordability of prepaid programs and the economic recession are fueling the intense progress of the prepaid cellular phone market.
As expected, the major phone companies are not exactly pleased with this, considering that they earn much even more revenue on postpaid programs as compared to prepaid. There are several factors for this is. The first is that contract plans are more expensive than prepaid programs. Conventional postpaid programs can run upwards of $80 per month even though a prepaid plan with a similar amount of minutes might be as low priced as $40. Second, not only do cellular providers generate much more income on postpaid programs, but they have a secure, repeated revenue stream by locking their users into 2 year contracts. The last reason postpaid programs are so profitable for the phone companies is that they charge exorbitant prices if you go over your minutes, often 25 to 50 cents for each minute. This can add up quickly and many consumers have unexpectedly run up enormous bills of many hundreds of dollars.
Obviously, with prepay service plans, you don’t have these problems. Prepay programs are now less expensive per minute and they don’t require service contracts. In addition, should you exceed the airtime that you have paid for, it is easy to just purchase more airtime.
Contract plans continue to be preferred by shoppers, though. The most important reason for this is that the cell phone handsets that come with contract plans are inexpensive, at least in the beginning. Many consumers continue to select contract plans because they can’t afford to pay $500 for a phone. The cell phone company will subsidize the price tag of the phone when purchasers sign a 2 year contract. Prepay plans, on the other hand, tend to have more expensive handsets since none of the price is subsidized. Buyers have to pay full price prepay phones. What consumers do not seem to recognize is that the contract plans are able to subsidize the cost of the handset since they recognize that over the course of a 2 year contract they’ll make up the price tag of the phone – and much, much more.
Prepay plans continue to gain market place share. They simply make more sense financially for consumers. The country’s economy has been depressed for many years and there is no indication that it’s getting better. The lower total cost of prepay cell phone plans will continue to fuel their growth and more consumers will choose prepay plans over the classic contract plans.
Looking to keep up with prepaid cell phones, then visit Prepaid Cell Phone News to learn about industry news.
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