Prepaid Plans Gain Popularity in the U.S.

If you read this blog, then I’ll go out on a limb and guess that you probably have a prepaid phone or at the very least, you’re interested in prepaid phones. Now, it might be because you don’t use your phone very much or because you want a smaller bill. But whatever the reason, you most certainly aren’t alone. A recent report released by NPD Group shows that prepaid phones are gaining ground over the postpaid market. I read this report in part of a long series of articles and graphs analyzing Sprint’s recent attempts to turn the failing company around. And while most of the report deals directly with Sprint, a small section was about prepaid offerings in general. The results were a little surprising at first, but the more I thought about it, the less surprised I was. The report indicated that prepaid mobile phone sales had jumped by 11% from the beginning of 2012 to 2013. Now, that might not sound like a whole lot, but when you stop and think about how many mobile phones there are in the US–reports indicated that 91% of all adults have a mobile phone, and in 2011 there were more phones than people in the US (which, by the way, is in the 300 million range)–suddenly 11% seems like an awful lot. Here is the handy chart that accompanied the report:

Clearly postpaid is still the majority, but that increase over the course of a year is definitely noticeable. And, judging by the slew of recent acquisitions of MVNOs by all four major cellular companies in the last year or so, clearly they have noticed as well. Because postpaid consumers are more profitable to these companies, we’ve also seen a recent shift in phone financing, led by T-Mobile, where companies are convincing customers that singing a two year contract for their $400-$500 phones is less scary and less prohibiting than a two-year contract for phone services. It seems to be working (or, at the least, they are advertising like it is) but I imagine that in a couple of years, consumers are going to wise up again and the industry will shift once more. Then again, it took us quite a while to realize that contracts weren’t the only way to go, so maybe I’m being too optimistic. Anyway, it’s kind of neat to see the prepaid market continue to grow and expand despite the downfalls of less robust networks, occasionally unreliable businesses and upfront phone costs. After all, in this economy, price is just as important as anything else, and until the major phone companies drop their prices, I wouldn’t be surprised to see this trend continue. What do you think? Are these numbers surprising? Let me know what you think in the comments!]]>