Prepaid Cellular Plans US: Part 1, Market Overview
Fast-paced technological advancement and innovation in the telecommunications industry have resulted in an increase in competition between telecom companies in the United States. This has led to a greater focus on prepaid services with companies offering competitive upgrades and services in prepaid plans. This has proven to be great for customers as the prepaid plans now have lower prices and better quality.
INDUSTRY FORECAST AND NUMBERS
According to a 2017 customer study by Market Force International, prepaid numbers are consistently on the rise. The number of prepaid users doubled from 5% in 2016 to 10% in 2017.
BestMVNO also predicts that the numbers of the prepaid industry will continue to rise due to the emergence of prepaid MVNO's (mobile virtual network operators).
PREPAID CATCHING UP WITH POSTPAID
Historically, the average revenue per user (ARPU) for postpaid services has always eclipsed that of prepaid services. However, the gap between postpaid and prepaid ARPU has decreased immensely. This increased profitability of the prepaid industry has led telecom companies to focus on the domestic prepaid business, which was previously largely ignored. For example, in 2017, Verizon began a campaign to gain back ground in the prepaid market which it had previously ignored in favor of its postpaid business.
INCREASING COMPETITION IN PREPAID SERVICES
MetroPCS Communications which is T-Mobile's prepaid brand, offers unlimited LTE data with talk and text for $75 for two lines. Boost Mobile, which is Sprint's prepaid subsidiary offers an unlimited prepaid plan for $50 per month for the initial connection and $30 per month for each additional line. The plan costs $80 per month for two lines. Cricket, which is AT&T's wireless brand reduced the prices of its unlimited prepaid plan from $70 to $60 per month. While United States Cellular Corp. offers prepaid plans for $70 per month with unlimited high-speed data.
Due to this increasing competition, prepaid services also use additional service differentiators to make themselves stand out in the industry. MetroPCS supports video streaming in 480p standard definition and offers a $100 instant rebate for new customers on each line for a device. Boost Mobile offers international advantages like unlimited talk and texts to Mexico and 8GB in roaming data. Boost also offers mobile-optimized streaming in high definition.
Emphasis ON UNLIMITED DATA
While unlimited talk and text is still valued, stiff competition in the postpaid markets has led to a growing trend of unlimited data plans in the prepaid market. The unlimited data war from the postpaid market has now extended to the prepaid market. This has led to many telecom companies increasing their prepaid data offerings like MetroPCS, which just increased its 8GB monthly plan to unlimited. Similarly, United States Cellular Corp. has added high-speed data to its prepaid plans. The company also added more data to its $35 and $45 prepaid plans. Sprint, T-Mobile, and AT&T have all followed suit and now offer unlimited data plans.
GROWING INFLUENCE OF MVNO'S
MVNO's (Mobile virtual network operators) have emerged as popular and inexpensive alternatives to larger network providers. According to MobileBurn, "An MVNO is a company that sells mobile phone service by making use of another company's existing network infrastructure. An MVNO will have its own rates and calling plan features, its own billing system, and its own customer service department".
Almost all of MVNO plans are prepaid and the MVNO companies use networks of major carriers, some even being their subsidiaries. MVNO's have emerged as prominent players in the telecommunications market with the rise of prepaid plans. In the Market Force study of 2017, Consumer Cellular which is the MVNO of AT&T and T-Mobile, ranked number 1, with Straight Talk Wireless, Cricket Wireless, and Virgin Mobile taking the second, third, and fourth place respectively.
Despite the consistent rise in prepaid and MVNO's, the conventional in-store experience is still valued by customers. The 2017 Market Force study revealed that over 1/3 of those surveyed had visited a carrier's retail store in the past three months. Amongst those respondents who went to the stores, 24% bought new phones, 16% got their phones fixed, and 15% changed their service plan. This trend is crucial for MVNO's and has resulted in TracFone building its own stores and Consumer Cellular providing customer service at Target stores.
To wrap up, the prepaid wireless industry has grown from 5% to 10% from 2016 to 2017. The rise is connected to cheaper rates, more options, and growing popularity of MVNO's. The industry is extremely competitive with service providers competing over customers by providing unlimited data, customer service, and other service differentiators.