For decades, we have had one notion about “prepaid” mobile phone service. It was a product useful to, and purchased, by consumers who could not afford postpaid service, were unbanked or credit challenged. Over time, that definition has expanded to include “youth-oriented” services, where the economics of service still are important, but brand actually has been more important as well.
We might be seeing something different, though. As Virgin Mobile USA announced it will offer iPhone to its prepaid customers beginning Friday, June 29, 2012, becoming the second “prepaid” mobile services provider to have that privilege, as Leap Wireless also will sell the Apple iPhone, we could be seeing a couple of interesting changes in the mobile market.
Though the traditional “prepaid” market segment will remain, we could be watching the emergence of a potentially-new segment, “pay as you go,” which at least in principle is distinct. You might say “pay as you go” is a retail packaging or payment preference, not so much a demographic descriptor. In other words, we could see a much-bigger segment of the market opting to use smart phones and service plans on a no-contract basis, because they prefer it, not because they “must” buy in that manner.
Some will note that this possibly grows potential market share for the traditional “prepaid” providers, but that would be true only if the tier-one providers decide not to respond to the new market demand. It is possible that we could see a shift in buying behaviors that do not reflect the demographics of buyers, but only their payment preferences.
Virgin Mobile USA will offer iPhone 4 and iPhone 4S with its “Beyond Talk” unlimited data and messaging plans as low as $30 per month on the Sprint Nationwide Network. That could be important. Many executives at mobile firms, unable to sell the iPhone, have noted the disadvantage. Having the iPhone should help.
But it remains possible that the tier-one service providers, who tend not to like the prepaid business for its thinner profit margins, might decide not to comptete, at least initially. If so, the “prepaid” mobile service providers, which have been unable to sell the Apple iPhone, could gain more market share. Since Virgin and Leap Wireless now sell the iPhone, some of that “you can’t get an iPhone” disadvantage is removed.
To be sure, consumers at Virgin Mobile USA and MetroPCS will have to pay full retail for their devices. But that also should provide a key test of consumer demand for doing so. If “prepaid” customers in large numbers change their behavior, all other carriers will be free to start experimenting with non-subsidized service plans as well.
Virtually all global mobile carriers would prefer to be in that situation, and we might now get a true test of consumer willingness to pay full retail for their coveted devices.
The iPhone will be available without a contract and with no fees for activation or roaming. New and existing customers can purchase iPhone atwww.virginmobileusa.com, RadioShack, Best Buy and select local retailers.
