Two out of three new U.S. wireless subs go prepaid

For every three consumers in the U.S. that adopt a new wireless plan, two will opt for a prepaid alternative to the more expensively monthly contract. This statistic, cited by the New Millennium Research Council (NMRC), a Washington D.C.-based think tank, confirms what it predicted one year ago: that prepaid would continue its growth in response to widespread penny-pinching.

In a survey of 2000 consumers the NMRC conducted last March, 39% - or around 60.3 million – of U.S. consumers said they were contemplating cutting back on their cell phones to save money if the recession continued. The NMRC followed this up with an October 2009 release that stated the explosion over the summer and early fall in increasingly inexpensive and diverse prepaid plans was most likely the tipping point for most consumers to turn their threats into action.

Ovum and IDG both confirmed that the fourth quarter of 2009 was the first time that the number of new prepaid wireless customers in the U.S. outnumbered new contract-based cell phone providers. NRMC is betting that this trend will continue on into the first quarter of 2010 and throughout the rest of the year.

According to NRMC’s latest quarterly findings:

• New prepaid cell phone subscribers accounted for nearly two-thirds, or 65%, of the 4.2 million net subscribers added by U.S. phone carriers in Q4 2009.
• Prepaid providers grew 17% in Q4 2009 to 54.4 million subscribers, up from 46.3 million the previous year.
• Contract-based cell phone service grew only 3% over the same period of time.
• One out of five cell phone subscribers are now using prepaid phones, bringing prepaid users to 20% of the total wireless market, up from 18% at the end of 2009.
• There were 285 million total wireless subscribers in the U.S. at the end of 2009.

Jose Guzman, project coordinator for NMRC, declared this the “era of cell phone penny-pinching,” and he said it would persist long after the recession thanks to the rapid growth of all-you-can-eat and unlimited prepaid deals as low as $30 to $45. Leap Wireless’ prepaid Cricket service was the first to introduce a low-cost prepaid plan without taking the prices lower last week. Prior to that, falling prices was the name of the game, causing all the prepaid players and even some postpaid ones to respond.

John Breyault, vice president, of public policy, telecommunications and fraud for the National Consumers League, also noted that outrageous early termination fees, which the FCC is investigating, expensive bandwidth-capped data plans and increasing pay-as-you-go text messaging rates on postpaid plans are also driving consumers to look for prepaid alternatives.