Prepaid Cell Phone Plans Are the New Growth Industry

The cell phone market has changed in the past several years. Though the total cellular phone market continues to grow, conventional postpaid plans are now getting smaller in overall market share. Postpaid programs are rapidly being succeeded by less costly prepaid plans.

The two typical types of mobile cellular service plans are prepaid and postpaid. Prepaid plans allow you to pay for your airtime upfront. With postpaid plans – otherwise known as contract plans, you pay for your minutes at the end of the month. Postpaid plans require a credit check and a contract due to the fact you pay for your minutes after you have used them.

The cell phone marketplace has grown each year since its beginnings, and the overall sector continues to grow. In The United States, over 80% of the public at this point use cell phones. That trend is growing, though substantially less quickly today than in prior 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.

In the mean time, new prepaid subscriptions are expanding. In 2008 in excess of 50 percent of brand new cell phone users decided upon prepaid mobile phone service. The following year, in 2009, in excess of 80 percent of new cell phone subscription growth came from prepaid service plans.

In the past, prepaid service plans were used by two kinds of consumers: teens and people with bad credit. Since classic postpaid programs call for a credit check, some people were incapable of purchasing a standard postpaid plan. In the past, those people with bad credit or even no credit history composed the majority of the prepaid user base. The one negative aspect of prepaid plans, up until just recently, was that prepaid cell phone plans were much more expensive in comparison with postpaid programs.

However, a few years ago the cost of prepaid plans began to fall. Now prepaid mobile phone service plans are significantly less costly than postpaid plans. Numerous prepaid companies are providing unlimited airtime plans that are less expensive than similar postpaid service plans that have 500 minutes of airtime. The cheaper cost of prepaid plans, along with the economic recession, is fueling the intense growth of the prepaid phone sector.

As expected, the cell phone companies are not completely happy with this, given that they earn significantly more profit on contract programs when compared to prepay. There are several reasons for this is. The first is that contract programs are more expensive than prepay plans. Classic contract plans can run in excess of $80 a month whereas a prepay plan with comparable airtime could be as inexpensive as $40. Second, not only do contract plans earn more profit for the cell phone companies, but they have a risk-free income stream by locking their customers in with long-term contracts. The 3rd reason contract programs are so cost-effective for the cell phone companies is that they outrageous fees if you exceed your minutes allocation, usually 25 or 50 cents for each minute. This can add up rapidly and many folks have accidentally run up huge cellular phone bills because they went over their minutes.

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 cell phone programs remain popular with buyers. The most important factor is that the handsets that they offer are cheaper, at least upfront. Many people continue to choose post-paid service plans because they can not afford a $500 mobile phone. The mobile phone company will finance the price tag of the cell phone when consumers sign a 2 year contract. When compared, prepaid models are definitely more expensive since none of the price is subsidized. Clients have to shell out top dollar for pay as you go models. What customers do not recognize is that post-paid service plans are able to pay for the price tag of the mobile phone since they recognize that over the course of 2 years they’ll make up the cost of the handset.

Prepaid plans continue to increase in popularity, though. They just simply make more sense for users financially. We seem to be stuck in the current recession. The reduced rates of prepaid phone plans will continue to boost their popularity and a great many more consumers will pick prepaid service plans over the classic postpaid programs.

To find out more about prepaid cell phones, then visit Sarah Mitchel’s site on how to choose the cheapest prepaid plan for your needs.