Phoenix Unlimited

Tuesday, May 18, 2010

Postpaid vs. Prepaid

Over the past few years prepaid cellphone service has become more mainstream and therefor more prevalent everywhere you look.  Years past if you wanted to buy prepaid you understood that you would be charged a premium for every minute you talked.  The phones offered by prepaid companies were $19.99 and let’s be honest... those phones were really bad.
Ten years ago Cricket and MetroPCS launched in selected cities across the country with what became known as a Hybrid Prepaid plan.  They would offer unlimited talk for a set price with no bells and whistles.  Service was very restricted and spotty at best.  However, as those two companies matured and grew they began to offer better coverage and to be honest better service.
The biggest problem with the prepaid market is its reputation.  Most consumers would never choose a prepaid service because they think they will sacrifice quality of service over price.  Because of this reputation many customers have remained loyal to the Big 4 companies in the United States.  Over 250 million americans have a cellular device from either Verizon, AT&T, Sprint or T-Mobile.  Some of this data is misleading since it accounts for “devices” or “wholesale” rather than cellphone users but you get the picture.  Service revenue of the four companies are in the 30 Billion range
The year 2009 has marked an entire new era in cellular service.  The United States has a population estimated near 300 Million people.  Quick math will tell you that there isn’t much “Growth” left in the adoption rate for cellphones.  A friend of mine told her kid that he doesn’t need a phone since all his friends will have one.  A sad statement, but a true one in many cases.  The days of telling your parents that you couldn’t find a pay-phone will no longer work as an excuse for not calling when you are late.
Due to the ever shrinking potential market for the Big 4, they have recently started to offer prepaid service themselves.  The only carrier staying out of this game has been Verizon but as you’ll learn in this post that’s not entirely true.  The price wars have begun and the days when buying prepaid meant giving up this or that are over.
Recently, I read a news article saying prepaid will never have smart phones.  However, this morning I was on a conference call with the Sprint Prepaid Group (SPG), they announce Android phones will be sold under their prepaid brands of Virgin Mobile as well as Boost Mobile.  They also announced the rate plans.... $25/month for unlimited data/text/messaging with an Android phone and 300 minutes of talk.  
If you have a smart phone on Verizon, AT&T, or T-Mobile you know you are paying an additional $30/month for that benefit.  The cheapest you can have an Android operating system phone on Verizon is 90+ dollars a month and commit to a 2-year contract and 450 minutes a month of Talk.  
Verizon:                   450 minutes
Phone Droid            $80.00
Activation Fee        $35.00
Mthly Plan              $89.99
Mthly Service 2y      $2,159.00
Total cost  $2,274.00
Virgin Mobile:          UNLTD minutes
Phone Android $400.00
Activation Fee $0.00
Mthly Plan $60.00
Mthly Service 2   $1,440.00
Total cost          $1,840.00
Virgin Mobile:         1200 minutes
Phone Android $400.00
Activation Fee $0.00
Mthly Plan $40.00
Mthly Service 2y  $960.00
Total cost          $1,360.00
Virgin Mobile:         300 minutes
Phone Android $400.00
Activation Fee $0.00
Mthly Plan               $25.00
Mthly Service 2y  $600.00
Total cost          $1,000.00
The example above illustrates why prepaid is so attractive right now.  The draw back for prepaid really comes back to cost upfront verses cost over time in many cases.  Some of you noticed that earlier I said Sprint owns Virgin Mobile and Boost Mobile.  Virgin and Boost are not what the industry calls an MVNO.  In other words... when you call customer support you are talking to employees being paid by Sprint.  When you deal with companies like PagePlus, Tracfone, or SimpleMobile you are dealing with a smaller company and in most cases poor customer service.
Verizon has taken the approach to prepaid by allowing many MVNO’s to use their network.  Companies like Tracfone, and PagePlus are examples of this.  Tracfone recently launched in Walmart the SmartTalk brand offering unlimited talk and text for a great price.  I don’t want to say anything bad about this company since the rate plans are excellent and the coverage is... well... better than Virgin Mobile and Boost Mobile.  However, you give up the phones and data that Virgin and Boost offer since it’s well... Sprint.
So, why would anyone buy postpaid if prepaid is cheaper?  Good question.  Postpaid will always give you a better selection of phones.  Postpaid gives you access to all of their roaming partners so that you don’t have to worry about coverage in most cases.  Postpaid will give you excellent family plans.  (Virgin Mobile is rumored to be offering family plans by the end of the year.)  Companies like Cricket offer family plans, but they are often dummied down and in most cases not any cheaper than postpaid.
Our company sells Virgin Mobile, Boost Mobile, PagePlus, Simple Mobile and Airvoice Mobile.  Why so many?  Well, not all companies are created equal.  When selecting a cell phone company you really should ask the sales representatives what the differences are.  I can tell you from experience PagePlus customer service leaves you desiring more.  However, we sell this company a lot.  Why?  Because they have a really cheap price and great coverage.  You do lose some things when you leave Virgin Mobile and Boost Mobile who are owned 100% by a major Big 4 carrier.  However, in most cases you gain something of value.
I’m a big believer that postpaid with their 2 year contracts are too expensive.  Soon everyone will understand this and start switching over to prepaid.  Prepaid is very competitive and will remain so over the next few years.  Good luck when choosing your path.
If you have comments or questions... please post them below.

1 comment:

  1. AnonymousMay 19, 2010

    He has a big point there, another thing that with verizon/sprint/at&t ect is that those prices don't even include taxes, surcharges, and all the other million hidden fees they don't tell you about, with the plans virgin has it is a straight fee already includes all the fees you would be worried about, so those numbers up there stay firm with virgin mobile BUT verizon's tack on another min 300-400 dollars per 2 yr contract! it's ridiculous, although sprint is the only one that doesn't charge an extra 30 dollars a month for smartphone it doesn't change the fact that it is way more expensive for the service, you will be paying after taxes around 85 ish amonth for a smartphone, Verizon will be easily 100 per phone,then you have to wait 2 years before you can actually buy a phone for a reasonable price, prepaid stays the same for every customer new old doesn't matter, I can't believe how much people pay for there services, when right around the corner you can get the service for half the price OH and not to mention Virgin got an award last year for there outstanding customer service! Think 2 b4 u buy