Why don't more Americans use prepaid plans?
I read the New Millenium Research Council's report and I'm not satisfied with the answer. Seems incomplete. I think the way cell phone subscriptions are sold - buckets of minutes - is different from Europe. What do you think?
Clarification added December 4, 2008:
Here's a link to the study (PDF format):
http://newmillenniumresearch.org/news/120408_ORC_survey_news_advisory.pdf
Answers (11)
Bret O.
Assistant Store Manager at Famous Footwear
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Hi Esme,
While I know it isn't a definitive answer to your question, I am sure that many of us (Americans) utilize the service providers "bucket of minutes" plans due to family usage for our personal lines. I know that I would spend half of my time stocking up on prepaid if I had to cover the air time my spouse uses, and that isn't any worse than the average teen or college student. On the business side it just makes sense that a service provider plan is utilized to avoid issues in air time management when utilizing many cellular phones for one business, not to mention the ease of accounting with a singular billing.
Sarah M.
Recruiter, Sales, Motivation
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I use prepaid (Virgin Mobile) for several reasons:
- Its the only cell phone provider that gets service at my house
- For $50 I get 1000 minutes that roll over if I "top up" as little as $20 a month
- I get 1000 text msgs for $10 that don't expire every month so if I don't use them all they roll over
- For $10 - $20 (depending on bandwidth wanted) I can check my email etc
The only improvement would be better phone offerings (iphone / blackberry) but I will live with what I have since its cheaper and I get service!
Michael S. B.
Information Security Officer at Associated Foreign Exchange
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I could care less about minutes, I barely use 60 a month, but my wife does, so we have a family plan and she uses the lion share of the minutes. On the Other Hand....
I use a HUGE amount of Bandwidth. My "phone" (an HTC Athena) easily consumes over 1 GB of data per month (I've hit 7 in one month). I doubt any prepaid plan allows that much for the $25/month I pay now for data....
Max H.
Operations, Strategy and Customer Service Consultant to Small Businesses and Non-Profits / Governement Analyst
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1- "buckets of minutes" are how cell phones were first sold. First entrant has to be knocked off.
2- A lot of the Euro style plans have extra fees in the US. For instance, the $20 TopUp with Virgin is essentially a fee for keeping your number. I think BoostMobile has about 8 million fees that make it pricier than an actual contract.
3- Criminal enterprise. In the US, most of the phones for prepay are disposable cell phones. Crappy units that criminals LOVE. It's a whole new world of small time criminal enterprise these things and I think a lot of places you'd go to get prepay tend towards low scale income where small time criminals hang out: downtown drug stores and convenience stores.
4- Lack of great offers from big companies: I think T-Mob is the only major carrier to offer prepay. While Virgin is a big brand that England may love, it's new to the US.
Really, if I could get an IPhone, and jail break it to work with T-Mobile paygo, I think it would make sense for me. But, me likey data plan, too.
Sherry F.
Remote Bookkeeper at Blue Stone Accounting, LLC
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I remember the meetings where prepaid wireless cards were brought up. Hardly anyone thought that prepaid would fly with the consumers. The phone companies in the US had always billed by usage in arrears. It was a huge break from how things had been done. There are probably still people standing around going "I can't believe that worked". I haven't read the report, what is it about the report that doesn't seem right. I don't work in the industry right now, but I know people who do.
Cassandra "Cassie" W.
RENTAL DIVISION MANAGER at A DELTA REALTY
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Esme,
for me they are not viable to my business....I never know how many 'minutes may be used per week, month etc...there for a plan with the exact usage spelled out works for me...and i know exactly what i have..no guessing
regards,
Realtor Naples Cassie
My guess is that the decisions made by major carriers are to blame. All major carriers offer prepaid plans, but seem to market them to certain customers only, with "no credit check" being one of the major selling points.
Another factor is that American consumers are used to buying handsets from carriers at subsidized prices, and the only way to get newer, "hot" phones is by signing post-paid contracts (regardless of what the report says about it being a "myth"). Handsets bought from one carrier usually cannot be used with another carrier even after the contract is up.
Alisa T.
Interior Designer
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I have a cheapy little Virgin Mobile phone and barely use the minutes I get each fiscal quarter when I "top up" for the minimum $30. The minutes just add up and I could subscribe to a plan on a monthly basis if I started using my phone more often. I just don't use a cell phone enough to justify a $60/month plan and I don't feel the need to show off a fancy iphone to all my friends anyway. The service works great most of the time (I think it runs on the Sprint network actually) and that's the important part. I do agree with Sarah that a better selection of phones would be nice, but I don't generally feel an urgent need to google anything or check my email when I'm out, so I stick with my basic phone. Although a camera in my phone would be nice - once less thing to carry in my purse. They do carry camera phones, but it's a such a low spending priority. There are shoes I don't own...
Greg P.
Audiovisual Services for Corporate and Special Events. Author.
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Prepaid is just not a god deal on the whole for most people.
Because they're crap.
It's actually cheaper to have a "normal" plan under contract, and you'll get a much better phone as well as have access to a much broader range of services.
If you use the phone once a day, the prepaid plan is actually more expensive. If you don't use the phone at all, your minutes expire. The sweetspot for getting the most out of a prepaid plan is so small that it is almost never achieved by actual consumers, and they almost always figure it out.
The main purpose of prepaid plans is to provide service for consumers who fail a credit check when applying for service.
Take your pick.
