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Lisa Hronek Posts Tagged ‘sprint’
Will Consumers Switch to Prepaid Phones to Save Money?
Prepaid cell phone plans have always been popular with consumers who are looking to control or cut costs. These plans are also popular with consumers who struggled with poor credit that didn’t allow them to sign on for a two-year agreement with a national carrier. The downside with prepaid plans was that consumers were forced to pay the full price for a phone upfront and the phone choices associated with the plan were often limited in selection. Likewise, most prepaid plans did not always include the latest phones, such as the iPhone. However, recently, prepaid carriers such as Leap Wireless’ Cricket service and Sprint’s Virgin Mobile service began to offer higher end phones like the iPhone with their lower cost prepaid plans. Let’s review the prepaid plans from these two carriers in more detail in comparison to a national carrier:
- Cricket sells the 16GB iPhone 4S and the 8 GB version of the iPhone 4 for $500 and $400 respectively. The Cricket plan costs $55 a month and includes unlimited voice, text, and data. However, once a customer has consumed 2.3GB of data, their internet data connection is throttled to a slow crawl.
- Virgin Mobile sells the 16GB iPhone 4S for $650 and 8 GB version of the iPhone 4 for $550. Virgin Mobile’s baseline plan of $35 a month includes 300 minutes, unlimited data, and unlimited text.
- A typical iPhone with a two-year contract from AT&T costs $200 for the 16GB iPhone 4S and a two-year contract for $80 a month ($40 a month for 450 minutes, $20 a month for 300MB of data, and $20 a month for unlimited texting). AT&T’s total cost would be $2,120 for the iPhone and the two-year contract. This is compares to a total two-year cost of $1,820 for Cricket or a two year cost of $1,490 for Virgin Mobile. Therefore, consumers could save $300 with Cricket or save $630 with Virgin Mobile in comparison to a national carrier AT&T. So why are consumers paying more over a two-year period for their phone and their plans?
As mentioned, it only recently became possible for consumers to get top phones like the iPhone or Android on prepaid plans. Additionally, it has been noted that consumers are hesitant to pay $500 or $600 upfront for a phone when they can just pay $100 or $200 initially with national carriers (and pay more later with their two-year contract). This psychology factor likely plays a large role in the low share of prepaid plans, along with the fact that most consumers are not likely to do the math or comparisons between plans. Brand awareness may also be a factor due to the larger marketing budgets of national carriers.
Prepaid plans may not be dominant today, but consumers are always looking for deals to cut costs and save money, which includes their wireless plans. It is highly anticipated that prepaid plans will attract more consumers in the future due to these cost savings.
The Mobile Wallet: Coming to a phone near you
In case you haven’t heard, Apple announced its upcoming mobile wallet service. It will be introduced through an app called Passbook with the release of its next iPhone. The app will allow users to store loyalty cards, event tickets, and coupons in the app. The company’s intentions are somewhat unclear, but experts seem to think this positions Apple to move into mobile payments mainly because it’s not a huge leap from storing loyalty cards to storing credit cards. And consumers already trust Apple – the company has 400 million credit cards on file through iTunes, so the transition could be relatively seamless.
Apple will enter an already crowded space. Google, of course, has been offering Google Wallet for a year now. The offering is limited by the fact that it works only with Sprint on a handful of phones, with one payment card – the Citi Mastercard – and can only be used where Mastercard’s PayPass system is used. Sprint has announced its intention to introduce its own mobile wallet, and it’s unclear how that will affect the mobile relationship. Isis has been in development for almost a year, and is a partnership between T-Mobile, Verizon, and AT&T. American Express cardholders will be able to use the Isis mobile wallet, along with Chase, Capital One and Barclay cardholders. The service is scheduled to begin testing this summer in Salt Lake City and Austin, TX.
And then there’s Facebook. It’s hard to imagine that the company would actually move into the mobile wallet space. However, the company does seem to want a piece of the action, although probably most likely in the form of processing payments, rather than creating mobile wallet products for consumers. It recently moved away from its virtual currency to real money – something that the experts think is an indication of the company’s intentions to move into the payment space. And in a survey – this one by Cisco – 30% of consumers surveyed said they might one day use Facebook for banking services if they were offered. In terms of specific types of banking products, 14% said they would use a Facebook prepaid account they could reload, 8% would consider using a Facebook checking account or debit card, and 5% would consider a savings account or online bill-payment service. Despite the Cisco survey, there’s no indication that the company plans to provide traditional banking services. The company has also obtained money transmitter licenses in 15 states which are required for companies that keep, retrieve or transfer money. Additionally, any eWallet service would require a money transmitter license. The general consensus is that the licenses are an indication that Facebook plans to create a wider payment system, but guesses on the specifics vary widely.
Despite a large number of surveys done on the subject, it’s somewhat unclear how consumers feel about mobile payments. Starbucks is certainly a success story that no other retailer has been able to match. The app launched in January, 2011 and by the beginning of December 2012 the company stated that there had been 26 million transactions using the app. According to a study by the Carlisle & Gallagher Consulting group, which surveyed 600 consumers, 48% were “interested” in mobile wallets. Of those, 53% said they would prefer an alternate provider over their primary bank. But according to a survey by IDC, of consumers who have a phone enabled with Near Field Communications, only 2% are expected to use them for purchases in 2012.
The technology landscape is certainly littered with product failures. Some because of bad marketing approaches, some had fatal design flaws, and some because consumers just weren’t ready. But sometimes these product failures pave the way for the future. Remember Apple’s Newton? It was a complete flop, but in retrospect provided valuable information to make the iPad the huge success that it is. When Apple announced the release of the iPad, many naysayers talked about the failed Newton. Many of today’s mobile wallet players most likely won’t be around in the future. But most of them will probably provide valuable information on how to construct and offer a mobile wallet to consumers. Despite less than enthusiastic consumer sentiment, the mobile wallet is destined to happen sooner rather than later.
T-Mobile Up For Grabs Again
AT&T recently announced that its attempt to acquire fourth-place U.S. carrier, T-Mobile, is officially dead. Besides being a big loss of potential future earnings for AT&T, it also means the loss of $4 billion, which AT&T now owes to T-Mobile’s parent company Deutsche Telekom in the form of money and spectrum access. So who’s next in line to fight for T-Mobile? It appears that Sprint may be back at it again. Sprint had previously negotiated with T-Mobile, prior to AT&T’s deal, and it might try again in an effort to increase its 17% market share, and stay afloat in a market that is overpowered by AT&T and Verizon. However, there are some obstacles Sprint would need to overcome for a merger to even be possible. One is the severe cash shortage they are experiencing as a result of their recent acquisition of the iPhone. Another is network compatibility issues. At this point this is all just speculation, as there are potentially many buyers chopping at the bit to get a piece of the lucrative wireless market. Until anything is decided for certain, we can definitely expect to see that super tall girl in the hot pink dress a little while longer.
iPhone Network Comparisons
The iPhone is now offered on three different carriers: AT&T, Verizon, and Sprint. If you’ve been watching television lately, you might have noticed that the competitive ads are beginning to heat up; each one focusing on that network’s supposed strength. A recent study performed by Metrico Wireless, a mobile device performance analytics company, reported that AT&T wins for fasted data speed (plus AT&T is the only carrier that lets you talk and surf at the same time), Verizon has the most reliable phone service, and Sprint is getting lots of attention because of its unlimited data plan. The study by Metrico Wireless included 6,000 voice calls, 8,000 data doanload/upload tests, and more than 21,000 web pages. Among the three carriers, Verizon dropped the fewest number of calls (2.1 percent of the time), Sprint had the highest call quality on outbound calls, and AT&T had the highest call quality on inbound calls. When it comes to download speeds, Metrico concluded that AT&T was the clear winner with a maximum download speed of 6,047Kbps (Kilobits per second) – impressive compared to Verizon, which came in at 2,371Kbps, and Sprint with only 1,767Kbps.
However, what any iPhone customer will tell you is that when it comes to call quality and data speed, it’s all about location, location, location. It is unclear exactly where Metrico conducted its bandwidth test, so these results should be taken with a grain of salt. I have learned from personal experience that AT&T’s service can differ drastically from one area of Chicago to another, so state to state is sure to vary as well. Another interesting conclusion from Metrico was that the most recently released iPhone 4S performed perfectly across all three networks, 100% of the time. What I think this means, is that even though you might get a different experience on each network, it appears as though technological advances may be leveling the playing field.