Prepaid Cell Customers Now Outnumber Contract Subscribers: Study

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Prepaid Cell Customers Now Outnumber Contract Subscribers: Study

Penny-pinching U.S. consumers struggling to make ends meet in the ongoing recession are shunning contract-based cell phones in favor of less expensive prepaid cell phones, and the fourth quarter of 2009 marked the first time that the number of new prepaid wireless customers in the U.S. outnumbered new contract-based cell phone providers, according to industry data from both Ovum/Datamonitor and IDG.

Additionally, based on the ongoing recession and the recent surge in attractive prepaid phone deals, New Millennium Research Council — which predicted a surge in prepaid customers a year ago — expects the trend to remain throughout the rest of the year.

“The era of cell phone penny pinching is officially here,” said Jose Guzman, project coordinator at NMRC. “Thanks to the recession, the U.S. cell phone marketplace continues to undergo fundamental changes that will just get bigger as the economic downturn deepens. What is different from a year ago is the explosion in new ‘all-you-can-eat’ and unlimited prepaid deals as low as $30 and $45 that will remain attractive to consumers long after the current recession is over.”

According to NMRC’s recent data:

—New prepaid cell phone subscribers accounted for nearly two-thirds (65 percent) of the 4.2 million net subscribers added by U.S. phone carriers in the fourth quarter of 2009
—The prepaid segment of the wireless market grew by 17 percent in the 4th quarter of 2009 to 54.4 million subscribers, up from 46.3 million in the same quarter in 2008. By contrast, contract-based cell phone service grew only 3 percent over the same period of time
—One out of five cell phone subscribers are now using prepaid phones. The prepaid segment represents a larger proportion of subscribers in the United States than ever before, hitting 20 percent in the fourth quarter of 2009, up from 18 percent at the end of 2008
—Overall, there were 285 million wireless subscribers in the United States at the end of 2009

Last year NMRC released a survey of more than 2,000 Americans conducted by Opinion Research Corp. (ORC), which showed that 39 percent, or 60.3 million, were contemplating cutting back on their cell phones to save money if the recession continued.

On Oct. 15, 2009, NMRC issued a follow-up statement that the explosion over the summer and early fall in increasingly inexpensive and diverse prepaid wireless cell phone plans represented a likely “tipping point” in consumer habits. (For more information, visit

NMRC is a Washington-based think tank focusing primarily on telecommunications and technology.