In an economic downturn, prepaid mobile is big business
Why pay $100 or more each month for a two-year cell phone contract when you can pay $50 and keep yourself off the hook?
At least that's the thinking behind the latest ad campaign by Boost Mobile, a prepaid, or "no-contract," mobile service provider whose parent company is none other than Sprint Nextel.
In an economic downturn, consumers are reevaluating the privilege of paying mobile service providers -- including Sprint -- $50 to $150 (or more) per month for their cell phone. And according to Boost Mobile president Matt Carter, that's a revolutionary idea worth calling someone about.
ZDNet: How much have sales of prepaid phones increased since the beginning of the economic downturn?
Matt Carter: We're seeing a chasm, a shift in the wireless category. Surely the economy has given people a platform to reevaluate their own economic situation. People are discovering the no-contract segment --they're looking for affordability, predictability and flexibility. We see ourselves as the freedom fighters of the wireless industry, and we're giving people a constitution of choice. The [economy] has actually given people more choice to pick better plans to fit their lifestyle.
The no-contract segment won't go away, and it's here to stay. It will be a bigger part of the overall market. Today, we're seeing that it's a much bigger pot. About 60 percent of decisions in the wireless market are for the no-contract segment. If there are 5 million people in that quarter, 60 percent are going toward the no-contract segment. More and more people are looking for those options.
We're all about consumer choice -- what the contract business is is about the carriers. We don't lock people in. We've got the best push-to-talk network in the world -- reliable, dependable, high-quality. We're really the only carrier out there that has a nationwide, high-quality PTT network. Verizon has dabbled without a whole lot of success. People like the PTT, the instantaneous nature of it, so it's still an integral part of our selling proposition.
ZDNet: The stigma of the prepaid phone is strong, referencing anything from multi-passport-toting movie spies to low-income populations. How do you change consumers' minds?
MS: Historically "prepaid" has been stigmatized by its demographic. We have to change the market opportunity. It's not about one's economic disposition. It's about having choice -- do you or don't you want to be in a contract? The majority of people will say they don't. We're going after people who want flexibility.
Second, you have to have an attractive plan. Our $50 nationwide talk, text, web and walkie-talkie plan -- that makes people do a double-take. It appeals to a lot of people.
The third thing -- you have to have devices that commensurate with those in the marketplace. Traditionally, they're refurbished, like a refurb electric razor. [On Boost Mobile,] these are high-quality handsets from Motorola for $49 to $229 that are QWERTY, Bluetooth, camera, and so forth -- all those features people are looking for.
Fourth, it's the marketing. We have focused our marketing to be more inclusive, from Joe the Plumber to the soccer mom. The brand has to have appeal. Evidence of that is our spokeswoman, racecar driver Danica Patrick. She's partnered with us to help us say that no-contract is for all types of people.
You're looking for a smart choice. For $50, that doesn't seem like an economic or stigmatized decision. That seems like a smart decision. Why pay more when you can get a high-quality handset on a high-quality network and the features that most people use? This is a new sort of democracy within wireless.
ZDNet: Why do consumers continue to gravitate toward contract mobile service?
MC: Consumers have always looked to contracts as the default segment. The carriers into themselves have created a perception around this particular segment of the industry. As companies like MetroPCS, Leap Wireless and Boost aggressively come in, and make [prepaid] plans competitive and handset portfolios appealing and marketing much more ecumenical, you're getting more people saying, "Hey, wait a minute. do I really want to be on a contract?"
We're never going to have the budget of Verizon or AT&T. But we can keep pushing to get word of mouth out.
The contracted business is an anomaly around rest of the world: Europe, Asia. We're pioneering this here [in the U.S.]. It takes awhile for a revolution to take hold and gain its grounding. But I think over time, people are going to demand [cell service] on their terms.
We're seeing more and more people across the board -- Motorola's device roadmap, to application developers -- people are looking at the numbers and seeing that more people are moving to the no-contract segment, and people want to be a part of that. Growth brings with it opportunities, and we're seeing a lot of that coming our way.
Our core competition? MetroPCS and Cricket -- we're nationwide, they're regional. Their product is more home-calling area. We can be used anywhere around the country.
We tend to do extraordinarily well with urban, Hispanic segments. But since we launched with the $50 monthly unlimited, we've seen a plethora of new subscribers joining the Boost franchise, from the cowboy in Nebraska to the suburban soccer mom to the elderly couple in Florida. It brings them altogether under this tent -- the fact that they feel someone has provided them a wireless offer on their terms.
Fifty dollars means $50, none of these hidden fees. People are really voting for this.