Comments on article found at: connectedplanetonline.com/3g4g/news/sprint-prepaid-world-0428/
I am an advocate for prepaid services. The prepaid marketplace is not the refuge of the lower economic strata; the prepaid market is where customers go when they wish to have greater control over the fees they pay and services they use.
The market is changing. Prepaid will continue to grow. Unless the postpaid marketplace radically changes, prepaid will grow. Prepaid will likely be as large as postpaid. Prepaid will be a dominant force in the telecommunication marketplace.
Prepaid is popular because there are no credit checks. Prepaid is popular because there are no monthly bills. Prepaid is popular because there are no contracts or ETFs. Prepaid business models can provide the same kinds of customer features as postpaid business models. If you consider most postpaid business models, carriers are pretty much giving away the farm in high MOU, low flat rate billing plans, which include everything from texting, web surfing, and voice. These postpaid plans are close to being all you can eat plans.
The significant differences between prepaid and postpaid plans are:
The postpaid model allows carriers to collect a minimum fee every month whether or not you use the cell phone. This means the carrier has cash coming in all of the time, even if the majority of its customers are not using 100% of the features they are paying for. This is what you call an annuity business.
The prepaid model has no such guaranteed cash flow. A prepaid wireless carrier has no artificial mechanisms to handcuff a customer to it. Prepaid carriers do not sign up customers on contract. Prepaid carriers cannot collect an early termination fee (ETF), therefore no disincentive to leave the prepaid carrier.
Prepaid service is ideal for those parents whom are paying for their kids’ cellular service. It is a great way to keep usage under control.
Postpaid carriers have been claiming about the demise of the prepaid carrier since the mid-1990s. Why is the prepaid carrier still around? The answer is simple; the customers recognize the advantages of prepaid service.
Prepaid service gets a bum rap with claims of poor service and poor customer service. The claims have validity but that has nothing to do with it being a prepaid service. Postpaid carriers like Verizon Wireless and AT&T Mobility offer prepaid service under their own brand and under other brands. When a postpaid carrier offers prepaid service under other brand names, they are wholesaling their network to others. Carriers do not prioritize reseller services over their own services.
Carriers love the postpaid telecom model because it enables them to establish a monthly revenue stream, which can be used to establish a valuation. Carriers do not have to develop a prepaid track record like MetroPCS or Leap Wireless. Postpaid carriers simply have to put to the number of subscribers they have and the types of annuity contracts they have signed and BAM!!!, you have an easy valuation for the carriers. A prepaid carrier valuation is much tougher. Prepaid carriers have customers that have paid the carrier a fixed amount. This fixed amount cannot be fully recognized as revenue immediately. The only portion of the money that can be recognized as revenue is the portion the customer has used. Financial analysts frown upon prepaid business models.
Consumers want to customize, in real time, their service usage/plans. I believe the prepaid business model can be more responsive to real time customer customization of service plans than the postpaid model. Prepaid does not eliminate fla