There has been a significant increase in the amount of people that are opting for commitment-free cell phone plans. According to the New Millennium Research Council, about one in five Americans with a cell phone is using a prepaid plan. In addition to the benefit of not being tied to a contract, many users have found prepaid plans that cost less per month than contract plans.
Many of today's most popular phones such as the iPhone and DROID require a contract. Given the cost savings, many customers are foregoing the "cool" phones and opting for a basic phone without a two-year contract and a lower monthly fee.
A prepaid plan with unlimited calls and text messages is available for $45 per month. That's approximately half of what you'd pay on a two-year contract for a similar plan through Verizon Wireless or AT&T. Furthermore, many prepaid users don't need unlimited talk and text messaging as part of their plans. Customers at Tracfone, the largest independent provider of prepaid service, pay an average of $11 per month. Other users have found prepaid accounts with a small amount of minutes and unlimited text messaging best suit their needs.
In the past, prepaid plans were primarily marketed towards users who did not qualify for contract-based plans due to poor credit. As the economic recession has forced many people to cut costs, prepaid service has become more appealing to many users. In addition, many prepaid services have begun to offer better deals in recent years.
Considering there aren't a lot of new customers who are willing to sign contracts, it's possible prepaid service will get even more attractive due to greater competition. In the first quarter of this year, the seven largest wireless carriers in the U.S. expanded the total number of contract subscribers by just 230,000 people. In comparison to the entire customer base of 280 million, that number is fairly negligible. The seven largest prepaid carriers added about 3.1 million new subscribers in the first quarter. These trends have changed over the past couple of years. Two years ago, wireless carriers added 3 million subscribers under contract, and 2.3 million to prepaid plans.
The prepaid wireless market changed dramatically in January 2009 when Boost Mobile announced a prepaid plan with unlimited minutes for $50 a month. Since then, Virgin Mobile, Tracfone, and a few other carriers have announced similar offerings.