Verizon steps up prepaid challenge
Follows AT&T in sweetening its non-contract offers with two new devices, but not seriously gunning for smaller players
Published: 1 May, 2012
Verizon and AT&T have typically left prepaid business mainly to their smaller rivals, but the past couple of years have seen a shift towards pay-as-you-go in the US, even among higher value users, and Verizon is responding with new contract-free offerings.
Several factors have been driving an increased uptake of prepaid deals - economic pressures; the trend for individuals to have more than one mobile device; and the rise of non-handset gadgets which are more likely to come without contract commitments. Verizon has announced a mobile hotspot and an Android smartphone on a pay-as-you-go basis, just days after AT&T doubled the amount of data it included in its prepaid data plans to be more competitive with bigger prepaid players like T-Mobile.
The new Verizon gadgets are the LTE-capable Jetpack 4510L personal hotspot, made by Novatel, which costs $130 and comes with a data plans ranging from $15 a week for 250Mbytes to $90 for 10Gbytes; and the Samsung Illusion smartphone, with costs $170 with an $80 prepaid plan, including unlimited voice and text plus 1Gbyte of data. The latter is not really cheap - AT&T has a similar deal for $75 and TMo offers a $50 tariff, though that has only 100Mbytes of data along with the unlimited voice and SMS.
But don't look for the big two US cellcos to get seriously aggressive against TMo, MetroPCS or Boost. Mark Beccue, ananalyst at ABI Research, says they will be too wary of the margin squeeze for that, but are looking for "incremental adds, versus for the other guys it's their bread and butter."
He told WirelessWeek that they would risk cannibalizing their profitable postpaid bases if they cut their rates too far in the direction of those offered by smaller players. "They're not necessarily looking to take away business. If a higher percentage of people are going to consider moving to no-contract, they want to keep them," he commented.