A new incentive for pre-paid wireless customers

incentives for pre-paid wireless customers - jean chatzky logo boxYou'll get more for your money with no-contract wireless – as long as you pay your bill on time. Today, Boost Mobile, one of the pre-paid arms of Sprint, rolls out Monthly Unlimited with Shrinkage.

It works like this: The basic Monthly Unlimited (unlimited phone, text, data, IM and 411) is $50. Pay your bill on time for six months and your monthly tab drops to $45. Hit 12 months of on time payments and you go to $40. And with 18, you lock in at $35 for as long as you're with the carrier. Oh, and the months don't have to be consecutive; they're additive. If you pay on time for two months, skip a month or two, then pay on time for another four, you still get your $5 off.

Why would Boost do this? Competition from Metro PCS which has been knocking at the door with an unlimited $40 offer point and T-Mobile which offers talk and text at the same $40. Getting customers to pay their bills – and avoid the loss of income that occurs when their phones are turned off -- is the other reason.

"Roughly half of our Monthly Unlimited customers experience some break in service by not making an ontime payment in a six month period," says Andre Smith, Boost Mobile Business Director. "Some forget, some don't have the money, some are prioritizing monthly expenses."

Will this gambit – like the inclusion of data in some T-mobile prepaid plans announced earlier this week – keep growth in the pre-paid segment of the market, which accounted for 65% of all new cellular customers in the last quarter of 2009, according to JD Power, going strong? Schwark Satyavolu, co-founder of Billshrink.com thinks it's possible.

"I doubt this will make a lot of customers [of traditional, pay-at-the-end-of-the month plans] move. But I could see them gaining share of pre-paid plans." The fact that unlike many regional carriers, which rent space on cellular networks, Boost gets favored national status on its own network as part of Sprint is an advantage, he notes.

Paul Kapustka, editor and founder of sidecutreports.com, which analyzes the wireless industry, agrees. "In this market, it's been price first, device second." The pre-paid customer, who is typically younger, sometimes right out of college, or someone without strong enough credit to qualify for a post-paid plan, will lock at a phone contract and say there's no way I can lock myself in for two years, Kapustka explains.

But they now see that at the same time prices are coming down, Tracy Ford, editor of rcrwireless.com says, devices are getting 1000% better. "Now you can get a feature-rich phone without a two-year contract," she says. Boost, for instance, has both an Android ($349 - $399), the Samsung Seek ($149) and Blackberry Curve ($249 plus an additional $10 a month ).

Kapustka predicts confusion over the next few years as the 4G networks roll in and consumers aim to sort the new offerings out. But he says: "In a few years, the two-year contract may be as obsolete as buying 3000 minutes. It's just inevitable. Going forward you'll have much more of a shift toward pre-paid or pay for the amount of bandwith you use. Inevitably it'll be much easier to measure than minutes. But less simple to understand."
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