There exists something of a divide in the cellular industry. We’re seeing an increasing market for smartphones and other data-intensive handsets. Those, for the most part, are expensive devices that carriers subsidize in exchange for a two-year contract. On the other side is prepaid, which has fueled the industry for the past half year. In the past two quarters it has greatly outgrown postpaid subscriptions.
Carriers, of course, prefer postpaid. Not only do they spent more per month on average, but they also provide a predictable stream of income. Investors love predictability. It appears, however, that consumers who don’t need data services have wised up and are moving to prepaid. This has a few implications for the market in general.
As prepaid carriers grow, they’ll want to offer more advanced services to their users. We’re seeing that already. Virgin Mobile just introduced plans with unlimited data services, and has a BlackBerry to go along with it. Boost Mobile, another Sprint subsidiary, also has unlimited data plans and a BlackBerry. MetroPCS has a few touchscreen data phones, and Cricket does too. Soon enough, we’ll see these carriers with Android handsets.
Actually, we won’t have to wait that long. Later this month Boost Mobile will make available to its subscribers the Motorola i1. It’s the first Android you can get on a prepaid basis, and it should attract more than a few curious parties. I do wonder, though, whether prepaid is yet a viable platform for data-heavy handsets like the i1 promises to be.
As long as it comes as advertised, the level of service should be fine. Boost advertises unlimited, so as long as they’re not cutting off customers who exceed some arbitrary limit — say, 2GB — then users will have no trouble using the service. The catch is that the phone will only work in Sprint’s primary coverage network, and only their iDEN coverage network at that. That will mean slow data services, but, again, this isn’t new information.
The biggest problem lies in the subsidy. Since you do not make a commitment to Boost Mobile service, the company will not pay for part of your handset. When the i1 hits Best Buy on June 20 it will cost $350, more than you’ll pay for the most popular Android handsets. That and the iDEN network seem to be the only downsides. Both Cricket and Virgin could pick up a Kyocera Android handset over the summer, and while that would take away the service problem, it would add the handset problem, as the Kyocera device looks like the crappiest Android handset to date.
Will people be willing to pony up $300 to $400 for handsets if they can get services, including unlimited data, for cheaper than postpaid and without a contract? I’m not sure, but if people start to go for that it could change the industry.
