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Masses Have Spoken: Pre-Paid Is Dying, People Want Cool Smartphones Instead

At one time, pre-paid phones were relatively popular. They were a very viable and interesting alternative for people who didn’t need the bleeding edge of tech, but wanted to stay connected and at a reduced rate. Sure, they had to make do with middling specs, older generation devices or stripped-down feature phones, but many users found the trade-offs worthwhile. No rigid or expensive contracts or early termination fees, and subscribers could easily manage their spending with pay-as-you-go accounts.

That was then. Things seem to have changed now, as pre-paid purveyors like MetroPCS and Leap Wireless saw a massive fall-off in growth during Q1. Notably, this is a quarter that’s usually their strongest, and yet Leap’s business slowed by 22 percent, while MetroPCS signed 82 percent fewer new customers than this time last year. This is positively jaw-dropping.

Then again, if you look at the state of today’s mobile industry, maybe it’s not. The major carriers, frankly, offer hotter phones. And providers, such as Sprint and T-mobile, are also actively courting budget-conscious consumers — even going as far as offering free devices to users who are on government subsidies.

Then there’s the general public’s growing tech-savviness. When it comes to mobile technology, people’s understanding and appreciation are maturing. This is clearly evident in recent statistics, as smartphone adoption has now overtaken feature phone ownership. According to a recent Pew Internet & American Life Project survey, 88 percent of all American adults now own a mobile phone, and of them, 53 percent are smartphone owners. That’s a 46 percent adoption rate in this country. In other words, nearly half of all adults in the U.S. are rocking smartphones. This figure is way up compared to May of last year, when the stat was 35 percent.

Back then, some folks (14 percent) weren’t even sure if their handset was a smartphone or not. These days, the figure is eight percent (which I still find kind of shocking. But hey, at least they’re learning…).

It’s easy to see why the shift is happening. With the iPhone available on almost all the major carriers now, and Android devices advancing at a rapid clip, there’s a lot to tempt everyday users. People want Siri. Or live wallpapers. Or live updating tiles. So, as the public gets exposed to newer, more advanced devices, along with some high-profile marketing hype, they’re clearly developing a taste for better phones. Maybe mediocre (or even crappy) was good enough before, when people didn’t know any better, but it’s a whole new ballgame now. They don’t want something that looks like the Jitterbug their grandma is sporting, and they can more easily spot a low-to-mediocre smartphone a mile away.

So perhaps the descent of the pre-paid market is just a sign of the times. In a climate like this, it can be tough to compete. That doesn’t stop the providers from trying, though. More are offering at least mid-level smartphones, and understanding how data-hungry everyone is becoming, these companies are also experimenting with high-speed mobile broadband options. Focusing on data more may not be a bad way to go, particularly since so many smartphone users (of all types) are feeling pinched by data plans these days. Could this be the brilliant idea that saves them? We’ll have to wait and see.

Have you ever had a pre-paid/pay-as-you-go phone? Did you graduate to a smartphone on a contract? If so, tell us about why you made the leap and if you could see yourself going back.


Adriana Lee

Adriana is the resident writer-slash-culture vulture who has written about everything from smartphones, tablets, apps, accessories, and small biz...

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