Carriers Court New Bases

By Staff -- TWICE, 2/26/2007

ARLINGTON, VA. — To keep the subscriber base growing, carriers have turned to prepaid and children's applications, the Telecommunications Industry Association (TIA) noted. Among children, wireless penetration is less than 30 percent. In 2006, a number of new services were introduced that target the children's market, specifically their parents.

For now, however, prepaid service is the fastest growing segment of the wireless industry, having almost tripled between 2002 and 2006 to 29.7 million users, who accounted for 14 percent of all wireless users in 2006, TIA said.

With the wireless subscriber base approaching saturation, carriers are turning to the prepaid market as an additional source of revenue, TIA said. Prepaid wireless is popular, the association continued, "because it requires no long-term contract, no activation or termination fees, and no credit check." In addition, "it offers parents a means of controlling their children's wireless spending," TIA said. "Carriers are making prepaid plans more attractive by enhancing service, lowering price and adding phones."

Eventually, carriers hope to convert prepaid subscribers to more lucrative postpaid subscribers, TIA said.

Originally, prepaid wireless service was targeted to people who could not pass a credit check for postpaid service. The market has since "undergone a transformation, with more businesses and individuals turning to prepaid as a means of controlling costs," TIA said. Other important segments of the market include parents seeking to control the cost of their children's wireless service, light users and people who use cellular phones only for emergency purposes, and senior citizens and others who are new to the wireless market.

TIA expects the number of consumers using a mobile virtual network operator's (MVNO) prepaid plans to continue to exceed the number of consumers using a carrier's prepaid plan. By 2010, MVNOs will account for 70 percent of the prepaid market, TIA forecasts.

In 2004, the number of MVNO prepaid customers surpassed the number of prepaid customers of facilities-based carriers, but in 2006, the facilities-based segment rebounded with a 22.4 percent increase comparable to the 22.2 percent advance for MVNOs. Both segments will grow rapidly during the next four years, with MVNOs averaging 18.9 percent compounded annually compared with 12.9 percent compound annual growth for facilities-based wireless carriers.