Cricket Creates Big Buzz With Prepaid iPhone Offer
Would-be iPhone owners who balk at the idea of using postpaid wireless services will soon get a chance to use Apple's phone on a prepaid basis thanks to wireless provider Cricket. The company will charge a substantially lower monthly rate than most postpaid plans offered by larger carriers; however, users will have to pay more upfront to acquire the phone.
Jun 1, 2012 5:00 AM PT
In what could be a disruptive move in the smartphone market, Cricket Wireless announced Thursday that it's offering the latest iPhone models under a prepaid plan.
Subscribers to the plan will have to pay full price for their iPhones -- US$499 for a 16 GB iPhone 4S or $399 for an 8 GB iPhone 4 -- but will get unlimited voice, texting and data for $55 a month, with no contract.
Data, though, is "throttled" at 2.3 GB each month. That means data speeds slow down after reaching that threshold.
By comparison, Verizon, Sprint and AT&T charge $200 for a 4S and $100 for an iPhone 4 but require a two-year agreement. To offset that subsidy, carriers charge more for service. Voice, text and data plans from them are in the range of $70 to $100 a month.
"The Cricket iPhone offering is a pretty big deal," Carl Howe, research director for the Yankee Group, told MacNewsWorld.
One of the barriers to many consumers buying an iPhone is the ongoing two-year commitment, with data plan, which can amount to around $2,000, he explained. Cricket pegs the cost at closer to $3,000.
"The whole prepaid model should eliminate that type of expense and we should see much lower costs for data plans for iPhones," he said.
"This is going to be disruptive," he added.
And that appears to be Cricket's intention. "Our rate plan of $55 a month is less than half of any other national contract carrier," Cricket Senior Vice President Matt Stoiber told MacNewsWorld.
"As customers look at that disruptive price point on a monthly bill and look at the cost of the phone," he continued, "they will quickly realize that over the two-year contract that they would get with a postpaid carrier, they're going to save over $1,000."
Math Favors Prepaid
Prepaid plans are receiving increased scrutiny from consumers these days, observed Michael Morgan, a mobile devices analyst with ABI Research.
"When you do the math, you've paid back the deal you got on the phone in the first 12 months of the contract," he explained. "The next 12 months is cream for the operator."
While there can be a big upfront cost with a prepaid plan, he continued, the lower monthly costs will be more beneficial to the consumer in the long run. "If you save 50 bucks a month in service charges, in 10 months that's $500," he noted. "That's the handset subsidy you'd have gotten if you went postpaid."
Apple may be watching Cricket's program very closely. Up to now, the iPhone has had stellar success in the postpaid world, but if it's to expand into emerging markets, it's going to have to compete in a prepaid world.
"This will be an interesting foray to see how Apple performs in a prepaid market," Morgan said.
Apple did not respond to our request to comment for this story.
As for Cricket, which is owned by Qualcomm spinoff Leap Wireless, it believes steep upfront handset costs will be a barrier that many of its subscribers will be willing to vault.
"Our customers have been asking for us to add the iPhone," Cricket's Stoiber said. "Customer demand has driven us to this point.
"We are striving to meet our customer needs," he added. "Diversifying to iOS is a way to do that."
As the iPhone becomes more common, questions arise as to whether the device can maintain its powerful cachet. "It's not going to be exclusive anymore," telecom industry analyst Jeff Kagan told MacNewsWorld. "It's not going to have that mystery it had over it the first few years."
"[Commonness] is going to dilute the brand to a point," he added. "Whether that will be bad or good is a question."
However, Morgan asserted that Apple's brand supersedes how the carriers handle it. "The carriers are latching on to the Apple brand and leveraging it, instead of affecting it."