Will Consumers Follow Through on Wireless Plans?

Some quarters are more important than others. The first quarter of 2009, for example, will provide an important test of whether consumers are "putting their money where their mouths are." The reason? Some surveys have consumers telling researchers they will cut back or drop important communication services.

A recent survey by Pew Research Center, for example, has some 20 percent of respondents reporting they’ve gone with a less expensive cell phone plan, or canceled service altogether. About 22 percent adults say they are saving money on their cell phone bills.

Young adults, the group that is the most likely to use mobiles, are the most likely to have taken this step: 30 percent of respondents under the age of 30 and 20 percent of other adults say they have changed cell plans or dropped service because of the recession.

Three-in-ten adults with family incomes below $30,000 say they have changed or cut their mobile service, and 13 percent of those making $100,000 or more say they have done so as well.

If those respondents really are acting as they say they will, we might expect a bit of an explosion as mobile providers report first-quarter results. To be sure, over the last couple of quarters there has been a clear upsurge in use of pre-paid mobile services, generally interpreted as a cost-saving measure.

Still, AT&T, the first mobile provider to report first-quarter results, had a wildly successful first quarter for post-paid plans. There are of course some other logical developments we might be watching for. Among the obvious economy measures are switching from post-paid to pre-paid plans, and that clearly is happening.

On the other hand, we will be watching for any signs of actual, industry-wide shrinkage of wireless accounts. A simple switch to pre-paid generally reduces average revenue per user, while maintaining subscriber numbers. That likely means some shift of market share among wireless providers, even if it does not automatically suggest overall subscriptions will dip.

Based solely on the AT&T results, respondents are not necessarily behaving as they say they will.

http://pewresearch.org/pubs/1199/more-items-seen-as-luxury-not-necessity