Wal-Mart Straight Talk a Tipping Point?

In March of 2009, the Opinion Research Center estimated that 8.7b million Americans already had discontinued their mobile service because of the recession, and suggested that as many as 60 million mobile users would seek ways to reduce spending.

One way many consumers seem to have done so is to substitute prepaid service for contract plans. That would account for robust subscriber growth for virtually all providers of prepaid service since then.

But Wal-Mart's new “Straight Talk” prepaid service, offered at the $30 and $45 levels, could end up being the “tipping point for millions of consumers who are already considering moving away from expensive contract-based cell phone service,” says Allen Hepner, New Millennium Research executive director.

Hepner believes that the $30 plan (with 1,000 minutes, 1,000 texts per month, mobile Web access and no-extra cost 411 calls, with no contract and no penalties) and the $45 plan (unlimited calling, texting, mobile Web and 411) that Wal-Mart now offers under the “Straight Talk” brand are going to get serious attention.

With average monthly contract plans reported to be about $81, the more than 140 million U.S. contract-based wireless customers who use less than 550 minutes a month may now have even more reason to consider switching to a less expensive cell phone option, particularly in a changing environment in which plans for 1,000 minutes are available through Wal-Mart for $30 per month, Hepner argues.

In March 2009, ORC estimated that there were 29 million prepaid accounts in service, representing about 16 percent of the total base of mobile users.

“We see that 8,740,000 Americans, that is 19 percent of consumers without a cell phone, report that they already have ‘discontinued cell phone service in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns," said Graham Hueber, Opinion Research Center senior researcher.

At the same time, ORC suggested that 39 percent of postpaid mobile customers--60.3 million consumers--were likely to cut back on their cell phones to save money, the Opinion Research Corporation estimated.