JD Power Study Suggest Potential for Huge Prepaid Wireless Shift

About 16 percent of prepaid wireless users have switched carriers in the past 12 months. Some 51 percent of those switchers previously had contract service, a new survey by JD Power and Associates says.

About 12 percent of those surveyed said they would switch carriers sometime in the next year, compared to 13 percent in 2008.

Among those intending to switch, 24 percent intend to switch to contract service. That suggests 75 percent of switchers would consider prepaid plans.

And there are clear differences between "pay as you go" users and prepaid customers, suggesting two clear niches. The study also finds the average pay-as-you-go user is older, more likely to be retired and has fewer wireless phones in their household.

The monthly prepaid plan user more closely resembles the contract plan user, desiring a large network, mid-range feature phones and messaging, but without the commitment or penalties of a contract.

That is likely the most significant finding, as it suggests the real difference between prepaid and postpaid users is in fact not so much ability to pay or demographics as it is preference for terms of service.

That is not to say some prepaid users are "credit challenged" or lower income. But the survey suggests the potential prepaid audience is quite a bit larger than it has been in the past. "Mainstream" postpaid users might in fact be persuadable candidates for prepaid.

About 66 percent of prepaid users who renew monthly report that they have cut ties with their former contracted service carrier. That suggests huge possibilities for market share shifts as well.

Pay-as-you-go users spend an average of $35 for each airtime purchase, a decrease of $5 from 2008.

Monthly non-contract users spend an average of $25 less per month than those with contracts do. They report spending $56 per month compared with an average monthly service cost of $81 for contract users.

Non-contract customers report using 320 minutes per month—a notable increase from 233 minutes in 2008.

Pay-as-you-go users report using an average of just 145 minutes, while monthly non-contract users report an average of 573 minutes per month.

According to the study, more than 40 percent of non-contract plans are monthly plans, compared with less than 30 percent in 2008.

FCC Investigates Google Voice Blocking

The Federal Communications Commission has opened an investigation into the blocking of Google Voice from the iPhone App Store.

James D. Schlichting, acting chief of the FCC's Wireless Telecommunications Bureau, has asked for answers to several questions. The FCC wants to know what role AT&T played in the decision. Keep in mind that the FCC already is looking at wireless open access and handset exclusivity, both of which seem for those reasons to bear on the status of Google Voice on the iPhone.

The FCC further wants to know what role AT&T might play in restricting other iPhone apps. The agency also wants to know what roles Apple and AT&T can play, by contract, in the development of iPhone apps.

The FCC wants to know whether Apple consulted with AT&T in the process of deciding to reject the Google Voice application. Documents relating to any such discussions must be produced.

The FCC also wants an explanatiion of how Google Voice might differ from any other VoIP application that al4ready is authorized to be used either on the iPhone or on AT&T's network.

The agency wants detail on any conditions included in AT&T’s agreements or contracts with Apple for the iPhone related to the certification of applications or any particular application’s ability to use AT&T’s 3G network.

If there are terns of use limiting customer use of third party apps in general, the FCC wants to know what those limitations are.

The FCC wants to know about AT&T’s role in certifying applications on devices that run over AT&T’s 3G network.

If there are any differences in AT&T’s treatment of apps running on the iPhone and other devices used on its 3G network, the agency wants to know what those are.

Please list the services/applications that AT&T provides for the iPhone, and whether there any similar, competing iPhone applications offered by other providers in Apple’s App Store. The agency wants to know whether any other devices that operate on the AT&T network can use Google Voice.

The FCC also wants to know whether apps rejected for the iPhone are allowed to run on other devices on AT&T's network.

"Please explain whether, on AT&T’s network, consumers’ access to and usage of Google Voice is disabled on the iPhone but permitted on other handsets, including Research in Motion’s BlackBerry devices," Schlichting has asked.

People sometimes forget how powerfully regulatory and legal policies bear directly on the telecommunications business. This is just the latest example.

For All of You Who Find Mobile Usage EVERYWHERE Annoying

Really, there are times when our mobiles do not HAVE to be powered up.

Price War Breaking Out in Prepaid Wireless

MetroPCS Communications is making another potentially disruptive move in the prepaid wireless market, introducing a prepaid $40 a month unlimted plan including voice, texting and Internet access.

The $45 plan now include sunlimited email, navigation and social networking applications. MetroPCS’ $30 and $35 local unlimited plans will now include caller ID and call waiting.

The $50 plan continues to offer smartphone customers complete HTML Web browsing and enterprise wireless email.

For anybody who doubted potentially huge changes in the prepaid market, this is yet another example.

MetroPCS was the first North American wireless carrier to offer unlimited international long distance calling for an additional $5 per month, to over 100 countries and over 1,000 destinations. This unlimited international long distance feature is available on both the $45 and $50 service plans.

MetroPCS is also offering consumers a family plan. With MetroPCS’ family plan, families with two to five lines will be able to enjoy MetroPCS Unlimited Nationwide service for talk, text and Web access for $35 per line.

TracFone Wireless, the nation's largest prepaid wireless service, recently introduced a $45 flat-rate monthly plan for calling and text messaging. That undercut the previous $50 benchmark for unlimited monthly plans set by Sprint's Boost Mobile prepaid service earlier this year. The pressure is now on Boost, and Virgin Mobile, to match its rivals by dropping pricing below the $50 level.

The other big change will be a breakthrough in phone models available to prepaid customers, particularly the higher-end smart phones. Historically, low phone cost has been something of a requirement for budget-oriented customers, but that will change as the customer base begins to reflect the same demographics as the postpaid base.

http://investor.metropcs.com/phoenix.zhtml?c=177745&p=irol-newsArticle&ID=1314223&highlight=

Apple, AT&T Ban Google Voice, Put Restrictions On Google Latitude

In the never-ending debate about whether usrs benefit more from "open" amd "closed" application environments in the mobile space, Apple has tended to be the best example of innovation and consumer benefit provided by the "closed" model, even though many would likely argue the evidence tends to suggest "open" leads to more rapid innovation, as a rule.

"Closed" can lead to benefits if the provider can optimize performance of all applications and devices, while at the same time delivering better user experiences. Apple has excelled, on that score.

But Apple's recent decision to ban Google Voice from the iPhone App Store is a salient reminder that the ability to optimize user experience can come at a cost.

To be sure, nobody is quite sure who was the driving the ban. AT&T obviously has incentive to protect its existing voice business. If Apple drove the decision, the reasons are more difficult to discern.

Google Voice allows free domestic calling and texting and cheap international calls, and will in the near future provide number portability. That AT&T wouldn't be too happy is obvious. But why would Apple support such a move, beyond the clear interests of its partner?

Could perceived competition between Apple and Google, which traditionally has been quite well mannered, be moving to a new stage more analogous to the ways Microsoft and Google now compete?

In what might be a related move, Google Latitude for iPhone and iPod touch. available as a Web application running in Safari, might have been "forced" to operate in a more restrictive way than the same app runs on other mobiles.

Gooble says it worked closely with Apple to bring Latitude to the iPhone in a way Apple thought would be best for iPhone users. But afterwards, Apple requested that Google release Latitude as a Web application "in order to avoid confusion with Maps on the iPhone, which uses Google to serve maps tiles.".

"Unfortunately, since there is no mechanism for applications to run in the background on iPhone, which applies to browser-based web apps as well, we're not able to provide continuous background location updates in the same way that we can for Latitude users on Android, Blackberry, Symbian and Windows Mobile," Google says.

Again, there are reasonable user experience reasons for Apple to avoid user confusion. But one suspects there might be more than that going on here.

Skype in Patent Dispute

eBay says in a regulatory filing that it is set to go to trial on June 10, 2010 on what appears to be a key VoIP patent dispute with Joltid Limited, which licenses peer-to-peer technology to Skype..

Skype has begun to develop alternative software to that licensed through Joltid.

EBay wrote in the quarterly filing that it recognized that pending litigation over the technology behind Skype could ultimately have an "adverse result," so it had begun to develop alternative software to the technology it licenses from Joltid Ltd for Skype.

In its regulatory filing, which contains the typical disclaimers about the potential damage if eBay's position is not upheld, eBay made the statement in typical legalese that if the company is not successful, it might have to shut Skype down.

That could, in a worst-case scenario, lead to Skype being shut down, but that typically is not what happens. The parties come to some sort of settlement. Remember the wave of patent infringement lawsuits back in 2007 that started with Vonage?

One way or the other, this will be settled. Joltid doesn't win if its customer goes away, and eBay is developing alternate methods in any case.

Watch for Fireworks in Prepaid Wireless Later This Year

Watch for shake-ups in the U.S. prepaid wireless market later this year. The obvious example is what Sprint Nextel might do with its 10 million customer strong Boost-plus-Virgin Mobile business.

Now that unlimited prepaid plans have been successfully launched by MetroPCS and Leap Wireless, for example, other contestants are likely to have to rethink packaging and pricing. Products, after all, are positioned in relationship to other products, not in the abstract. In fact, when a produce cannot be valued and priced in relationship to other known products, consumers are likely to resist buying.

In context, the prepaid market will look different to typical buyers when the range is "unlimited for this price" compared to "buckets at other prices." The value equation is changed, even if, as a practical matter, for most uers the difference between "truly unlimited" and "a big bucket" is indistinguishable.

Were Sprint Nextel to announce an unlimited prepaid, it wouldn't be unusual, given its similar "Simply Everything" postpaid offers, or the fact that major competitors already have proven market receptivity to prepaid "unlimited" offers.

That would not be Dan Hesse, Sprint Nextel CEO's style. He will want to do something more potentially disruptive. Since I have been predicting the emergence of smart phone prepaid plans, I might as well suggest that would be something Hesse would consider.

Traidtionally, major carriers have tried to protect their postpaid bases by restricting handset access available to prepaid users. But given heightened competition in the overall mobile market, the growth of demand for prepaid and the leading role of smart phones in creating a base for new data services and revenue, smart phones inevitably must move to prepaid, as well as being more heavily pushed on the postpaid side of the business as well.

So one possibility is a major push by Boost Mobile and Virgin Mobile USA to offer unlimited plans with access to devices such as the Palm Pre, reversing the age-old policy of allowing prepaid resellers access only to older handsets.

As for why Sprint Nextel might have wanted to buy Virgin Mobile USA, there are a couple of possibilites. Undoubtedly Sprint Nextel has concluded that prepaid is due for significant growth. In that case, one might as well start growing faster than other competitors.

Perhaps Sprint Nextel is preparing for a disruptive move in prepaid. In that case, heft makes sense. Perhaps Sprint Nextel simply wants the better economics that accrue to scale.

Also, Virgin Mobile might simply have reached the point where it typically makes sense for a larger player to buy out a smaller player. That point ideally comes when the target company customer base is highest, churn is lowest, costs have decreased, and demand has increased.

At the end of the first quarter, Virgin Mobile's base was at 5.2 million subscribers from 5.1 million in the year ago quarter and had gross adds of 630,259, falling from 795,575 subs. That suggests a peak has been reached.

Virgin Mobile’s churn at 4.8 percent was flat sequentially and down from 5.1 percent in the first quarter of last year. And its earnings of $19.1 million were up from $4.7 million in the prior quarter.

Basically, the acquisition profile was right.

And there are competitive considerations. It appears Verizon is looking at a possible expanded move into retail prepaid. T-Mobile already is a significant player in prepaid, and in recent quarters has seen most of its net growth in prepaid. AT&T says it is watching the market, though prepaid only represents about four percent of AT&T's market, and the company is wary of cannibalization of its postpaid base.

All of that is an explosive set of circumstances. I'd be watching for fireworks that will redefine "prepaid" later this year.