Prepaid mobile phone market finally hit the U.S. in a big way, as the economically strapped consumers flock inexpensive fee, as you-go services. The result is likely to mean that the major mobile phone providers may be forced to line the price of the contract service plans to save consumers from defecting.

This is good news for consumers who might see lower prices for pre-and post-paid service plans. But this is very bad news for mobile phones operators to make more money from their post-paid customers than prepaid customers.

Prepaid cell phone plans, which were very popular in Europe and other parts of the globe for several years, allows consumers to buy the phone at full retail price, without committing to a contract and pay for the service in advance. In contrast, after the fee-based services require users to sign a one-two-year service contract, and their use of the account on a monthly basis. In exchange for signing a contract, mobile operators often subsidize the cost of the phone.

For many years after the payment of business models dominate the U.S. mobile phone market, providing high growth rates in the U.S. wireless operators. Meanwhile, the prepaid market in the United States is largely left to consumers who are young, price-sensitive, or a credit risk. Although all major cell phone operators offer prepaid services, small operators such as Leap Wireless, MetroPCS and Virgin Mobile USA, largely dominates this market.

Now it looks like the tide is turning. First quarter revenues from all major mobile phone operators show that consumers flocking to the new all you can eat plans to advance, while the contract after the paid plans.

Post-pay (wireless services), an increase of more than likely, “Craig Moffett, a Sanford Bernstein analyst shares, said in a research note published this week.

Post-paid subscriber growth came to a “virtual halt in the first quarter of 2009, Moffett noted. He believes that the net additions of post-paid customers in all the major carriers, has dropped from 58 percent in the first quarter of 2008 for the first quarter of 2009.

However, prepaid customers are on the rise. A year ago, about 50 percent of new cellular phone users have registered for pre-mobile phones, Moffett said in his note. But in the first quarter of 2009, about 80 percent of the mobile phone subscriber growth came from the prepaid plans.

Sprint Nextel, which reported results on Monday, is the most vivid example of how things seemed to be shaking in the wireless industry. Sprint added nearly 674,000 new prepaid subscriptions in the first quarter, according to Moffett estimated. However, the company has lost about 1.25 million subscribers of the post.

Driven bad economy
The boom in mobile phone prepaid service may be initiated in the sour economy, and the fact that service providers such as Sprint and Virgin Mobile USA, which recently introduced a $ 50 unlimited voice services. Sprint to Boost Unlimited service also includes unlimited text messages and unlimited wireless Internet access. Leap Wireless and MetroPCS to offer similar all you can eat plans.

Sprint services offered through its subsidiary to increase for mobile devices, the use of excess capacity on the former Nextel iden network. So affordable service does not require the costly modernization of the network. Service launched in January, and he was recognized as a huge success. Sprint leaders Monday said the initial development of services was higher than expected company.

It seems that $ 50 price could be too good for some consumers to pass up. Comparable post-paid service plans offered by AT & T and Verizon Wireless cost $ 99.99 per month. And Sprint’s own “simply everything” plan, which includes unlimited Web surfing and e-mail in addition to the unlimited voice messages and service costs $ 99.99 per month.

Sprint to the Director Dan Hesse said during a conference with analysts and investors that “there is no doubt that there is movement in the direction of advance.” But he is careful to point out that he did not see in the market of prepaid cannibalizing on the more lucrative post-paid business model. In fact, he said that the prepaid market actually expands the entire wireless market.

“Some of those prepaid customers the people who use mobile phones for the first time, he said.” So I think in general, as the industry, we see earnings growth longer than we would have seen without the prepaid services. ”

But with more than 80 percent of the U.S. population, with the help of cell phone service, it’s getting harder to sell wireless service for people who have not yet own a mobile phone. This means that wireless operators are already trying to steal each other’s existing customers.

The challenge for wireless carriers is that not all cell phone customers are equal. Moffett analysis shows that customers tend to generate less than half the pre-post value of customers over time. And the reason is simple. On average, prepaid customers to generate revenue in less than a month after the paid customers. They tend to switch between service providers. And they tend to use more network resources, an average of about 2000 voice minutes per month compared to about 1000 minutes per month than the post-paid customers.

As a result, carriers such as Sprint, which increases their prepaid subscriber base through its post-paid customers will, over time, make less money, Moffett reasons.

But regardless of the carriers want to offer more services to prepaid, the troubled economy may accelerate this trend. As more Americans lose their jobs and household budgets get tighter, some mobile phone users are starting to choose the cheapest prepaid plans cell phones when their current post-paid contracts expired.

A recent study conducted by Opinion Research Corporation at (ORC) for the New Millennium Research Council (NMRC) has shown that many people had to cancel their plans for mobile phone and a prepaid mobile phone in response to financial crisis.

It is obvious that the current trend is probably bad for wireless operators. But if more wireless operators to increase the match with their $ 50 All-You-Can-prepaid service has plans, price wars may occur, which are likely to benefit consumers. And it is very likely that the price declines will not stop at the prepaid plans. If the carriers start to lose even more post-paid customers, they can also be forced to reduce the cost of their contract, based on all you can eat plans.

But since the majority of prepaid services only to offer basic phones, the price war may not be immediately affected by the more advanced smartphone sales and service plans. Nevertheless, as the cell phone market reaches saturation, mobile operators can not afford to lose subscribers.