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The Re-Resurgence of the Prepaid Wars

Sarah Thomas
3/14/2014
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US wireless operators run hot and cold on how interested they are in the cash-conscious consumers of the prepaid market. But prepaid is hot now.

AT&T Inc. (NYSE: T) closed its acquisition of Leap Wireless International Inc. (Nasdaq: LEAP) Friday, less than 24 hours after receiving approval from the Federal Communications Commission (FCC) . Shortly thereafter, Sprint Corp. (NYSE: S) announced an entirely new prepaid brand, the aptly named Sprint Prepaid, to sit alongside its Boost Mobile and Virgin Mobile USA Inc. (NYSE: VM) brands. (See Sprint Segments Its Prepaid Subscribers and Sprint Revamps Prepaid Offers.)

The timing might have been a coincidence, but the message is clear: Prepaid is still (or again?) an important battleground for wireless operators. T-Mobile US Inc. has successfully made waves, and AT&T and Sprint plan to respond accordingly. (Verizon Wireless , for its part, is holding strong and maintaining its "meh" approach to prepaid.) (See T-Mobile Leads, Sprint Suffers in Pricing Wars and Verizon's 4G Strength Keeps It Above the Fray.)

AT&T has promised to unveil "the new Cricket" in the coming weeks, promising to "shake up the no-contract segment with a combination of simple, low-cost rate plans; a terrific lineup of smartphones; and a great network experience." (See AT&T Plans a Prepaid Cricket Attack and AT&T's Device Mix Shifts Away From Postpaid.)

Sprint says its new prepaid brand is designed for those customers that don't want a contract, but also don't want to leave the comfort of a big brand. It offers two options and, interestingly, one doesn't even include wireless data, but relies on WiFi, which would seem to put it in competition with some of its MNVOs like Republic Wireless and Scratch Wireless. (See Why WiFi-First Works for Wireless.)

Sprint Prepaid customers can choose between a $45 monthly plan for unlimited talk and text messages, and WiFi-only data, or a $60 plan with unlimited talk and text, and 2.5GB of high-speed data that can be slowed to 3G for video streaming. They can choose between the Spark-enabled Samsung Galaxy S4 Mini, LTE Galaxy 3, or 3G Moto G, or a pre-owned iPhone 4S. (See Sprint Sparks to Reduce Churn, Save Unlimited.)

Prepaid and contract plans run on the same networks, and the prepaid offerings are improving, so you have to wonder if more consumers will see the writing on the wall and ditch their expensive contracted plan for a no-contract offer. It's typically the paltry data offerings or out-of-date handset selection that stops them, but the market will continue to look more attractive the more attention operators pay to it.

If AT&T makes good on its promises with Leap and T-Mobile continues its path of carrier pricing destruction, today's moves might just be the first of many that make contract-free look all the more appealing.

— Sarah Reedy, Senior Editor, Light Reading

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SachinEE
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SachinEE,
User Rank: Light Sabre
3/27/2014 | 6:35:04 AM
Re : The Re-Resurgence of the Prepaid Wars
@ Liz Greenberg, this is a very good analysis I must say. I also wish that's not true but that seems most likely the case as you have put it quite logically. These carriers will never lose the money. They will make it work for them one way or the other. The shift from CDMA to GSM will produce a lot of confusion among the consumers and carrier will come out the ultimate winner.
SachinEE
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SachinEE,
User Rank: Light Sabre
3/25/2014 | 6:55:23 AM
Re : The Re-Resurgence of the Prepaid Wars
@ jabailo, that is the point actually. You have to let go of streaming. That's what these plans are intended for. These seem to be intended for people who use their mobile phones mainly for voice and text and may be keeping presence on social media. The people who use computers and tablets for heavy data use and cell phones for keeping their online presence would like these plans.
jabailo
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jabailo,
User Rank: Light Sabre
3/22/2014 | 4:51:20 PM
Re: Cheap phones
How about satellite Internet for trains?

I've been looking at rural properties such as cabins that are close to off grid, and when I look for Internet providers several satellite ISPs are coming up!

My recollection of satellite internet was Iridium.  The Boeing-McCaw venture back in the 1990s.   They had planned to launch 220 LEOs...Low Earth Orbit Satellites, but I don't think they ever got that many birds in the sky and it eventually got sold off.

Rip Van Winkling to a decade or so hence, suddenly I see a lot of satellite providers offering service at very low rates ($30/mo).   I will have to dig around since their appearance has blindsided me somewhat.   I've been told that the basic problems is the speed of light.  

If you go with geosynchonous satellites, that's 22,300 miles back and forth added to your internet traffic.   The LEO system would have put them very close to the Earth, 200-500 miles or about 2-3x the orbit of the Shuttle or ISS (110 miles), but that means the have to move in relation to the surface.  Which means you need a lot of them to cover he planet.  Not sure which system the current group uses.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/21/2014 | 5:48:06 PM
Re: Cheap phones
Fiber along the rail with the signal transmitted up through the wheels?
jabailo
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jabailo,
User Rank: Light Sabre
3/20/2014 | 10:13:51 PM
Re: Cheap phones
Can you imagine the bandwidth that something the size of a rail should provide!

Another option...fiber optic cable with the repeaters you describe.

Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/20/2014 | 7:00:14 PM
Re: Cheap phones
I can think of a couple of options here to improve service. One would be to install small cells alongside the track, connecting to a small cell or microcell inside the train which would convert the signal from LTE to Wi-Fi.

I also wonder whether would be possible to actually run a data signal through the track itself, and then up through the wheels of the train where the wheels touch the track.
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
3/20/2014 | 4:40:39 PM
Playing catch-up
Prepaid is commonplace in many other areas of the globe, so the U.S. is just really catching up at this point. 

Prepaid is also catching on in financial services. Prepaid enables people who've gotten into credit issues before to better budget their finances. If they are using pre-paid, they can give themselves a hard limit on how much they spend monthly for telecom and data. 

Prepaid can help the company gain revenue more quickly, though the recognition of revenue earned gets more complex from an accounting standpoint.
jabailo
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jabailo,
User Rank: Light Sabre
3/20/2014 | 1:36:12 PM
Re: Cheap phones
When I took our commuter rail into Seattle every day, about a 20 mile ride, what I tried using my Wimax mobile option.  

I found that it would be ok standing still, but had trouble when the train was in motion.   LTE was not as prevalent at the time, but there were others who had USB modems from their cell companies.  My guess is those were 3G data connections, maybe 1.5Mbps.  I think their performance was better than mine, but that could be because there are more cell towers along the route and some dead zones for my Clear service (since the train runs along a fairly unpopulated freight corridor, mostly industrial and warehouses, and it was in a valley much of the way.

Could the Engine host an LTE/Wimax connection and link it up to a hub in the cars?  My guess is yes although these technologies must have a max bandwidth close to 6Mpbs and one channel isn't going to help a train full of Wifi connected people!  

So, ideally we'd each have our own LTE/Wimax connection and hopefully there are no dead zones along the way!  

My phone has LTE, and in my car, when I'm in the LTE zone (my neighborhood isn't fully converted yet) I am able to stream HQ music very well.  However, if I drive into the 3G zone, it stalls and skips and becomes nearly unuseable.

 

 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/19/2014 | 6:19:15 PM
Re: Cheap phones
Couldn't they just use LTE or some other wireless data to connect the rail car to the backhaul? Make the rail car into a sort of super-MiFi?
jabailo
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jabailo,
User Rank: Light Sabre
3/18/2014 | 9:43:02 PM
Re: Cheap phones
Not only have I not seen it work...I'm not really sure how it is supposed to work at all.

They put a Wifi hub on a train car, fine, but what does it then communicate with? Do they use the rail as a communications link?  If the engine in radio contract and they run it along some voice band?


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