Contract-Free iPhone: Hello Cell Phone Penny-Pinchers
AT&T made the leap first, revealing that it plans to offer 8-GB and 16-GB iPhone 3G smartphones at a special "no-commit" price. That translates to $599 and $699, respectively, to avoid being locked into a two-year contract. Contract-free iPhones will be available starting March 26.
While offering devices contract-free is not a completely new strategy, the iPhone going contract-free is a sign that mobile operators and device manufacturers are changing their business models as the economy dwindles and smartphone users fear being locked into a lengthy agreement.
According to a recent study performed by the New Millennium Research Council (NMRC), a Washington D.C.-based think tank, the recession is prompting millions of Americans to disconnect their cell phone plans to cut spending.
The survey found that two out of five Americans with contract-based cell phones are likely to cut back to save money if the economy continues to slide over the next six months. The survey polled 2,005 Americans. That represents 39 percent of contracted cell phone users, or 60.3 million consumers who would ditch a cell contract to save some dough.
Seeking cell phone savings could also spark a spike in prepaid phone sales. NMRC found that no fewer than 40 million Americans, or 26 percent of consumers with contract-based cell phone service, are more inclined to ditch the contract for prepaid cell phone service. In addition, the survey found that one in five Americans who have prepaid cell phone service switched in the last six months from a contract-based service due to recession-related concerns, and two-thirds of prepaid customers say they are saving money compared to a landline phone or contract-based cell phone.
Along with cutting out a contract or opting for a prepaid device, the study found that extras like mobile Internet connectivity, e-mail and texting are also likely to suffer in the economic downturn. About 19 million Americans, or one in five cell phone users with extras, have considered cutting back on extras or have already, while 41 percent of cell phone users said it is very likely or somewhat likely that they will cut down on extras if the economy worsens.
"The era of cell phone penny-pinching is officially here," said Allen Hepner, a scholar with the NMRC, in a statement. "Thanks to the recession, the U.S. cell phone marketplace is undergoing fundamental changes that will just get bigger as the economic downturn deepens. What we see in these survey findings is clear evidence that most consumers will keep a cell phone during this recession, but only after shifting to less expensive cell phone plans, such as prepaid, and also by scaling back on cell phone extras including Internet connectivity and texting."
Graham Hueber, a senior research with Opinion Research Center, which commissioned the study, agreed.
"The change in thinking and purchases is clearly already taking place and has been for months," Hueber said in a statement. "For example, we see that 35 million Americans—that is 19 percent of consumers with 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.' This strongly suggests that a recession-related shift in attitudes and purchasing habits is already under way."