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Will prepaid capture the feature phone market?

While we’ve seen a number of smartphones and smartphone plans hit prepaid carriers, their bread and butter remains with feature phones. These are often older models that carriers can provide cheaply without a subsidy. Customers can more easily afford them, which makes for easier access to prepaid services. Feature phone shipments, though, are down. Handset shipments grew just 21.7 percent year-over-year from Q1 2009 to Q1 2010, but the smartphone sector fueled that growth, increasing shipments by 56.7 percent year-over-year. It made me wonder if we’ll see people sign contracts only for high-end smartphones, with feature phones heading mostly to prepaid.

As we saw with the first quarter results from major carriers, people are shifting their cellular habits. Where at one time they might have signed a two-year contract in order to receive a mediocre phone for free, we’re seeing less of this behavior these days. People will still sign a two-year contract for the iPhone, or BlackBerry, or Android devices, but they’re less willing to use a feature phone with postpaid services.

This trend does not come as a surprise, and I expect we’ll see things shift more in this direction in the next few years. There are so many prepaid companies offering good rates on a commitment-free basis that it makes less and less sense to sign a two-year contract for those services.

What I really wonder, and I have no idea about this one, is of how this will change the feature phone market. Will prepaid services continue to offer mostly very low-end and refurbished handsets? Or will there still be a market for more advanced feature phones? I suppose there’s room for a little of everything, but I’m not sure how much room.