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Polarizing the wireless industry

Happy New Year everyone. Hopefully next week will bring us some news in the world of prepaid wireless. For now, we’re going to continue discussing issues related to the industry. Today we’ll look at the issue of smartphone vs. prepaid. They’re on two different ends of the spectrum. Prepaid is considered a low-cost alternative to contract cell phone service, while smartphones not only require a contract (for the most part), but a data plan which can add $30 to your monthly bill. So if the economy is headed downward still, will the reaction by consumers be to slow the smartphone trend in favor of the cheaper prepaid option?

RCR News seems to think so. In their “2009 will be terrible” article, they observe:

Of course, if economic conditions continue to worsen, many consumers could buck the smartphone trend and it’ll be boom-time for prepaid wireless.

I don’t think the two paths are mutually exclusive. Both sectors of the industry could see a boom in 2009, though for different reasons. For prepaid it’s clearly the economy. As their cell phone contracts expire, you can expect to see people migrate to prepaid, at least temporarily. Note, however, that most of these consumers probably don’t have a $30 data plan attached to their current plan. We’re talking normal cell users and their normal contracts.

On the other hand are smartphone users. Here we have a demographic who feel it’s important to pay extra for data service and use the smartphone features to their fullest. While money might be tight around the country, that doesn’t mean everyone. Plenty of people aren’t feeling the effects of the economic downturn. Those are the folks who will continue their smartphone patronage. As I learned long ago, there’s always a market for the ridiculously expensive.

My guess is that we’ll see significant growth in prepaid along with a modest growth in the smartphone market. Will that be bucking the trend, as RCR puts it? Perhaps. The smartphone sector has seen significant gains over the past few years, and to have that growth slow could suggest consumers are bucking it. Still, I think modest gains are fine at this point, considering everything that’s going on.