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Why there might not be a price war in prepaid unlimited

The phrase “price war” has been bandied about for the past week or so, on the heel’s of the new unlimited voice and text plan from Straight Talk. We even saw that affect the stocks of a few prepaid carriers earlier in the week, though the market appears to have corrected itself. There might not be a price war after all. In fact, according to Sue Marek of FierceWireless, it’s not very likely. In a well-reasoned and sourced post, Marek takes down the claims which struck fear in the hearts of carriers earlier in the week.

While she makes a number of points, including the margins for wireless resellers like Tracfone, parent company of Straight Talk, she really hits it on the head when it comes to marketing costs. She has a quote from Ken Hyers, senior analyst with Technology Business Research: “If marketing is a huge segment of your cost, you can’t keep going lower in price and still advertise.” That should affect Boost Mobile, MetroPCS, and Cricket, all of which advertise rather aggressively, more than Tracfone, which uses its Wal-Mart distribution as its main marketing ploy.

Then again, Tracfone is at a disadvantage when it comes to billing and customer service. They need their own call centers and billing systems, while Boost can rely on its parent company, Sprint. In fact, because. This may actually hurt Metro and Cricket a bit more, since they need their own systems, customer service reps, and marketing budget, while Tracfone and Boost are propped up in one area.

Again, the market seems to have corrected itself, and things are moving back to normal. We’ll see in six months, when Verizon will reevaluate the Straight Talk deal, what long-term effects this will have on the industry.