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AT&T Comes Clean: Prepaid $85, Postpaid $120, For The Same Plan, Same Phone

April 12, 2011

This is a earth-shaking, landscape-altering announcement by AT&T.  I don’t know if they realize what they just did, but I’ll tell you. 🙂

IMO (in my opinion), this is the last straw, the tipping point, the edge of the cliff for contract (or “postpaid”) wireless.  Here’s why:  when the two monsters, AT&T and Verizon, introduce smartphones to prepaid, which AT&T has done now, that begins to make their prepaid service nearly indistinguishable from their contract service.  Keeping quality fones from prepaid service is a highwire act that the two biggies have been pulling off for a couple years.  But when the fones are the same and the service plans are the same, BUT THE COST IS MUCH CHEAPER, where are people going to go?  Just ask Blockbuster where all their customers went (Netflix will tell you).

What’s fascinating about the Blockbuster-Netflix transition is the similarity between that situation and the tiny David-like prepaid companies (the size of Netflix at its origin in 1997) taking on the Goliath AT&T/Verizon behemoths.  Through innovation, technology, and more focus on pleasing the customer, the smaller companies can gradually take market share and eventually terminate the large one(s).

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http://www.fiercewireless.com/story/att-brings-lg-android-smartphone-gophone-prepaid-brand/2011-04-12

AT&T brings LG Android smartphone to GoPhone prepaid brand
April 12, 2011 — 12:03pm ET | By Phil Goldstein

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The FierceWireless story begins, “AT&T Mobility (NYSE:T) is jumping into the prepaid smartphone market by partnering with LG to bring an Android smartphone to the carrier’s GoPhone prepaid brand.”

The LG Thrive, left, and the LG Phoenix are headed to AT&T. Click here for details.On April 17, AT&T’s prepaid GoPhone brand will offer the “LG Thrive” smartphone for $179.99, according to the company’s press release.  The article says, “AT&T is the latest carrier to bring smartphones to prepaid subscribers. Sprint Nextel’s (NYSE:S) Boost Mobile prepaid brand recently launched its first CDMA Android smartphone, the Samsung Galaxy Prevail.”

FierceWireless also reported that, “In addition to the new phones, AT&T also updated its GoPhone data plans for customers who choose its $2-per-day unlimited talk and text plan or 10-cent-per-minute plan.”  And AT&T’s site shows their new data plans for prepaid smartphones are:  $25 for 500MB, $5 for 10MB (which was previously $5 for 1 MB), and $15 for 100 MB (previously $19.99).

What really exposes the uselessness of a contract plan is AT&T’s statement from the same press release that they’re also offering a postpaid version of the fone, the “LG Phoenix,” for $49.99, with a required two-year contract.

So you can own the fone for $180 or rent the same fone for $50 with a 2-year handcuff … and what’s the difference in service?  Nothing.  What’s the difference in cost?  Prepaid is $2/day x 30 days = $60/month, plus $25 for $500MB data = $85, while their postpaid plan with the exact same usage levels is $69.99 unlimited talk, $20 for unlimited text, and $30 for 400MB = $120.  Ok, I got it now:  save $130 on the cost of the fone, in order to pay $35 per month extra for two years, which equals $840 extra for the luxury of handcuffs.  (We’re ignoring the possibility of exceeding the 400MB data limit, which results in an extra charge of $15 per 200MB.)

Now compare AT&T’s prepaid $85 plan, with limited data, to Lightyear Wireless’ $59.99 unlimited everything plan, with a much better smartphone selection:  which looks better to you?

As the differences between postpaid and prepaid plans become less and less blurred, consumers will figure out what a bargain the prepaid plans are, and that will mark the end of contract wireless.  This is another major step in that direction.
JC

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