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1. The Wireless Revolution

Make A Fortune In Wireless Gold RushThe Wireless Revolution:

“The Entire Contract Wireless Market Is Switching To Prepaid”


1. The wireless revolution will result in the entire contract wireless market switching to prepaid by the year 2015.

THE UNSTOPPABLE TREND:  THE MOVE FROM CONTRACT TO PREPAID

LightYear is saving people money on a bill they already pay.  And it’s a vital bill:  if you lose your job or your salary is cut, and you have to choose between dropping your $60/month nutrition product and your $60/month cell fone service, which do you pick?  Almost 100% of people keep the fone and lose the nutrition.

The mass exodus of the American population from contract (postpaid) cell plans – the switch to prepaid (no contract) – is imminent, and the evidence is overwhelming.  Jim Patterson, CEO and co-founder of Mobile Symmetry, and former President of Wholesale Services for Sprint, on May 10, 2011 wrote a blockbuster article, “Reality Check: Is 2011 the year of prepaid?” that gives us ANOTHER voice predicting the impending end of contract (“postpaid”) cell service.  His article strongly suggests that in 2012 we may see “the end of the post-paid market as we know it.”

Here’s the headline on the New Millennium Research Council’s Nov. 4, 2010 press release:  “Survey: 25 Million U.S. Consumers Set To Switch To Prepaid Wireless In Next 6 Months.”  Do the math:  25 Million ÷ 6 months = 4 Million people each month switching to prepaid!  Granted, that’s a small fraction of all wireless users, but it’s a HUGE jump from the one million a month that switched towards the end of 2010, and it’s an amazingly (alarmingly) fast increase.

NMRC LogoSam Simon, senior fellow, New Millennium Research Council, said:  “Even without the need to pinch pennies during the current economic downturn, consumers are clearly fed up with the high prices of contract-based cell phone service and the gouging that goes on with early-termination fees (ETF).”

Also from the Nov. NMRC press release:  47% (nearly half) of U.S. contract cell users are “‘very likely’ (23%) or ‘somewhat likely’ (24%) to switch” to prepaid when their ETF period ends.  Of customers with contracts who “are unlikely to switch to prepaid service in the next six months“: 56% are “very or somewhat open to switching to a prepaid cell plan at some point in the future, but not planning to do so now.”

To summarize the numbers, that’s half who are very likely or somewhat likely to switch, and of the remaining half, half of them are open to switching at some point in the future.  That covers MOST of the remaining contract users.

Sam Simon called 2011 “The Year of the Prepaid Cell Phone Consumer”:

we may have actually underestimated just how quickly this trend would catch on.

As the prepaid space offers new pricing, better phones, national coverage, … the trend away from [contracts] will accelerate as never before.“

[This] is starting to look an awful lot like what happened in long-distance service 20-25 years ago. People once scoffed at the notion that consumers would ever pull the plug on Ma Bell and go over to an upstart competitor.”

Number of predicted/estimated remaining contract customers by end of each year*:

  • Cust…Year…Result (or Predicted Result)Bell Tel Co.
  • 250M  2009  End of 2009:  14% of market is prepaid
  • 235M  2010  End of 2010:  20% of market is prepaid (may have been higher)
  • 185M  2011  NMRC projects “25 million switch in 6 months”; so 50M total switch in 2011
  • 135M  2012  Another 50M switch in 2012 – contract wireless gone by the end of 2012?
  • 085M  2013  Another 50M switch in 2013
  • 035M  2014  Another 50M switch in 2014

(*Note that during 2009-2010, the total number of cell users in the USA increased from 270M to over 300M, skewing the percentages.)

THE OFFICIAL BEGINNING OF THE END …
The way this plays out, I see contract offers becoming either drastically watered-down in restrictions and price, or simply being converted to prepaid plans.  On April 12, 2011, AT&T made the boldest (dumbest?) move yet among the big 4 carriers to blur the line between contract and prepaid, announcing they will offer the same fone for both their contract and prepaid plans, with obviously huge prepaid savings.  In my blog post that day, I said that announcement marked the official beginning of the end of contract plans.  Three days later, on April 15, US Cellular followed suit with a similar announcement.  How far behind are Verizon and T-Mobile with the same move?  At this point, they don’t have any choice.

AT&T vs AT&T

Notes:
1) After subtracting $130 in phone savings and crediting $840 in plan savings, AT&T prepaid is $710 cheaper than AT&T postpaid (contract).
2) LightYear prepaid is $580 cheaper than AT&T prepaid ($1290 cheaper than AT&T postpaid).

HOW BIG IS THE INDUSTRY?
The annual wireless industry revenue is approximately $200 billion; with 80% of that revenue switching from contracts to prepaid, that means $160 billion is up for grabs.  If LightYear takes just 1% of that with their extremely attractive “You + 3 = FREE” promotion, that would make them a $1.6 billion/year company.  (How many direct sales companies generate that kind of revenue?  10!)  However, LightYear is currently doing an estimated $6 million per month in revenue ($52 million for 2010); if LightYear grows to even one half of 1% of $160 billion annual revenue, that means their revenue would explode from $4 mil./mo. to $70 mil./month.  That’s the growth Monavie went thru from 2005-2008, creating a large swath of millionaires (but the public then ran out of money and decided to keep paying their cell fone bill and stop buying $30 juice bottles).  TIMING IS EVERYTHING!


HEADLINE NEWS:  THE WORD IS OUT
This story is slowly spreading online. Needless to say, the monster wireless advertisers – AT&T, Verizon, T-Mobile – don’t want the story out and probably have threatened and screamed as much as they can at the media to not run the story.  But thanks to the internet, the truth cannot be stopped.  Here’s a quick list of some of the websites who have run the story (I probably need to make a separate blog page just for this one prepaid story!):

Here’s an article from March 24, 2011: “Prepaid Wireless Has Finally Grown Up.”

The word was already out in the major media anyway, as far back as a year ago. Here are a tiny few of the many articles about prepaid from 2010:


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