Prepaid Cellular Phone Services
How Did Prepaid Wireless Get So Complicated?!

How do you compare prepaid cellular phone services?  Does that sound like a silly question to you?  Well, maybe it's a pretty basic question, but once you start digging into it, you'll find that prepaid wireless plans have become so complex and confusing.  Let's take a look at how prepaid plans have evolved over time:Prepaid Cellular Phone Services

Prepaid Started Off With Simplicity
Believe it or not, when prepaid cellular phone services were originally launched, they was pretty straightforward.  Load money on your account, make a call, and your account is deducted for each minute you use; simple and easy, right?  Prepaid had the real benefit of being a no contract plan for occasional users who didn't want, or couldn't get a contract cell phone.  (For a more detailed discussion about the benefits of prepaid wireless visit the Why Prepaid Wireless section.)  So how did things evolve to where they are today, and how did they get some complicated?  Well...

The Target Customer Changed Over Time
When prepaid wireless launched in North America, it was targeting what people have historically described as low value customers.  Typically those people who couldn't qualify for a contract plan usually because of low credit, or when a large deposit was required.  I hate to say it, but honestly speaking (which is the spirit of this entire website!), carriers were targeting the bottom of the barrel of wireless customers.  So why offer service to these customers at all?  Well, the bottom line is that they'd rather have them as customers and make some money from them, then send them away altogether.  The reality is that even these lower end customers have always been profitable.  And once in the carrier's family, hopefully over time they would buy up, or graduate to a postpaid contract plan.  It makes sense when you think about it.

Over time, the volume of customers fitting into this category began to grow.  Without getting into a philosophical discussion or debate about why this segment continued to grow, or arguably was there all along, lets just take it for granted that it was a lot of people, and interest in prepaid was growing.  As a result, all kinds of prepaid cellular phone services started springing up, but again, with very simple plans.  Even what most people would consider basic features such as voicemail and call waiting weren't readily available, and virtually always cost extra for carriers that did offer it.

Wireless carriers then found that their prepaid customers wanted more features.  Not just voicemail and call waiting, but also more flexibility and better value.  So Pay-As-You-Go (PAYG) plans began to evolve, offering more options for how much money you could load at one time, different expiration dates, better per minutes rates, day time and evening rates, mobile-to-mobile rates, etc.  Understandably, as more options and features became available, the appeal of prepaid did as well.  This variety of course lead to increased complexity.

Offers Have Evolved - A Lot!
It has become so difficult to compare prepaid wireless plans.  Around 2006 carriers started offering monthly plans to meet the needs of increasingly more sophisticated customers.  Basically, customers started saying: "Just because I don't want to sign a contract, doesn't mean that I want to get ripped off paying really high per minute rates - please give me better value!"  So along came prepaid (still no contract) monthly plans that were commonly known as Hybrid Monthly Plans.  They're "hybrid" because they look and feel much like a postpaid plan by offering a bucket of minutes, text messages, voicemail, etc. for a monthly fee, however, on a prepaid basis.  For a deeper dive into this plan type and others, please visit the Types Of Prepaid Wireless Plans section.

These monthly, or hybrid plans were great because they offered much better value than did pay-as-you-go plans, and felt a lot like monthly postpaid wireless plans,l but without the contract.  They didn't, however, get close to competing with the value offered by postpaid contract plans, but still a great step forward.  But there was a problem...

Arrival of Daily Plans
The problem with the monthly/hybrid plans was that carriers found that customers couldn't consistently pay on time each month.  What this meant was that a large number of customers would have interrupted service (a bad customer experience!), and carriers lost revenue, because they were expecting a specific number of continuous monthly payments (i.e. they were expecting 12 payments when they were only getting 11 or less payments), which is the basis for how they priced the cost of the plan.  In other words, it became somewhat of a lose-lose for customers and carriers.

While prepaid carriers continued to offer hybrid plans, they introduced the concept of Prepaid Daily Plans.  This allowed customers to pay usually from $1 to $3 on a daily basis for a fixed set of services (which ultimately evolved to unlimited).  This approach provided better value than the PAYG plans, but not quite as good as monthly plans.  So, if you couldn't afford a regular monthly payment, you could still get good value by paying a fixed daily fee.  Note that customers could typically switch between all plan types fairly easily, although some carriers did charge fees to make changes.  Also note that some carriers allowed you to pay the daily fee only on days that you used your phone, while others charged the daily fee no matter what.  Obviously, the former approach was much more desirable.  These plans are now basically extinct as they became to complicated to communicate and manage, and carriers much preferred to veer customers towards monthly unlimited plans.

Then Came Monthly Unlimited Plans!
As the options expanded, and competition began to really heat up in 2007-2008, new prepaid wireless carriers entered the market (ex. MetroPCS; acquired by T-Mobile, Cricket Communications; acquired by AT&T, etc.) that really disrupted the market.  They basically came in with guns blazing, essentially saying that they could provide the best value, and even compete with postpaid plans.  And so now we saw a flurry of Monthly Unlimited Wireless plans being offered by new prepaid wireless carriers, as well as the big players.  i.e. The game was on!

The Bottom Line - It's Confusing!
So with this evolution customers win, because we get better prices and more services.  So much so that a new type of customer is being attracted to prepaid - that being postpaid customers!  The value of prepaid wireless, and the flexibility of no contract, is now so powerful that many prepaid plans can be easily compared to the value of postpaid.  However, the bad news is that prepaid offers are so abundant that it really is confusing to compare prepaid wireless plans.  I don't care who you are, the options out there now are simply overwhelming.  That said, it's arguably no more confusing that postpaid plans.

Having worked in the prepaid wireless industry for over a dozen years, it still took me countless hours to compile the initial comparison charts, and a lot of time to maintain them as new plans are launched and existing ones change.  Most of us wouldn't want to spend that much time to compare prepaid wireless plans; it's just way too time consuming, not to mention frustrating when important plans details are difficult to find on carriers' websites.  That's why it makes me very happy when visitors to the site contact me to let me know that they found the site useful; thank you to those visitors!

Prepaid Cellular Phone Services

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