Cricket making noise in prepaid wireless market

IN DEMAND: Store Manager Roxana Gutierez, for the Cricket Wireless store in Olneyville Square in Providence, helps city resident Chris Raia select a new phone. Kari Toth, Cricket New England market director, is in the background. / PBN PHOTO/MICHAEL SALERNO
IN DEMAND: Store Manager Roxana Gutierez, for the Cricket Wireless store in Olneyville Square in Providence, helps city resident Chris Raia select a new phone. Kari Toth, Cricket New England market director, is in the background. / PBN PHOTO/MICHAEL SALERNO

The number of prepaid wireless customers is growing in the United States, and Rhode Island is no different. Providers are expanding retail options throughout the state, especially in urban areas.

Cricket Wireless, a prepaid wireless-service provider owned by AT&T Inc., first entered New England in 2014, and has already opened 220 points of distribution throughout the six-state region. In Rhode Island, the Atlanta-based company has opened nine new standalone retail shops almost entirely during the past year.

“We want to grow rapidly in Rhode Island,” said Kari Toth, New England market director at Cricket.

Prepaid cellphone plans don’t require a monthly contract, and are gaining popularity in the United States. According to the 2016 annual mobile wireless competitive market report, prepared by the U.S. Federal Communications Commission, prepaid subscribers grew 9.7 percent between 2012 and 2015, and prepaid subscriber revenue increased about 4 percent, to $25.6 billion, in 2015, comprising about 13 percent of total wireless-industry revenue. That number has grown each year since at least 2007, when revenue totaled $11.5 billion.

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It also helped fuel a year-over-year increase of 2.2 percent, to $191.9 billion, for the total wireless-service revenue, representing a bounce back from 2014 when the industry realized its first year-over-year decrease since 1985.

The four nationwide service providers, AT&T, Sprint Corp., T-Mobile US and Verizon Wireless, have all gotten into the prepaid market and own their own brands. Cricket belongs to AT&T, Sprint owns Boost Mobile, T-Mobile owns MetroPCS and Verizon has its own brand: Verizon Wireless Prepaid.

The providers also sell to several mobile virtual-network operators, or MVNOs, which are wireless providers that don’t own network infrastructure, such as TracFone, owner of Straight Talk, telcel, AMERICA and SafeLink.

The FCC could not immediately provide a state-by-state breakdown of industry growth, but Toth says the prepaid services are growing in Rhode Island, which matches nationwide trends. Customers might find the different brands in standalone retail shops, but they’re also popping up in kiosks or in electronics shops throughout the state, including Wal-Mart, Target Corp., Best Buy and GameStop Corp.

Toth believes customers are drawn to the prepaid model because of the freedom it offers from long-term contracts, known as postpaid service, which typically last a minimum of 18 months.

“I see across the industry that the customer wants flexibility,” Toth said. “They want control of their plan, and certainly transparency from the carrier, and I think some of the economic conditions of the last decade have forced customers to evolve and adopt smarter money skills.”

Indeed, prepaid services, almost exclusively less expensive than postpaid contracts, realized strong growth following the financial crisis of 2008, when the entire U.S. economy fell and customers went in search of more frugal options.

But the industry is still by-and-large designed for those who make less.

More than 50 percent of all prepaid subscribers earn less than $50,000 per year, according to the FCC, and 26.8 percent of all customers earn less than $25,000. By comparison, nearly two-thirds of postpaid subscribers earn more than $50,000 per year, and 35.5 percent of them make more than $100,000.

“We note that most postpaid users are in the higher-income bracket, while the converse is true for prepaid subscribers,” according to the FCC.

This may explain why many prepaid retailers are in poorer, urban areas. One of Cricket’s flagship locations, by example, is in Olneyville Square, a Providence neighborhood with a median family income 40 percent less than the citywide average of $32,058.

MetroPCS, also with a location in Olneyville, has retail stores in Elmwood and South Providence, two more neighborhoods with low incomes. It’s true the prepaid retailers are also located in commercial areas, including shopping malls and supermarkets, but downtown urban outlets are prevalent throughout New England.

“We do see where there are stores in more of our downtown areas across New England,” Toth said.

Nonetheless, Toth expects the customer base to expand, as wireless technology improves and providers continue to compete to provide better service for less money. As of June 16, Cricket offered 2.5 gigabytes of data per phone, starting at $40 for one line, according to the FCC. Since then, the provider has already dropped prices to $35 for 2.5 gigabytes of data. If the trend continues as Toth expects, it could eventually become a question of price and convenience for the customer, she added.

“What we’ve seen is that customers are migrating away from the two-year contracts, and looking at all the options out there,” she said. “We’re seeing it across demographics, across age groups and across ethnicities.” •

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