Millions Set to Cut Back or Terminate Wireless Service Plans

A new report from the Opinion Research Corporation for the New Millennium Research Council states that millions of Americans are set to disconnect or cut back on their expensive wireless service plans. That’s bad news for Sprint Nextel (S), Verizon (VZ), and AT&T (T), if true.

They are basing their analysis on a survey indicating that two out of every five Americans with contract-based cell phones, totaling 39% or 60.3 million, will cut back on their cell phones due to the severe recession.

Key would be whether those disconnecting revert to cheaper land-line connections or seek alternatives such as Skype, and whether this signals a behavioral shift that continues after (if) we emerge from the recession. Also, I am not sure what companies benefit from pre-paid connections. If you have ideas please forward to me.

Here are their key findings:

“A potentially major shift in consumer habits at the expense of contract-based cell phone service is underway as more consumers seek to save money in the face of the recession. No fewer than 40 million Americans – 26 percent of consumers with contract-based cell phone service -- are “more inclined today than ... six months ago to look at a way to save money on your cell phone bill, such as by switching to a prepaid cell phone service.” This group includes 38 percent of those in households making $35,000 a year or less, 32 percent of African Americans and 30 percent of those aged 18-34.”

“Cell phone extras – such as Internet connectivity, email and texting – are also likely to take a hit in the economic downturn. A total of 19 million Americans – one in five cell phone users with cell-phone extras -- have “considered cutting back” (5 percent) or actually “have cut back” (15 percent) on such features “in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns.” More than two out of five cell phone users with extras on their phones (41 percent) say it is “very” (19 percent) or “somewhat” (21 percent) likely that they will cut back on cell phone extras “if the economy gets worse in the next six months.” Fewer than two in five (39 percent) say it is “not likely at all” that they will make such cuts in the face of a deepening recession. “

OTHER KEY FINDINGS

• Nearly one in five Americans who now have prepaid cell phone service (17 percent) say they switched in the last six months from a contract-based cell phone service due to job or recession-related concerns. This figure includes 23 percent of 18-34 year olds and 29 percent of African Americans with prepaid phones.

• The ranks of all Americans without a cell phone who have “discontinued cell phone service in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns” includes 29 percent of 18-34 year olds and 28 percent of those living in households earning $35,000 a year or less.

• Among those who are likely to cut on back on their cell phones to save money “if the economy gets worse in the next six months” are 44 percent of those aged 18-34, 54 percent of those in households making $35,000 a year or less, and 55 percent of African Americans.

• Two thirds of prepaid cell phone customers say they are saving money “compared to a landline phone or contract-based cell phones.” Fewer than three in 10 (29 percent) said they were not saving money.

• Fewer than half of cell phone users (48 percent) say that the extras on their phone “such as Internet connectivity, email and texting” are delivering a “great deal” (29 percent) or “some” (19 percent) value. About one in five people see little value in such services. About a third of cell phone users (34 percent) have no such extras on their phones.

• More than four out of five Americans (84 percent) are concerned about the economic recession and already have cut back their sending “quite a bit” (39 percent) or "somewhat" (45 percent). Only about one in 10 Americans (12 percent) have made no spending changes as a result of the recession. Over half (52 percent) of individuals in households earning less than $35,000 a year already have cut their spending "quite a bit."

• Four out of five Americans own a cell phone, ranging from 84 percent of 18-34 year olds to just 68 percent of those age 65 or older. While 91 percent of those in households earning $100,000 or more have cell phones, less than two-thirds in households earning $35,000 a year or less (65 percent) have such devices. Nearly one in five Americans (17 percent) reports having a prepaid cell phone currently, compared to 84 percent with a contract-based cell phone. (There is some overlap due to individuals who own both types of phones.) African Americans at 22 percent are the group most likely to have prepaid cell phones.

Comments

[Mark Bern:]

I would also think that premium channel offerings on cable, and satellite TV will be following a similar trend. Cutting back the frills in everyday life is becomming more common and may continue for some time.

This economic downturn is strong enough and likely will last long enough to permanently change buying habit for some portion of the population.

My parents and in-laws lived through the Depression era and they just have a saver's mentality that was lost on the rest of us. My wife has to remove her mother's recyclable items regularly or things get "saved" for future use. Of course, there just isn't any more room for these saved items with all the rest that have already been saved.

My point is that while consumerism is not dead for most Americans (because most of us still enjoy stable employment) it will affect the habits of those who are hit the hardest. When this is all over, I believe that at least a portion of Americans will never be the same. How many will be hard to say until we have a good rear-view mirror opportunity some years down the road.

Mar 30 06:44 AM

[User 382113:]

I have not had a landline for 15 years. I have 2 cell phones with different phone numbers, I use pay and talk, usually a $10.00 card
on each phone per month, top up every 30 days and the balabce is carried forward.If you need more service you can get a monthly rate.
When I was on a plan- it cost me 3 times the amount for one phone.

Mar 30 09:50 AM

[rajeev bajpai:]

I tend to agree with the report as just another piece of information crossed me that skype is adding new users at a rate of about 10 Million per month. and in 2008 skype users spent about 33 billion minutes talking to overseas friends/customers whatever which incidentally is significantly more than the Verizon.

As the recession, job losses deepens obviously more people would love to cut down on the wasteful expenditure if they have an equally or even at times less easily available option.

The rise of the netbooks would further ensure more cheaper skype to skype communication while on the move.

Mar 30 11:21 AM

[Cold Hard T...:]

These survey results have about as much to do with reality as obama thinking he can fix the auto industry!
I manage a large corporate wireless program and can say with auhtority, that a lot of people don't like their wireless service and are always going to cancel and go to another company they feel is better. These surveys better represent displeasure with the value of their service. While this may cause some to actually cancel service, they will probably switch to a different provider. We all like our cell phones and few that have them will be without one for long. Even in a bad economy Americans like their stuff.
What gets me is how the market lemmings react to this crap and allow themselves to be manipulated by an OPINION that is based on emotion.
If you want to talk about cell companies losing subscribers, then lets talk about actual numbers that these companies provide to their stock holders. This is what should be driving the market!

Mar 30 11:36 AM

[somadude:]

I do not see cell phones being dropped by businessmen on the go all the time. Skype can't compete with doing business while walking through the airport (I don't think). Also, today’s youth would be lost if they did not have a cell phone attached to their ear 24 hours a day. It cracks me up to go to the mall and watch teenage girls walking 4 abreast, not talking to each other, but to someone else on their cell phones.

Snakeflake

Mar 30 01:27 PM

[Dotcom:]

Needs and wants. When times get tough for companies or people, you can choose to have every bell and whistle that's being marketed or you can wait and be forced into a needs only scenario. That's if things don't improve.

Companies T, VZ, Comcast... will morph to remain viable, profitable companies IMHO.

Mar 30 01:40 PM

[mcarl1387:]

I work for a company that provides services to SprintNextel and I can honestly say that this article is "dead on". I can't tell you how many people call in everyday looking to downgrade their cell phone service. I even try to talk people out of downgrading because it is not always the cheaper answer but they still do. People, think that if they disconnect the internet on their phones but don't change their plan also, aren't saving any money. But, yes this article is correct because I see it everyday. Also, more and more people are calling in for payment plans and arrangements. So many are simply too broke to pay their bills. I myself have developed a savers mentality because things are so expensive and the future so uncertain that I simply don't want to spend any money. Let's face it I think that 25% of this countries working class people are like me they're broke and living pay check to pay check barely getting buy.

Mar 30 06:45 PM

[RLLH:]

It would seem slightly incredulous to me if Skype was adding 10 million customers per month. So in 2 years the whole country will be on Skype? Surely this news should be given at once to Verizon and AT&T so their CEOs can find a new job..




" I tend to agree with the report as just another piece of information crossed me that skype is adding new users at a rate of about 10 Million per month. and in 2008 skype users spent about 33 billion minutes talking to overseas friends/customers whatever which incidentally is significantly more than the Verizon."

Mar 30 07:09 PM

[Steve Ward:]

Excellent info and so much for me taking on some Sprint/Nextel bonds for now.

Mar 30 10:56 PM

[Dean M:]

I put skype on an old smart phone I had and gave it to my kid. I could see something like that as a cheap alternative if I was flat out broke.

Mar 31 08:49 AM

[Byrdbrain:]

I am situated in a dead zone at my home. AT&T and Sprint phones service didn't help, so I got Comcast phone service w/LD and cancelled my cellphone service. I bought a phone that gets great service from my house and it only costs me $16.20 a mo. that comes out of my checking account and adds 150 min. monthly automatically. (You can have 300 min, 1000min, whatever suits your needs).I didn't need a lot a minutes a month and what I don't use, rolls over. I was paying about $50 a month for stuff I didn't need...or use. NET10 is a great service and uses AT&T and T-Mobile service. For those people that don't have a phone attached to your ear, but want access to the world when you're out and about, this is the plan for you. If you talk more, just buy more minutes. I even have a camerea and the LG model has bluetooth.

Mar 31 11:36 AM

[kotika98:]

I was reading just today, on another site, i think WSJ that people are massively thinking of cutting expenses by quiting their landline instead. That makes sense while the study you cite does not make slightest sense. Perhaps its the disconnect between what people say and what they do, but cellphone use never goes down in any country. It just goes up up up until everyone is using one, and using nothing else for communication. The only question is price, right now US is transitioning to the stage where its getting more reasonable - although median person spends what? $60–$80 bucks a month. Thats a bit much, it will have to come down. Here in china everyone and his trash collector has a cellphone, and ChinaMobile is the largest operator in the world because it costs less than $10 a month to talk all you want.

Mar 31 12:02 PM

[lavalamp:]

itouch + skype + wifi = almost zero cost

Mar 31 04:23 PM

[Moresby:]

I would cancel my cell phone contract f it was economical to do so, I think I am not the only one.
With Skype and the availability of free WIFI, I use it more and more.
I do not foresee getting rid of my cell phone altogether but I will switch to pay as you go.
In fact, I suspect a lot of people are cutting back on their cable subscription also, and how many of us need more than 60GB for their Internet?
Is this going to be a habit or a cut back because of the recession? Time will tell, my money is that this will become a habit.

Mar 31 08:23 PM

[Alpha Female:]

Prepaid phones are a great way to start. Cutting prices for a cell phone bill is easy if you want to switch to prepaid. You pay only for the minutes you use, and they can last you up to a year for 90 dollars! Only a deal you can get from a prepaid phone! I would recommend switching to a prepaid plan for people who a) don't like to pay for minutes they dont use, b) like to text, and c) make long distance calls.

Mar 31 09:55 PM

[User 386659:]

Great article, and from what I've seen it's absolutely true--consumers are downsizing wireless plans and features across the board while also looking for ways to pay less for their current plans. To that latter point, I wanted to encourage people trying to lower their wireless expenses to check out a great cell bill savings blog called fixmycellbill.blogspot.../ that constantly tracks new ways to cut wireless costs and exposes shady billing practices utilized by the cell phone companies. Find out how to stop your carrier from hustling you!

Mar 31 10:51 PM

[DDate:]

Why sign a contract when the 2 biggest unlimited prepaid companies now serve all the big cities?

Mar 31 10:55 PM

[trader_murf:]

Just a point of information. I haven't decided whether to stay with VZ or go to a prepaid with another company. In the meantime when I've sailed to the end of the cell phone contract world, I have only recently found out you don't fall off the end of the flat world. The service continues, everything continues on a month to month basis but without any contract lock in. The problem comes when your cell phone dies or you want a free phone or their $50 off a new phone you get sucked into a new 2 yr contract. I have also heard if you buy a new phone that is not locked VZ will give you a hard time about transferring your number and service to it.

Mar 31 11:59 PM

[Itss:]

Politically correct journalists' obsession with reporting on "African Americans" reaches new depths of absurdity with each passing day. First they obsessed endlessly over Obama being the "first African American president" -- which was as obviously blatant a falsehood as one could conceive. Obama is only half-African. If he were half Japanese and half Mexican do you think the media would get away with gratuitously referring to his racial identity as "Japanese American" over and over and over (and over) again? Now it seems the mis-information-spread... race-obsessed media cannot even report on prepaid wireless usage without introducing a racial angle. And by the way, you pathetic, dumbed down, propaganda-dispensing media elites:black people in America are no more "African" than white people in America are "European."

Jun 29 02:07 PM