The 7 Reasons that 2017 Is The Year Of The Prepaid Plan

60 second intro – the reasons you should take a prepaid plan in 2017

  • Prepaid plans are already more than 30% of the entire Australian market for SIMs.
  • And the use of this type of ‘pay before you call’ plan seems set to increase.
  • A number of factors are combining, in Australia and around the world, to drive their sales.
  • Data price deflation, homogenous 4G networks, phone leasing schemes, the rise of MVNOs and the inclusion of entertainment options in prepaid plans will all stimulate the uptake of prepaid plans.
  • These are important steps towards more competition and better deals for users, as we move towards the arrival of the eSIM.
  • If you have the choice, take a prepaid plan. I work for a comparison site and I do.

Prepaid plans are about to take off in Australia

To be clear, prepaid has always been a significant part of the telco industry. For some reason, it is considered the least glamorous type of network service connection. SIM Only and on account plans are deemed more ‘mature’ agreements to have with your phone company.

The derision of prepaid is a sentiment that we have never agreed with on WhatPhone. We have, in the past, listed the 21 reasons that prepaid is great. The most popular page on this website is the prepaid page. We consistently remind people of the basic selling points for a prepaid plan – the advantages it has over a postpaid SIM Only equivalent. Here are the critical ones, again, below.

Why prepaid has always been great

  • Value: Prepaid often offers better value than equivalent postpaid month to month plans for a particular spend.
  • Cost control: Prepaid users take cost control for granted. If you recharge with the value of the denomination your want to spend (e.g. $30), you have to consciously decide to exceed that. And the convenience of postpaid is still there. With the apps that most phone companies have, recharging is as simple as checking your bank account. The process can even be automated.
  • Flexibility: Move any month to a new plan or operator. The alternatie, a contract, ties you in. See data price deflation below.
  • Bring your number: Don’t worry. If you move to a prepaid plan, you can keep your existing phone number.

What’s changing for prepaid in 2017 ?

A number of factors are combining as we move in to 2017, which, together, will drive the uptake of prepaid plans.

Data price deflation (the ongoing reduction in the price of 1GB of data) is happening at prodigious rates. Every 6 months or so, you get another GB for your spend. Prepaid benefits from this. Contracted phones do not. Homogenous 4G networks, offered by Vodafone, Optus and Telstra and resold by smaller phone companies offer choice and remove Telstra’s stated network dominance. Telstra has launched their own phone leasing schemes and in other geographies, we’ve seen independent companies bring phone leasing options to market. Leasing a phone separates the user from the need to pay up front to get a phone, meaning many can avoid stepping in to contracts which don’t make any sense. MVNO market share has almost doubled in the last 2 years alone – led by prepaid providers. Finally, prepaid plans are starting to get some of the benefits that their more expensive postpaid alternatives have enjoyed. That includes entertainment options in prepaid plans.

Each of these factors will contribute to the uptake of prepaid. Let’s look at the evidence for each.

Data price deflation

Just 2 years ago, you would have received 200 MB on a $30 prepaid plan. Now, for the same $30, you will get 3GB – 4GB.

Data price deflation is the name we give to the inexorable increase in the amount of data you will get at a given price point. In 2014, just 2 years ago, you would have received 200 MB on a $30 prepaid plan. Now, for the same $30, you will get 3GB – 4GB for your $30, depending on the provider you choose. It’s easy to skim those numbers and shrug. It’s the way of the world and we’re used to rapid evolutions in technology. But take a moment to consider it.

  • If you were on a prepaid plan: You could have easily changed to a new prepaid plan, either with Optus or Vodafone, when they added more data. What they included has at least, tripled, over this two year period.
  • If you had a phone under contract: You may well have been tied in for two years, contracted to the 500 MB rate. Even if you had wanted to move to a new phone plan, with the same monthly spend, on the same network, they wouldn’t have let you.
Data Price Deflation

Data is now the key distinguishing feature of plans. It’s what people look for first when they’re picking a phone plan to take. The phone companies fight each other with their data inclusions and find clever ways to market them – for example, one of our favorites, Boost Mobile, who offer extra data on the weekends when you are away from home.

Homogenous 4G networks

For most people, the price premium Telstra charge for 4G data inclusions is just not worth it.

4G is the current standard for phone data speeds. Any (even ‘prepaid’) phone plan you purchase will come with a 4G data facility. 4G provides the kids of data speed on your phone that you would get at home on your dedicated broadband connection. People rely on their data connection and the fact they will get the best speeds wherever they are.

Generally, Telstra is considered to have the best network despite a series of outages in 2016. When it comes to 4G data footprint, coverage is no longer a material difference between the major networks or the smaller phone companies which resell them.

4G Network

As you can see from our chart, unless you are one of the 2 to 3 percent of Australians who live on the edge of the major cities, Optus and Vodafone’s 4G will cover you just fine.

Why is this important ? Because for most people, the price premium Telstra charge for 4G data inclusions is just not worth it.

Tiered plan inclusion structures

The bigger phone companies (Optus, Vodafone and Telstra) have started including entertainment services. (OVO Mobile, a smaller phone company also offers their own content). This is manifesting in the Australian prepaid market as ‘zero rated’ (uncharged) access to streamed audio.

streamed audio

Make no mistake, you can use a lot of data streaming audio if you want to. Some users might get to 3GB a month just streaming music from sites like Pandora or Spotify.

Make no mistake, you can use a lot of data streaming audio if you want to. Some users might get to 3GB a month just streaming music from sites like Pandora or Spotify. We believe Optus stand out from the crowd with their streaming audio inclusions. They offer a broader range of partners than anyone else on the market at the moment.

Value added services like included streamed audio present users with a range of phone plans that they can buy. Some have extra inclusions on top of the voice, SMS and data that we have come to need. Some just have the basics. There is more choice when it comes to prepaid than ever before.

telstra tier

The leasing of phones

The leasing of phones could well be with us in Australia, soon, too. If it arrives, you’ll see the uptake of prepaid SIMs spike.

There was a reason contracts became common-place. People didn’t want the contract, they wanted the ‘free’ (included as part of the deal) phone. One of the key problems that taking a contract out will solve is paying upfront for the device your heart desires.

Recently, Telstra launched it’s own leasing scheme. For a few dollars a month, you can lease your phone from Telstra, independent of a contract for the SIM. In the USA, Samsung and Apple have the same sort of leasing scheme. Just last week, in the UK, a new leasing option presented itself.

lease phone

The leasing of phones could well be with us in Australia, soon, too. If it arrives, you’ll see the uptake of prepaid SIMs spike. If an operator like Kogan Mobile were to offer leased phones, people could get the phone they want, without the upfront cost and add a prepaid SIM to it so they got the best value for the life of the phone.

This sort of facility is long overdue down here.

MVNOs are crushing it

In just the last 2 years, Kantar, a research company has shown MVNO market share increase from 2014: 13.1% to 2016 ( this year ): 22.9%.

MVNOs are smaller phone companies and they are doing a great job at stealing customers from the bigger phone companies. In just the last 2 years, Kantar, a research company has shown MVNO market share increase from 2014 : 13.1% to 2016 ( this year ): 22.9%.

australia market

The majority of smaller phone companies have prepaid plans. As the market becomes better educated about the value these smaller phone companies offer, MVNOs seem set to continue their rise.

The maths works better for prepaid customers

Buying the phone yourself and adding a SIM can save a user 25% over the life of the device.

Finally, the cold hard maths favours prepaid plans in many cases these days. In the past, phone companies would have bought you and your business by trapping you in a contract in exchange for them subsidizing your phone.

Today, that’s often not the case. Phone companies like Optus and Telstra are actively trying to reduce their phone subsidies. They have never been in the phone business, they sell network access. This is borne out in the total cost of ownership statistics that we do for new phone releases. See the iPhone 7 example, below. Buying the phone yourself and adding a SIM can save a user 25% over the life of the device.

Why Buy an iPhone 7 Outright + a SIM
from a small phone company ?

Neil

Found a deal on WhatPhone


  • Bought the iPhone 7 32 GB from Apple

    $1,079

  • 24 months on Kogan x $33.30

    $799.20

  • ( = Unlimited Oz Talk & Text + 8GB of 4G Data )

Minimum Total Cost $1,878.20

On Vodafone network

Sally

Went with a Vodafone contract


  • iPhone 7 32 GB

  • 24 months contract on Vodafone x $103.00

    $2,472.00

  • ( = Unlimited Oz Talk & Text + 9GB of 4G Data )

Minimum Total Cost $2,472.00

On Vodafone network

By finding a reseller deal on WhatPhone and buying his phone outright, Neil makes a

25%

saving

Summing up the reasons 2017 is all about prepaid

Prepaid plans evolve constantly, partly because they have to compete every month for your custom. It’s the way you want your phone plan to be: keen and attentive. You want your phone company making an effort to keep you from month to month. Prepaid deals abound. You’ll get double data one month and a price discount the next. They know they need to be competitive or they’ll lose you. Remember, the alternative is signing up to a contract and the phone company ignoring you for 24 months.

Prepaid plans are innovative in a way that their postpaid equivalents just don’t have to be. Including streamed audio will save data and gives users a range of options. Smaller phone companies like Yomojo if they want the Optus 4G network and the streamed audio doesn’t appeal, or Optus themselves if they want the Optus 4G network and streamed audio does.

There are some negatives, of course, with prepaid. If you want to go roaming, you are likely to need a postpaid SIM or at least talk to the phone company before you try and use the SIM overseas. Those that don’t understand might look down their nose at you or having one. Many are just not clear on the differences inherent in a prepaid plan.

This is all practice for the eSIM of course. When the eSIM is released in the years ahead, we believe that most phone plans will be as flexible, predictable, and good value as these prepaid plans.

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.