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Virgin to Offer 3d No-Contract Cellphone Plan

Posted on: Monday, 11 July 2005, 18:01 CDT

Jul. 11--British adventurer-tycoon Richard Branson made three legendary runs at circling the world in a hot-air balloon. Now his cellphone company is making a third run at upending traditional US wireless pricing.

Virgin Mobile, part of Branson's global travel and music conglomerate, this week is rolling out a no-contract calling plan called Month2Month, a third alternative to existing by-the-minute and by-the-day plans. For $30 a month, plus federal taxes and fees, it will offer 150 weekday minutes and 150 night and weekend minutes.

The main innovation: Customers who use up the 300 minutes are automatically switched to costlier calling plans in increments of $10 a step, but with a guarantee they will never pay more than 20 cents a minute and will revert to the $30 rate the following month, without having to take any action.

Depending on how many minutes they run over, subscribers can wind up paying just 4 cents a minute for additional minutes beyond the initial 300, a rate competitive with plans that normally require two-year contracts.

The service also requires you to pay $25 to $150 upfront for a phone.

Roger Entner, a wireless industry analyst with Ovum, an Anglo-American consulting firm, said that for people using fewer than 300 minutes, considerably better deals are available from carriers including Cingular Wireless, T-Mobile USA, and the 7-Eleven convenience store chain's SpeakOut Wireless brand.

But for people making 300 to 600 minutes of calls a month, Entner said, "They actually offer a pretty good deal. One thing with the Virgin plans is that they are the most complicated, but once you understand it, Month2Month is a very interesting product for heavier users."

Marina Amoroso, an analyst at Yankee Group in Boston, said the Virgin gambit suggests "prepaid is in the early stages of a price war. Virgin is trying to show they're still the leader in the non-contract space."

With over 190 million Americans carrying cellphones, plans like Virgin's, known as prepaid or no-contract, are widely seen as the last source of major growth. Because they do not require credit checks or long-term contracts, prepaid plans are viewed as the most likely way the industry will recruit subscribers among the roughly 100 million people without cellphones, who are disproportionately teenagers, children, young adults, and people with poor credit histories.

Amoroso said 20 cents a minute has long held as a kind of floor for prepaid wireless rates. But moves like Virgin's, along with Cingular and Verizon Wireless recently offering prepaid plans with unlimited free calls to other subscribers within the carrier's network, are fueling price cuts, she said.

Beyond Wireless Inc. has begun offering rates as low as 10 to 12 cents per minute prepaid, with the calling time never expiring as long as subscribers make one call every 60 days.

Beyond, however, does not offer any local phone numbers in New England, so area residents calling local subscribers here would have to pay long-distance rates to reach them.

Like SpeakOut and Beyond, Virgin is among a proliferating number of "virtual" wireless brands that resell service on major national carrier networks. Walt Disney Co. last week unveiled plans to offer its own branded cellphone service this year which, like Virgin's, will use Sprint's network. Disney's ESPN cable sports channel plans to roll out another sports-oriented cellphone brand. And Sprint is providing calling services for a Hispanic-themed virtual network, Movida.

Virgin has largely stressed image and youth in marketing, not price or value. But with Month2Month, Virgin has moved to a new pricing plan that can prove -- for people making about 20 minutes of calls a day -- several dollars a month cheaper than Cingular, Verizon, or T-Mobile, and even competitive with some national carriers' contract rates, which usually are significantly less than with prepaid plans.

"We think this signals the coming of age of pay-as-you-go wireless," said Dan Schulman, Virgin Mobile's chief executive.

"Prepaid used to be a dirty word in the industry, and it used to be a very poor cousin to contract plans.

"We think this is really the beginning of a lot more transparency in wireless pricing."

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Source: The Boston Globe

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