The wireless industry can’t seem to decide if mobile devices will be hard hit because of the economic recession or not. While some say cell phones have become essential and are, therefore, recession proof, the latest report from the Opinion Research Corporation for the New Millennium Research Council indicates that millions of Americans are in fact on the verge of disconnecting their expensive wireless service plans. Based on its survey, two out of five Americans with contract-based cell phones, totaling 39% or 60.3 million, are likely to cut back on their cell phones to save money if the economy gets worse over the next six months (which, let’s face it, it will).
More than 40 million Americans are more inclined now than they were six months ago to consider switching from a contract plan to a prepaid service. Amongst those studied, 38% were from households making less than $35,000, 32% were African Americans and 30% were between the ages of 18 to 34.
If consumers aren’t ready to ditch the contract entirely, many might consider cutting back on the extras instead. NMRC found that 19 million Americans – one in five cell phone users who current subscribe to additional services – have considered cutting back (5%) or actually cut back (15%) on features like Internet connectivity, email and texting. All blamed financial reasons – job loss, fear of job loss or general fear of the recession. If the economy continues to worsen, nearly 20% said they are very likely to actually go through with the cuts.
Recession-related shifts in attitudes and purchasing habits are already underway, according to Graham Hueber, senior researcher at the ORC. 35 million Americans, or 19% of consumers with a cell phone, have already discontinued their service. When it comes down to it, these consumers just aren’t finding the value in their cell phone extras anymore.
The good news is that most consumers will ultimately keep a cell phone service. The bad news (or good news for the prepaid carriers) is that these cutbacks in phone plans and services are inevitable and already upon us. Carriers can and should take measures to prevent subscriber churn, but as Allen Hepner, scholar at the NMRC puts it, the era of penny pinching is officially here.