The free cell phones from the government program is exploding. In fact, it is growing so fast that it’s eating into the prepaid wireless phone business.
Prepaid cell phone vendors, Tracfone, MetroPCS and Leap Wireless all recently reported disappointing financial results for the second quarter, and the outlook for the third quarter was not bright. This came as a surprise to investors, as the prepaid mobile phone industry has been on fire.
Prepaid phone users are price conscious users — especially in these tough economic times — and it’s tough to beat an absolutely free phone given out through a government program. As a result, prepaid phone companies are losing customers.
Prepaid phones generally cater to the low-income segment of the market. They offer low-end phones on a fill’er up basis. The phone comes with a set number of minutes on them, and when they are used up, another bundle of minutes is purchased. This is a convenient system for the low-income consumer — if they don’t have the money, they don’t buy more minutes.
As you’d expect, prepaid phone users are a very price conscious crowd, looking for the best deal possible. And with no contract involved, they are free to toss one phone for another if the rates are more attractive. Imagine using a prepaid phone and then seeing the ad for an absolutely free cell phone. Out with the old and in with the new, free phone.
The free cell phones, paid for through the government’s Lifeline Assistance program, come with up to 250 minutes of free monthly minutes. So, what if a person needs more minutes? Most of the providers of these free phones will let you “buy up” to get more minutes. For example, fast-growing, Assurance Wireless will give you 500 minutes for $5 or 1,000 minutes and 1,000 text messages for $20. It’s tough for prepaid to compete.
In order to receive the free phone and minutes, you must qualify for the federal government’s Lifeline Assistance program. While the rules are slightly different in each state, you are generally eligible if you make less than 135% of the federal poverty level or if you already participate in many government assistance programs such as Medicaid, food stamps, housing assistance, SSI and others.
There are quite a few vendors who specialize in the Lifeline cell phone market, but there are three big ones that do the vast majority of business. These are, in order of market share, Safelink Wireless, Assurance Wireless and ReachOut Wireless. For complete information on the program, it’s vendors and state eligibility, please visit http://www.freegovernmentcellphones.net.