Survey FInds Millions Expected to Cut Back Cell Phone Costs in Recession

According to a recent study performed by the New Millennium Research Council (NMRC), a Washington D.C.-based think tank, the recession is prompting millions of Americans to disconnect their cell phone plans to cut spending.

The survey found that two out of five Americans with contract-based cell phones are likely to cut back to save money if the economy continues to slide over the next six months. The survey polled 2,005 Americans. That represents 39 percent of contracted cell phone users, or 60.3 million consumers who would ditch a cell contract to save some dough.

Seeking cell phone savings could also spark a spike in prepaid phone sales. NMRC found that no fewer than 40 million Americans, or 26 percent of consumers with contract-based cell phone service, are more inclined to ditch the contract for prepaid cell phone service. In addition, the survey found that one in five Americans who have prepaid cell phone service switched in the last six months from a contract-based service due to recession-related concerns, and two-thirds of prepaid customers say they are saving money compared to a landline phone or contract-based cell phone.

Along with cutting out a contract or opting for a prepaid device, the study found that extras like mobile Internet connectivity, e-mail and texting are also likely to suffer in the economic downturn. About 19 million Americans, or one in five cell phone users with extras, have considered cutting back on extras or have already, while 41 percent of cell phone users said it is very likely or somewhat likely that they will cut down on extras if the economy worsens.

"The era of cell phone penny-pinching is officially here," said Allen Hepner, a scholar with the NMRC, in a statement. "Thanks to the recession, the U.S. cell phone marketplace is undergoing fundamental changes that will just get bigger as the economic downturn deepens. What we see in these survey findings is clear evidence that most consumers will keep a cell phone during this recession, but only after shifting to less expensive cell phone plans, such as prepaid, and also by scaling back on cell phone extras including Internet connectivity and texting."

The carriers are feeling this pricing pressure and are making moves to retain and attract value-conscious customers. Sprint Nextel (NYSE: S) has a $100 plan that includes unlimited voice, data, and text services for high-end handsets, and its subsidiary Boost Mobile has a $50 unlimited plan for non-smartphones. T-Mobile is also rewarding some long-term customers with a $50 unlimited voice plan.

(March 23, 2009)

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